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Blair Enns, Author, Pricing creativity

Hacking the Value Conversation

 

Blair Enns, Author of Pricing Creativity Book

Blair Enns, Author of Pricing Creativity Book

By Blair Enns, Pricing Creativity Webinar Host – May 2018, details here.

The value conversation is where value pricing theory goes to die. The difficulty in mastering this conversation is what causes most people to give up on value-based pricing completely and revert back to selling time and materials. It needn’t be so difficult, though.

There’s a hack to the value conversation that a successful former client of mine pointed out after reading the manuscript of Pricing Creativity: A Guide to Profit Beyond the Billable Hour. When he explained it to me over dinner I thought, “This is brilliant. I should put it in the book.” In the end, I didn’t include the hack because I feel strongly that mastering the value conversation is one of the most valuable skills in all of business – a skill that can transform careers and businesses. So, while encouraging you to learn that skill, I’ll now give you the shortcut. But first, some context.

Perhaps the Most Valuable Skill in Business

There are three tiers of financial success in a creative firm that I can correlate to pricing strategies. The lowest tier of true financial success is occupied by the efficient cost-based pricers – those firms that bill as many of the available hours as possible. An efficient firm might bill around $200k in adjusted gross income (AGI) per full-time equivalent employee (FTE), whereas the average cost-based firm might bill around $140k in AGI per FTE.

The next tier of success is where you find the value-based pricers – those who charge based on the value to the client and not based on their costs or inputs of time and materials. These firms escape the limits imposed by the pursuit of efficiencies, moving their AGI/FTE number north of $200k, into $250k and maybe even the $300k range.

The very highest tier of financial success, however, is reserved for those value-based pricers who master the value conversation. These firms can push into the $400k range and beyond, with no real theoretical limit. A well-facilitated value conversation not only has a profound effect on the income of the firm, it creates more value for the client and it is a thing of beauty to behold. I consider it to be one of the most valuable – perhaps the most valuable – skill in all of business.

The Value Conversation Framework

Here’s the simple four-step framework for facilitating the value conversation:

  1. Confirm the client’s desired future state (What do you want?)
  2. Agree on the metrics of success (How will we know we have achieved these things?)
  3. Uncover the value that would be created by hitting these metrics (What’s this worth?)
  4. Offer pricing guidance (I’m going to bring you a range of solutions in the $Y to $X range.)

There’s lots of nuance around the “how” of each of the four steps above, but it’s really that straightforward. You’ll notice that by the end of the value conversation you haven’t even begun to think about solutions. Your entire focus is on the client: what they want, how you’ll measure their success, how much value you might create for them, and finally, some initial ideas on what you might charge for helping to create such value. After this conversation, you retreat to think about costs and solutions, building and pricing your proposal accordingly, while following the rules set out in Pricing Creativity.

The Reality: Few Get There

So, why are there so few firms mastering what seems like a simple conversation and moving to the highest tier of financial success?

The reasons are many:

  • This mastery is a sales skill and not a pricing skill
  • It requires you to be selling from the expert practitioner position and not the vendor position
  • It’s tactical knowledge acquired from doing, not implicit knowledge acquired from reading or listening
  • It requires you to be talking to client-side executives charged with value creation and not middle managers charged with managing a project or budget
  • The first few conversations can be awkward, and few push through the awkwardness to get to the incredible riches on the other side

All of these reasons and more make a value conversation hack so valuable. So here it is…

The Hack

Early in Pricing Creativity, I tell the story of the first time I saw a one-page proposal based on value rather than inputs. It was the principal of that firm that I found myself having dinner with while the book was in pre-production. Commenting on the manuscript he said, “You left out my hack!” What did he mean, I asked? He replied that he never mastered the value conversation. (Chapter 9: Master the Value Conversation – to me, perhaps the most important chapter in the book.)

Instead, early on in the sale – much earlier than I would advocate – he would put a one-page proposal on the table with three options. But he didn’t view this proposal as the final one. In fact, he said that the initial proposal was never the final one. It was only there to serve as a catalyst for discussion over what the client really valued. The hack, according to my client, was to put at the bottom of each option, “Choose this option if X is important to you.” X might be speed to market, customer service, low risk, knowledge transfer or anything else. He would then ask the client, “Which one of these options is the most appealing to you?” The client would point to one, and in doing so, reveal what he most valued. This would direct the conversation. “Ahhh, so educating your team as we develop the product (or programme) is something important to you?”

