September 21, 2020
Reader question: “How do I value price ‘making better decisions’?”
Fellow list member Jaap van Leent wrote in with a question related to my Value Pricing Calculator about how to value price something like helping clients make better decisions (shared with permission):
Hi Jonathan,
Great idea! I used something very similar for my former marketing agency (although not truly based on value but we worked with monthly retainers and gave 2-3 options based on the goals they mentioned - but still based on our hourly rates on our end).
Right now I’m doing a lot of research on decision making (psychology, data, cultural, etc.). During this time I’ll blog a lot and eventually start a consultancy/training business, helping business owners and managers make better decisions.
I’ve been thinking a lot about how to estimate the value of a “better” decision (and a more successful business as a result from better decisions). Before I start it’s all very vague (no proper risk assessment, no idea about the impact a decision will or could have on the business). Maybe asking them “what’s not making the wrong decision worth to you?” could provide useful insights. Or what would be the impact if X ends up being a massive success.
Do you have other suggestions?
Keep up the good work!
— JVL
Great question!
Here’s the thing...
The only person who knows what something is worth is the buyer. But they usually don’t know in their head, they know in their gut.
The way to estimate the value is to have a conversation with them about their underlying motivations - i.e., hopes, dreams, worries, and fears.
Uncovering how much “making better decisions” is worth to a given individual begins with defining precisely what “better” means to them.
“Better” will be defined differently by different people in different situations.
For example:
- More quickly
- Higher confidence
- Bigger impact
A great way to identify the key metric is to ask how they know they aren’t where they want to be. In this case, I’d ask something like:
“How do you know you’re not making good decisions now?”
Once you know what metric they want to improve (i.e., make better), you can ask “How much do you want to improve that metric?” and “What would it mean for your business if we are successful?”
This will tell you roughly what the overall initiative is worth to them (i.e., the value) which you can then plug into my Value Pricing Calculator to come up with prices for three proposal options.
Yours,
—J