July 30, 2020

“How do I apply value based pricing to a project with hourly costs?” and more...

In today’s group coaching session, we had a bunch of good questions that touched on topics like:

When to have The Why Conversation
How many follow-up calls to have in the sales process
How to get in touch with the real decision maker
How to apply value pricing to a project that has hourly costs
How to charge a premium for a subscription service when free options exist
How to know when value pricing is a bad fit for a prospective client

Good stuff!

Here are some of the questions I answered today:

Sequencing the Why: do you always use the Why in your first call, or do you qualify, then conduct a second call for the Why? What if you can’t get the Why answers you need during the call? Just set up another call and try again to dig deeper? (timestamp 1m 40s)

What are your thoughts on scheduling follow-ups? There seem to be 2 projects within a big software project: the project itself, and the project of getting the project started. I’m usually VERY lenient about follow-up convos (they seem really salesy), but I’m losing deals left and right because prospects are either (1) overwhelmed by the options and want someone to guide them, and (2) my competitors are scheduling follow-ups and building more rapport with them. (timestamp 7m 33s)

Do you have any best practices for getting in touch with the real decision-maker? Recently had a "why" convo with a CTO -- I was a really good fit for the project, but they didn’t want to put me in touch with the CEO (who would ultimately make the decision). Of course, he bailed on our follow-up call and they picked another provider (probably the one that got a hold of the CEO lol). (timestamp 20m 1s)

How do I apply value based pricing to a project with hourly costs? Value based pricing has worked well for consulting, but I now want to apply it to a software implementation project. I have a new client, trust is high, and they’re great about accepting the costs presented if they understand the pros and cons of each option. They’re re-launching one of their SaaS platforms, and they need to take payments. So the value of doing the project is high. The existing platform is a mess, and there’s a lot of remediation to be done to take payments and apply subscriptions in a secure manner. And they understand that’s necessary. There are multiple payment solution options, depending on how fast they want to deliver vs what features they offer to customers. The client most values being able to weigh the cost of implementation vs the business value and they (now) value higher quality delivery. I don’t want to present a "$x per month for a team of 3 (my staff are paid hourly) and we’ll do whatever you want for as long as it takes" proposal, it’s how the previous vendor lost the work – the client couldn’t see what the cost of a project was before committing to it, and it could take months to deliver. Do you think there is a value proposition to differentiate the options - beyond just "this is cheaper to implement/this is cheaper to run/this has more features"? Is there a way to price/present the options to cover the risk of budget-overrun given the ‘unknowns’ of the inherited system, but only if needed? (timestamp 28m 39s)

One of the products on our ladder will be to offer Hotels new websites. It’s a competitive space as many of the booking engine providers offer websites for free - but the sites are what you would expect. My thinking is we offer 2 options: $$ option - Monthly Subscription - Using our custom WP Template - $1000 a month min 24-month contract. (We have a team member that would be doing this work, not me). $$$ option - Custom site What do you think of a website subscription model? (timestamp 41m 50s)

On your sales pages you have sentences like "The price is $xxx, which distinguishes those who are serious about their business, and is easily recouped through the reduction of manual labor and increased profits." I don’t often see phrases like this justifying a price point. Why do you do this? What is the difference compared to just stating the price? Is it working for you? (timestamp 47m 24s)

What if the client wants to hire you before you have the "value"? I had the "why" with the stakeholders but didn’t fully drill into the business case to arrive at their perceived value. I followed up recommending any of: a) diagnostic (review their system), b) a "process observation" (diagnostic), or c) an additional, free discovery call to continue the "why", inviting the owners to join. I received this response: "I must be honest, this seems like a pretty straightforward proposition… are you willing to provide immediate training to help us address what I consider to be remedial needs? If so, I think we can quickly move forward based on the wish list Michael shared with you. After that, once we have the basics shored up, we would be open to a discussion on larger, structural elements." (timestamp 50m 15s)

Most of our services, are co-designed with the clients team. But we believe there are some products that are a standard pack (ecommerce, mail automation, on boarding) that will probably will work better with no intervention from the client’s team (especially because they are part of the problem). how can we build the offer without looking that we are avoiding their team (which we are). More specifically, the question is, how do we design and price a product without client interaction, without lowering our prices? (timestamp 55m 50s)

(If you’re curious, you can review the entire list of past questions here)

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Yours,

—J

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