We have to do a better job of educating our clients and prospects. There is a lot of mediocrity out there. I find it hard to deal with clients and prospects who demand the level of services we provide and also demand we cut our prices to match some cut-rate, low-quality vendor. Even worse, I find it frustrating when we lose business to a cut-rate vendor after having a client demand we provide a level of service I know that other vendors cannot match. Help!
Thoughts of the day: Educating your buyer is essential to winning and hanging onto business. In a recession, many vendors will cut prices and cut corners to go along with the lower price. Customers may not understand what they”™re getting from your company and how that compares with what they might or might not get in the future. There are lots of ways to educate the customer; make sure you take advantage of the many opportunities to do so.
Define what the customer gets ”“ above and beyond your time and materials. Build a marketing piece that helps prospects and customers compare apples to apples. Make a checklist of everything that is included in what you provide. Give the checklist to buyers who are comparing services. Ask them to go over the list in detail with other vendors to be sure everything that”™s on your list is on the other guy”™s list and is included in the base fee.
Understand that competing with bottom feeders is crazy. In a recession the temptation is to cut fees and then cut them again to match or beat another vendor. The only company who wins this game is the lowest cost, high-volume provider with the deepest pockets. Everyone else who plays this game just loses money and eventually goes out of business.
Develop a bundled price. Refuse to break down pricing into time and materials. When prospects ask for an hourly rate, explain that it is a poor measure of anything.
Educate your buyers. One vendor can offer an hourly rate that is half of what you offer. But if they charge for twice as many hours as you do to complete the same job, the customer saved nothing. In fact, lower prices often equate to lower skill level, which translates into higher errors, more re-do and poorer quality outcomes. Look for buyers who are smart enough to understand this.
Talk with customers about the value of the outcomes they seek. For instance, what happens when they are down because a solution doesn”™t work correctly? What happens if they lose a piece of business because they can”™t deliver properly, due to failure of a low-cost vendor? Find out what kinds of risks buyers aren”™t willing to take. And help them place a value on risk-avoidance.
Get invested in helping your customers grow their revenue and profit. If you do that, your fees will be covered by the increases. You will become a profit generator rather than an expense. That is where real value kicks in for both of you.
Get onto the same side of the table as the customer. See the world through their eyes. Help them focus on the whole picture of where they”™re going and how you can help them get there. Shift the conversation away from picking apart your direct costs.
Take a look at the profile of all of your customers. Are there any that are not likely to value growth and profit? Think about getting rid of them. They”™re on a downward slope and you don”™t want to go down with them.
Become predictable. Know what you can deliver. Promise to do exactly that. Find customers who value that. And then do exactly what you said you were going to do. Set up a contract that rewards performance. Take a piece of the profit, knowing you can always deliver increased profits. Sharing risk with a customer is a compelling sales proposition.
Looking for a good book? Try “Value Based Fees ”“ How to Charge ”“ and Get ”“ What You”™re Worth” by Alan Weiss.
Andi Gray is president of Strategy Leaders Inc., strategyleaders.com, a business-consulting firm that specializes in helping entrepreneurial firms grow. She can be reached by phone at (877) 238-3535. Do you have a question for Andi? Please send it to her, via email at AskAndi@StrategyLeaders.com or by mail to Andi Gray, Strategy Leaders Inc., 5 Crossways, Chappaqua, NY 10514. Visit AskAndi.com for an entire library of articles.