In this way, the early proposal led to a more targeted value conversation in which the client and the firm could talk through specific value drivers that the client had revealed by simply pointing to an option, all while framed by the context of the initial prices. The discussion would result in the firm coming back with another proposal more specifically targeted to what the client most valued.

To Hack or To Hold Firm?

As someone who values rule-breaking as much as I do rule-making, I love this hack while I simultaneously worry about sharing it with you. There is no substitute for mastering the value conversation. I’ll repeat that I believe it might be the most valuable skill in all of business, but I also know that the size of the gap between those who understand value pricing and those who truly implement it is problematically large, especially in the creative professions.

As I craft this parting advice I find myself wondering what I would do if I were in your shoes (Win Without Pitching is a productised service business – we don’t value price the way a customised service firm like yours should) and I don’t think I would deviate from proper sales process and a good value conversation. But not all value conversations are good and easy, especially in the beginning. And like all good hacks, I would keep this in my back pocket for those situations where I saw that an elegant theory was clashing with my harsh reality.

So use at your discretion. If you do try it, I’d be interested in hearing how you make out.

Pricing Creativity Webinar Registration Details

Pricing Creativity Webinar Registration Details

 

Ask Me Anything (AMA) with Rebecca Caroe

How is your marketing going?   If you could make one change to your marketing for 2018 – what would it be? (Be brutally honest, tell us what being in control would mean to you).

Now’s your chance to start that change.

Rebecca Caroe is doing a national tour visiting these cities
  • Christchurch 24th November, 2017
  • Tauranga on 27th November, 2017
  • Wellington on 28th November, 2017
  • Auckland on 1st December, 2017
  • Blenheim on 4th December, 2017
  • Queenstown on 7th December, 2017
Meet Rebecca in the morning – anytime from 7 am to midday and get your marketing questions answered, so you can make that change happen for 2018.

Why should I?

Getting expert and independent advice will help you find out if you are doing the right things, whether a change could help your business and give you peace of mind.
Rebecca wrote on LinkedIn recently about “rip-off” marketing agencies and what best practice for Adwords and SEO should be.
She will showcase the Creative Agency Secrets local marketing process and you’re invited to come and learn.  Just tell us you’re available and we will send you the details and where to meet.

 What you could learn

  • How to test your business website is working
  • 8 top tips for local marketing (that you can do yourself)
  • How to make the one change you most want in your marketing
  • Why personalised coaching to learn skills is better than a training course
Doing the right thing at the right time with the right tools is what you need.  So ask Rebecca when she´s in your town.
Are you ready to raise your game for 2018 and improve the return on investment from your marketing spend?
Just tell us you want to meet and we’ll do the rest.  No charge – just invest your time and Rebecca will do the same.
Looking forward to meeting everyone.

Kiwibank, this is how I’d re-write your email

Kiwibank email text confuses

Kiwibank email text confuses

And I made a fool of myself on LinkedIn by explaining how I totally mis-understood Mark Wilkshire’s message.

Re-write to clarify the message

Here is how I would re-write the email in order to prevent others doing what I did.  [Aside: surely I’m not the most stupid customer Kiwibank has…please, humour me!]

Dear Rebecca

You have a Notice Saver bank account with Kiwibank.  The interest payments for this account come from our PIE Unit Trust.  The money you save in your account is invested in the fund and profits are paid back to you in the form of interest.

As an investor in this fund, we are obliged to share its recent financial performance with you. You can view an electronic copy of the financial statements for the year ended 30th June 2017 on our website via this link.  

[insert rest of the statutory text here].

Lots of love, Mark Wilkshire, Kiwibank

Why is this clearer?

I think this text improves the context for receiving the message.  It explains an investment I didn’t know I had and how the investment performance is relevant to my personal situation (bank interest).

Personally, I wouldn’t try to push out messages about other investments in this message.  Make it simply about this one thing, and how to contact us.

The full truth about what I did on Kiwibank

And, I would anticipate possible confusion among customers by enabling self-help tools on the website to be advance programmed to have answers to questions relating to this investment.

