Last week I looked at the four ways firms leak margin: pre-discounting, scope creep, free advice and giving in on price. This week I’ll look at the one thing behind most of them.
Thought for the week
You can’t stand behind a price you don’t believe in
Which comes first: charging better fees, or understanding your value?
Many people assume it’s the fees. Charge more, win a few clients at that level, and the confidence will follow.
In my experience, it works the other way round. Unless you really know your value, you’ll never price effectively.
To price effectively, you have to be confident. You have to be able to stand behind your price when it’s challenged. And you can only do that if you know what the client is getting for it.
People who aren’t confident in their price do something revealing. They reduce it in the quote, before the client has said a word. Not every time, but regularly. They second-guess themselves: “That feels a bit high. They might baulk. I’ll take a bit off.” Then, if the client pushes back anyway, they give way again, because they don’t know how to defend the number.
That’s two discounts, and the client only asked for one of them.
Now think about someone who knows their value. They can explain it in terms the client cares about. They quote the fee they meant to quote. When it’s challenged, they don’t panic, because they know what the fee stands for.
So the value egg comes first. Understand your value, and the confidence to charge properly follows. Try it the other way round and you’re just hoping the client doesn’t push back.
Top tip
Before you send the quote, check you can stand behind it
Before your next quote goes out, write down two or three things this client is likely to see as valuable, in their terms rather than yours.
Listen for clues. If a client keeps saying they’re short of time, is there something in your offering that saves them time? Maybe a single point of contact, or doing the chasing for them. If there is, and you wouldn’t usually mention it in a proposal, why not? Make it part of the package.
Then check your proposal template. Is there a “Why use us?” section before the fee? If the fee comes first, the client judges the price before they’ve seen the value.
And if you’re tempted to take something off the fee before you send it, stop. The fee isn’t the problem. You haven’t found the value yet.
All about value
A discount tells the client you weren’t sure either
In Edition 1, I introduced the P/V Formula: the client weighs your price against the value they perceive.
Cutting your price doesn’t raise the value the client perceives. If anything, it lowers it. A fee that drops at the first sign of hesitation tells the client the number was never firm, and that there’s probably more room.
Clients notice confidence, and they notice the lack of it. A fee stated calmly, by someone who can explain what it stands for, feels fair. The same fee said with a wobble feels like an opening offer.
Confidence isn’t bravado. It comes from knowing your value.
Price is the client’s language. Value is yours.
Next week: how do you find your value?
A small favour
If you’ve found Value Matters useful, would you help me spread the word? Please share it with your work colleagues and peers, especially anyone who quotes fees or talks to clients about price. The more people who see it, the more firms stop leaving money on the table.
Thank you.
Terry Dunbar
Selling Value 4 Professionals