!DOCTYPE html PUBLIC "-//W3C//DTD XHTML 1.0 Strict//EN" "http://www.w3.org/TR/xhtml1/DTD/xhtml1-strict.dtd"> Streamline Training & Documentation: Pricing that Reflects the Value of Your Services

Sunday, December 07, 2008

Pricing that Reflects the Value of Your Services

Having had my own unhappy experiences with clients who could not manage budgets without contracting for services at specified hourly rates, I was taken with a column by Tim Williams, a consultant to marketing communications agencies, that appears in the December issue of Communication Arts.

Williams outlines seven things to do to get away from pricing based solely on hourly rates to pricing based on value:
  1. Sell the result you are going to deliver, not the activities you and your team are going to undertake in order to produce the result.

  2. Negotiate the price for the job before you begin working. Pre-kickoff is when your work "has the highest perceived value with the client."

  3. Go ahead and ask the client what they think the assignment is worth. They'll mention a high figure, or a figure that's in the same ballpark as your own estimation, or a figure that undervalues your work, in which case you need to provide evidence of why the value is more than they think (or let on).

  4. Offer options, and structure them bearing in mind that the client's typical inclination is to go with a choice that falls in the middle.

  5. "Never lower your price. Instead, add value." I.e., don't leave the client with the impression that you produce discount services.

  6. Be flexible in the terms you set (e.g., the timing of payments) so that you make a value-based price workable for the client.

  7. Be willing to walk away. This is the only way to maintain leverage in the price negotiation.
Williams emphasizes the importance of teaching all employees about pricing for value and of learning from experience. He recommends:
Conducting postmortem analyses at the end of major client assignments and relationships in order to assess what was learned, how adequate the compensation was, the value that was created and how the agency might have priced it better.
The upshot will be steady improvement in your organization's ability to set — and sell — prices that reflect the value you deliver.


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