Are you shooting yourself in the foot with your pricing strategy? How much is your time worth? What does your pricing say about your personal or corporate brand? Do you have a pricing strategy, or do you set your prices by some ethereal or arbitrary method? Even though I believe issues surrounding pricing decisions are root level drivers to a successful business strategy, I never cease to be amazed at how many corporations and professionals seem to pull their pricing out of thin air. Moreover, of those that actually go through some form of disciplined process, many of them seem to believe that once they have set the initial pricing their job is finished – nothing could be further from the truth. In today’s post I share my thoughts on how to develop a sound pricing strategy…
While the topic of pricing is certainly not rocket science, it has indeed been a thorn in the side of business people since the dawn of commerce. It has definitely caused its fair share of angst, frustration, and vigorous debate among executives and professional advisors simply for the reason that it is one of the few metrics that touches virtually every aspect of a business. Pricing impacts everything from strategy and tactics, to finance, to branding, to marketing and sales, to vendor selection and supply chain management, to recruiting and compensation, and to customer satisfaction and loyalty. As mission critical as pricing is, it is also one of the most often undervalued and overlooked business disciplines.
A recent trend which demonstrates that corporations have recognized the need for specific domain expertise in pricing is the emergence of a bevy of C-level positions charged with direct leadership over strategic pricing. It is no longer uncommon for me to see a chief revenue officer or chief pricing officer joining the ranks of executive teams. Moreover, in absence of a specific headcount assignment tied to pricing, other C-suite officers are starting to take ownership over pricing as a key business driver.
Think about this – why is it that some attorneys have difficulty justifying $70 dollars an hour, and others can command $900 dollars and hour? Why do some products have a large backlog of orders at premium prices, while others struggle to get any traction at discounted price points? Why will someone pay $30,000 dollars for a Rolex, but feel a Timex isn’t worth more than $50 dollars? Why do some consultants get $50,000 a day for their time, while others have to give their time away? While I could continue by citing other examples of pricing discrepancies my guess is that it is not necessary…not only will the following points provide some insight into answering the aforementioned questions, but they are also the main items that should be considered when evaluating your pricing strategy:
Now that I’ve shared my thoughts on pricing, I’m literally going to put my money where my mouth is by slaughtering a sacred cow – I’m going to share what I charge my clients. I’m making this disclosure for no other purpose than to demonstrate there is no reason to fear pricing transparency as a professional. I don’t really care what others charge for their time, and also don’t fear that discussing my rate somehow works against me. I’ve always wondered why so many professionals hesitate to publish their pricing. Do they have something to hide? Are they fearful of providing their competition with a pricing advantage? As I was thinking about why pricing is such a sacred cow, the more questions I aksed myself in regard to pricing, the more I began to realize how large an issue pricing is for many professionals.
Before I get to the specifics of the numbers, I want to share a bit of background as well as some perspective on my thinking. Firstly, we have a number of different practice areas at N2Growth and our pricing varies based on the products and services being offered. Therefore the pricing that I’ll be sharing today reflects what I charge for my personal coaching/consulting time. In determining what I charge I tend to take a more subjective approach that considers a broader range of evaluation points. I look at the complexity of the issue I’m addressing within a framework that prices for value creation, and then I adjust my pricing accordingly. That said, I rarely let price be the sole determining factor in whether or not I engage with a company. At this stage of my career I tend to look at the nature of the engagement more than I do my rate schedule. If I find a situation to be of personal interest, or consider the circumstance an intriguing challenge, I’ll normally find a way for a client to afford my services.
I don’t typcially charge on a hourly basis but prefer to work on a contract basis. In most cases I work on a retained basis with monthly retainers ranging from $7,500 to well in excess of six figures based upon the scope of work and complexity of the assignment. That said, in some cases I’ve chosen to work for a substantially discounted rate where I found an interesting challenge and the opportunity to grow with a client. I also give a decent amount of my time away in our pro-bono practice. The reality is that I don’t really sell my time as much as I decide where and with whom I want to invest it.
While some people simply cannot wrap their minds around my pricing, others consider it to be a bargain. Could I charge more? Sure. Could I invest my time for less? Absolutely. Am I worth what my clients pay me? Clearly, or they wouldn’t pay it. Here’s the thing – for those that don’t understand what I do, or the value I create, I could cut my price by 2/3 and they still wouldn’t engage. The important thing is my price works for me, and it works for my clients…I don’t tend to spend too much time thinking about things outside those two measurement points.
Bottom line…pricing is not a taboo subject to be avoided, but rather a key metric that needs to be well understood as well as proactively measured and managed. Pricing needs to be dealt with in the most embryonic stages of strategic planning and needs to constantly be evaluated based upon changes in market dynamics.
Now it’s your turn – If you’re a professional services provider I invite you to share your rates, pricing philosophy, and the type of clients you serve below. It will not only be a good experience and a freeing endeavor, but who knows, you might end-up with a new client…
This website uses cookies.