My “Kiwibot” experience below reveals more about the lack of customer orientation and more about the regulatory communication box-ticking which probably sits behind this email misunderstanding.

Kiwibank Bot does not answer questions

Kiwibank Bot does not answer questions

 

 

Why the HELL NOT?

How to use Google My Business to improve SEO

How to use Google My Business to improve SEO

It’s frustrating when you search for a business and get the wrong answer.  Did you know that you can edit how your business listing is displayed in Google search results?  It’s called Google My Business.

This short slide deck shows what you can do in the tool and then how to use it to improve how your business is listed.

How to improve a ‘cold’ email introduction

Many businesses use direct email and purchased mailing lists for new business development.  It’s a tried and tested technique.

No cold calls

No more cold calls or emails. [Image credit http://muddycolors.blogspot.co.nz/] 

But it only works when you have a VERY compelling and well-written message.

Here’s an example we received

Would you like to have just one invoice to pay every month for all of you property maintenance? And only have to remember one number. Then give us a call and let us and our team do it all for you. From a one off job, or a complete maintenance package that works just for you

I have attached our company profile for you to see who we are and what we do

Also here is a link to our website [included but not hyperlined]

Please do not hesitate to contact us with any queries or quote requests

Kind regards

 

Improve your cold email text

Thanks very much for getting in touch.
As you probably can see I run a marketing business and my eagle eye couldn’t help noticing a couple of things you could improve with your approach email which I just got.

You forgot the company profile attachment.  And the link isn’t formatted correctly to open your website.

But the main thing your email lacks is a strong reason for me (the recipient) to DO ANYTHING.
Take a read of a couple of our blog posts about writing cold emails
Do you see that both give me a reason to reply?

I want to make you an offer

Will you let Creative Agency Secrets re-write your cold email so that it actually gets prospects to reply or click through to your website?
We will show you the techniques that not only get read, they get prospects to take action and start a dialogue with you.
If this sounds like the sort of marketing you’d like to be doing, let’s talk on the phone next week.
I have got time free on [name date] – any time after 10.30 am.
Thanks for your time

 

 

Regards

 

 

Rebecca Caroe

 

 

P.S.  There is no obligation to work with us after the phone call… but we are sure you won’t be wasting your time.

 

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Golden Questions

A “Golden Question” is one in which the answer tells you more than the question itself would imply.

Useful for research, discovery and us biz dev types who need to quickly assess new prospects and whether they will buy from us.

I learnt about it from Don Peppers who integrated it into his CRM method (Identify:Differentiate:Interact and learn: Customise).  His classic was to find out whether a customer had a high propensity to buy premium brand pet food.  The question was “Do you buy your pet a christmas present?”.  Neat, isn’t it?  Those who do, are more likely to lavish spend on their animals than those who don’t.  Simple.
And so how have I used it with my clients?  They are mainly working in B2B areas and so the question set needs revising depending on your particular positioning and needs.

#1 Digital Agency selling high end technology back-end services

Julian wanted to be able to find out whether a prospect wanted a simple web site or one with higher functionality.  Working with him, I developed two questions to help him quickly filter people:

Question 1: What was the date of your first website?

Question 2: How many times since then have you re-launched or substantially revised it?

Why does this work? With the first quesiton, he can tell if your company is an early adopter or late arrival for the new web technologies.   And with the second, he can assess your likely sophistication as a web user for marketing.  Each time you re-launch a website the functionality is improved. Relaunching every 2 years means you are more likley to be interested in moving to leading edge features.

So, how does your company stack up against his questions?

#2 Agency working with start-up web businesses

These lads want to be able to find out how far down the road you are to getting your website functional.  THey also need to find out the degree of technological sophistication of the person they are talking to.  Pitching yourself too “techy” and you’ll quickly lose the interest of a punter but being too simplistic has the same effect.  Similarly their services vary depending on the stage of the business and how close to launch the start-up business is.

Question 1: Have you got your requirements document written?

Question 2: Are you happy with your user numbers?

The first establishes business stage and sophistication and the second devines the success of the marketing support put into an already functioning site.

Now what golden questions are right for your business?  Can you use them to shorten your prospecting time frame and more quickly find prospects who have the potential to become customers?