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Pricing for Profitability


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Published in: Technology, Business

Pricing for Profitability

  1. 1. Pricing  for  Profitability   by  Michelle  Golden   President,  Golden  Prac5ces  Inc   Senior  Fellow,  VeraSage  Ins5tute  @michellegolden #PSTECH      #AAMKT  
  2. 2. Today:  2  big  things!  1. BeMer  scoping  2. Offering  op5ons  
  3. 3. Price  evolu5on.   Single,  Fixed  Price   Fixed  Price  with   Op5ons   Value-­‐based  Price  
  4. 4. Before  you  consider  proposing.  Are  you  confident  you  know  what  the  prospect  will   value  most?   •  What  are  their  real  issues  (pains)?   •  Can  we  ar5culate  (truly)  compelling  reasons  to  hire  us?  Do  we  really  know  enough  about  the  org?   •  Is  this  work  we  even  want?  hMp://     •  Are  we  aware  of  risks  in  pricing  this  work  &  promising  a   5meline  (true  scope)?   5  
  5. 5. BeMer  process.  •  Discover  (value  conversa5on)  •  Debrief  •  Brainstorm,  discuss,  decide  (pricing  council?)  •  Conversa5on  NOT  presenta5on   •  Prospect  should  know  what’s  in  your  FPA  document   before  you  give  it  to  them   •  Deliver  quotes  real-­‐5me   •  Doc  must  equip  the  intermediary  to  make  your  case  
  6. 6. Fixed  price  if:  •  Non-­‐dis5nct  specializa5on  •  Must-­‐have  services  (e.g.,  compliance)  AND  price-­‐ sensi5ve  economic  buyer  •  LiMle  ability  to  create  measurable  or  perceived   value  in  the  course  of  the  work  (unemo5onal)    •  Disconnect  between  technical  or  user  buyer  &   economic  buyer  •  CommiMed  to  “No  bill  &  duck”    
  7. 7. Value-­‐based  price  if:  •  Demonstrated  specialist  (go-­‐to  firm)  •  Technical  or  user  buyer  same  as  economic  buyer,   or  highly  influen5al  with  •  Can  create  measurable  or  perceived  value  in  the   work  process    •  Success  fee  or  “5p  clause”  based  on  client’s   percep5on  of  outcome’s  value  •  Hint:  almost  ANY  service  can  qualify  with  a  skilled   seller  &  an  educated  buyer  
  9. 9. Op5ons.  •  Anchoring  effect  –  buyer  compares  your  prices  to   your  highest  offering  •  Helps  people  decide  what  they  want  (no,  they   usually  don’t  already  know)  •  If  you  don’t  offer  a  premium  offering,  how  could   someone  ever  buy  one?  •  Move  people  UP  the  value  curve  
  10. 10. Inspira5on  
  11. 11. Op5on  ideas.   Leverageable  Areas   SILVER   GOLD     PLATINUM   (some  of  many)   (stripped  version)   (today’s  offering)   (premium)  Audit/review   Basic  services   Basic  services   Bundle  complementary  Tax   Basic  &  might  go  on   Basic  plus  “watch”   Bundle  proac5ve  &   extension  by  default   services   complementary  Consul5ng   Charge  for  assessment;   Charge  for  assessment;   Bundle  assessment,   less  tailored;  simple   custom  prework   customiza5on,  follow-­‐ phase   up  Access   2-­‐day  responses   Unlimited  access   First-­‐class  access  Work  5ming   At  firm’s  availability   Standard  turn-­‐around   On-­‐demand  Payment  terms   In  advance     Half-­‐down   Aligned  to  client’s  cash   flow  “Op5onal”  (a  la  carte)   List  poten5al  upgrades,  complementary  services  &  next  steps  
  12. 12. Control  scope  creep.  •  Clarify  client  due  dates  •  Remind  client  •  Educate  team  •  Consequences  (price  shii)  
  13. 13. Image: cefeida (flickr)
  14. 14. 10  elements  of  a  project  quote.    1.  Objec5ves,  needs,  deliverables  2.  Project  structure,  5meline  &  milestones  3.  Constraints,  assump5ons  4.  Define  roles  (customer’s  responsibili5es  too)  5.  Detail  scope  &  func5onal  requirements  6.  Include  “Addi5onal  Items”  for  common  add-­‐ons  7.  Establish  parameters  for  change  request  8.  Future  projects  list  (i.e.  what  is  NOT  included)  9.  Terms  &  guarantee  10.  Approval  
  15. 15. Preparing.  Prac5ce  areas,  for  each  key  service:  •  What  does  the  average  engagement  include?  •  What  can  we  strip?  •  What  can  we  add?  
  16. 16. Qs  to  ask  the  customer.  Issues  that  can  be  measured:  •  How  do  you  measure  it?  •  What  is  it  now?  •  What  would  you  like  it  to  be?  •  What’s  the  value  of  the  difference  immediately?  •  What’s  the  value  over  5me?  Unmeasurable?  qualify  on  a  scale  (e.g.,  1-­‐10)  
  17. 17. Tangible  value.  
  18. 18. Intangible  value.  •  Specialist  exper5se/knowledge  •  Unique  social  capital  •  Brand/reputa5on  •  Unique  result:  crea5vity  &  innova5on  •  Reducing  risk  •  Excellent  service  experience  •  Makes  customer  “look  good”    •  Rela5onship  brings  benefit  or  feels  good  What  else?  
  19. 19. Remember.  •  Price  beMer:  prac5ce  makes  perfect   •  Present  op5ons   •  Use  phases  (WHK)   •  Preprice  easy-­‐to-­‐an5cipate  items  •  Project  management  begins  with  scope     •  Head  off  scope  creep  at  the  pass   •  Set  then  manage  expecta5ons  with  clients   •  Communicate  scope  to  team  
  20. 20. More  Info:  (blog)   @michellegolden  (twiMer)  SEE: