Many businesses are stuck in the outmoded approach of time based billing, undercharging and setting fees based on what the competition is charging; a situation where the client and the market is driving your rates and not you. Value based pricing advocates that the customer is the ultimate arbiter of value. Here are a few tips to help you to implement value based pricing in your business:
Be clear on who you work with
Jeff Bezos, the founder of Amazon is famous for saying “start with the customer first and work backwards.” This is an excellent approach, and it begins with getting as clear as possible about your ideal client – what they look like, their needs, wants and desires. Clarity is power, and working with everyone who comes through the door just leads to frustration and takes you away from providing an excellent service to your top customers.
Develop a healthy level of self-esteem
Having a strong sense of self-worth and self-confidence prevents under-pricing, offering discounts at the first objection and having to chase for payment after the work is complete. It is difficult to quote a fee which is outside of your comfort zone, especially if you do not believe in yourself, or have the confidence in the difference you can make to the client’s end result.
Set clear objectives
A key aspect of value pricing is relationship building and helping the client to see how much they will benefit in the end. Be clear about your customer’s objectives. Set milestones and objectives aligned with those of your customers. Measurements or some form of key performance indicator reporting can be a great way to assess progress against agreed objectives. A useful approach would be to get the prospective client to explain how they would measure that the project or service implementation is a success.
Create packages for your services
Some businesses have different levels of service for different types of customers. Maybe your SME customers need one package and your international corporate clients require a very different package. Each should be valued in price based upon the value and service they deliver to the customer. Think about your customer and offer different entry points for them to use your services.
What makes your business unique
Think about what sets your business and its services apart. Is it your reputation, knowledge, experience, or are you in the right place at the right time? Help your clients to understand that in buying from you, they are getting a product or service that is better than what they may have sourced elsewhere.
Writing a successful proposal
The proposal should be a summary and not an exploration of your customer’s needs. It should be a clear explanation of what you understand their requirements to be, how they will be measured and the value to their business. Let this be the background around which you develop your fee proposal.