Get Creative with Your Pricing Model to Win More Business

Get-Creative-with-Your-Pricing-Model-to-Win-More-BusinessIf you don’t believe your services deserve a high price tag, neither will your clients.

And if you don’t think you can win business without dropping your prices below where they should be, well, you’re just not being creative enough.

This notion that industries are becoming commodified, and that professional firms must compete on price to win, is killing our business innovation. So many companies out there are trying to compete by expanding their offerings and dropping prices, when what they should be doing is the exact opposite: they should be shrinking their offerings and increasing their pricing!

Sometimes, it’s not what you charge but how you set up your pricing model that makes all the difference.

Your Imagination Is Your Only Limitation

Your pricing model can be a powerful tool for winning more business—but only if you’re willing to get creative with it.

Following the same pricing structure as all of your competition only encourages prospective clients to make side-by-side price comparisons. But as you know, the most successful businesses are the ones that stand out because of qualities that have nothing to do with how much they cost. (Think of all the top service brands out there—how many of them are standing on cheapness as their primary differentiator?)

Here are a few creative pricing models that are guaranteed to help you generate more leads, win new business, and differentiate your firm within a big sea of sameness.

Model 1: Fixed Pricing

If your competition tends to bill by the hour and charge hourly rates, do something different.

Specifically, come up with a fixed pricing model for your services. And if you use your hourly rate to estimate that fixed pricing, you’re doing it wrong!

Imagine this: three firms are bidding on the same project. The first two respond with typical hourly rates, a list of services, and a total cost estimate.

The third firm responds with a fixed bid, and when they’re asked why, they give an explanation that sounds something like this:

“We believe hourly rates place too much emphasis on vendors’ speed, rather than the ultimate profitability of your company. Whether a project takes 20 hours or 200 hours doesn’t matter to us, and we have no interest in dragging out our processes in order to charge you more.

“Instead of watching the clock, we’re focused on delivering results we’re proud of—results that will make a difference to your bottom line. We’ve found that stepping away from time sheets allows us more room for innovation, so we can come up with real game-changing solutions.

If you’re just looking to buy our time, we’re not the best fit for you.”

Which firm do you think is most likely to win the business?

Model 2: The Monthly Plan

If your company is struggling with generating long term revenue, and you find yourself working with a lot of one-and-done clients, you might want to consider nixing your one-time fees altogether. Instead, offer a monthly plan.

I see too many firms charge hefty one-time fees, only to never hear from the client again. Imagine if you could create long-term value for your clients and build ongoing relationships that keep the profits rolling in, simply by providing your services over an extended period of time along with some added value?

What’s going to have more impact on your bottom line: continually chasing new business at $10k a pop, or locking in that business with a $2k/month retainer that will last substantially longer?

Accounting and tax firms represent an industry that would greatly benefit from monthly pricing. Instead of working with a client once a year or quarterly, they could be offering ongoing value throughout the year and billing clients monthly.

You would be surprised how many of your clients would be willing to go this route—especially since it comes with the added perk of a lighter investment up-front.

Plus, if you’re one of the few firms in your industry that works under a monthly pricing model, that’s a hugely powerful differentiator that is guaranteed to get you noticed.

Model 3: The Choose Your Own Risk Approach

Have you ever asked yourself why one firm can charge $10k and another $50k for the same work?

Hiring vendors is always about risk tolerance. The more risk averse buyers are, the more likely they are to go for the larger price tag, based on little more than the simple consumer fallacy that more expensive = better.

Why is it that some firms are able to charge significantly more than you do, while you’re struggling to get business at your current price point? Is their work really that much better than yours, or are they simply more effective at soliciting trust from skittish prospects?

Most likely, it’s the latter.

We recently signed a new project that was originally scoped out at $20k, but the prospect really wanted to keep it at $15k. We reworked our offering to eliminate some services, allowing us to come in at the desired price point, but when we presented the changes to the prospect, we also carefully outlined the higher risk level they would be taking on under the revised fee.

Our explanation went something like this:

“The best thing about our pricing model is that our clients are able to choose their own risk level. We can certainly come in at $15k, but because we will be unable to do all the work we believe is necessary to achieve a high quality outcome, we are unable to guarantee that high quality outcome.

The $20k price point gives our agency full control of the project, and along with that, we’re willing to take on complete responsibility for its result. At the lower price, some of the work will be on your company, and you will have to assume a higher level of risk for the result.”

Ultimately, the client opted for the larger price tag in order to avoid the added risk.

Next time you create a proposal, consider offering the prospective client three price points that represent three different risk levels: high, moderate, and low. Some clients prefer to do a lot of work themselves and are willing to take on the added risk in order to save a buck, while others just want a guaranteed high quality result and are more than happy to pay a bit more to put that risk squarely onto your firm’s shoulders

Stop Competing on Price

If you find your firm continually getting beat up on price, and you know your clients are cringing when they get your invoices, it’s easy to slash your rates in hopes that you’ll “make it up on the next one.” Try to recognize this temptation as the knee-jerk reaction it is, and resist!

Constantly discounting your offerings shows that you’re not clearly differentiated in your industry, which means you’re missing out on big opportunities.

Don’t let your firm fall into the commodity cycle. Instead, take two doses of Madtown and call us in the morning.

We can help you get creative with your pricing, so that you can comfortably charge much more than you are now.

Imagine never having to compete on price again…how much of a game-changer would that be?

Cheers!

This article was originally posted at Madtown Design Co.

 

Renee Sanders is a PhD candidate in business at Capella University, where her specialization is strategy and innovation. Renee holds an BBA and MBA from the University of Maryland University College. Renee currently works in for a defense contractor as the Director of Strategic Pricing and Price to Win.

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