If you ever give a single price to a client, you can guarantee that price is wrong.
Everyone values things differently – it’s one of the difficulties we have to deal with when value pricing.
You have no idea how much any client is going to value the work that you do, so it’s your job to get as close as possible to what economists would call the buyer’s reservation price – more commonly referred to as the maximum willingness to pay.
The majority of the accounting profession are undercharging massively because of the fear of rejection and losing clients.
When you undercharge, you will find you end up having to cut corners, skip out on valuable extras and not give the client the results they really want.
It’s not intentional, but because you are so busy, you end up rushing jobs, making small mistakes or missing out on potential opportunities for the client.
Undercharging is not fair to you because you end up working crazy hard and not making enough money. But it’s also not fair to the client because you could give them a much better service if you only had the time and resources.
You need to charge a higher price so you can deliver value to your clients.
So, how do you set your prices when you don’t know what the client’s maximum willingness to pay is?
Rather than presenting the client with one single price that they can either take or leave, give them a couple of choices…
Create different packages for your services to suit different clients’ needs. You can think of it as a ‘Bronze’, ‘Silver’ and ‘Gold’ package.
If Starbucks only ever sold one small size of coffee, they would be throwing away millions of dollars every year. Having several different sizes allows the customer to choose to pay you more. If you don’t have an option to allow the customer to spend more, they won’t.
Back in the 1990s when I started my own accounting firm, I did a lot of tax planning and incorporation work.
I used to charge way too low – then I came across Menu Pricing.
I created 3 packages, making the middle package exactly the same as what I had been doing before, but at 3 times the price. I then had a cut-down version stripped down to the essentials, and a premium version with all of the highly valuable extras.
Over the next few years, I found it so much easier to make the sale.
The pricing conversation was no longer a yes or no question, it was instead about which package was right for the client.
Interestingly, I found that almost everyone bought either the middle or top package. I had also increased my average price to more than 3 times what I was charging before.
Over the last 20 years, I have collected dozens of stories from business owners who have implemented menu pricing and totally transformed their business.
There are some people that say it doesn’t work – but those people don’t understand value pricing.
I’ve heard people say that you should work out exactly what the client wants and needs and build that solution for them. I totally agree – but you still don’t know what that person is willing to pay.
If you only give them one price, it is going to be the wrong price. It’s either going to be too low or too high.
If it’s too low, the client will say yes and you will have left money on the table because you didn’t give them a chance to spend more.
If it’s too high, you lose the business because you didn’t give the client a cheaper alternative.
You must give the client choices and let them choose what is right for them and what is right for their budget.
If you found this valuable and would like to learn more about value pricing, I run a free live online training session every month with a topic chosen by you. Attend live and you can ask me any questions you have. Click here to register and I will send you an invitation to the next session.
Wishing you every success on your pricing journey
Chartered Accountant, Public Speaker and Author of Amazon No.1 Best Seller “Effective Pricing for Accountants”
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