June 20, 2017
Follow-up re: how to determine your cost
Long-time reader Mauro Chojrin wrote in with a comment regarding the definition of value that I shared yesterday.
Here’s what MC had to say (shared with permission):
> This definition of value sounds to me more in line with the price concept, since the value should always exceed it in order to make the offer attractive for the buyer... It’s hard to come up with a numeric definition if you want to factor in non-quantifiable value... tough mission you selected :)
I’ll expand on each of MC’s points individually...
> This sounds to me more in line with the price concept, since the value should always exceed it in order to make the offer attractive for the buyer.
The closer the price gets the the value, the less happy the client will be. If the price exceeds the value - as can happen with hourly billing - the client becomes upset.
Since you will never know the value exactly, I recommend setting the price well below what you estimate the value to be in order to increase your odds closing the deal and delivering a high ROI.
> It’s hard to come up with a numeric definition if you want to factor in non-quantifiable value.
It’s hard for you but not hard for the client.
If you could just throw a bunch of numbers at them, they’d have a “too high, too low, just right” reaction to each, no matter how intangible the benefits. Unfortunately, you can’t just throw numbers at them during the sales process.
So, you have to get into the ballpark with a Why Conversation and then offer three options in the proposal. If your Why Conversation was on target, one of the numbers will feel “just right”.