How your clients know nothing about price
Did you know your clients are absolutely clueless about price?
Yes – clueless.
And it’s proven. In fact, it’s proven by psychophysics, a branch of science that has been around for more than a hundred years.
So what does it mean?
Essentially psychophysics means that we are more sensitive to differences than we are to absolutes.
Take sensory judgments such as weight, smell, taste and sight for example. If I showed you two shades of red you would be able to see the difference – i.e. tell me which shade was darker – but it’s unlikely you would have no idea on the absolute shade of red.
The same with your sense of touch. If I asked you to put your hands in two buckets of water – one hot, one cold – you would struggle to tell me the exact temperature of the water. But you would be able to tell me which one was hotter and which was cooler.
We are great at understanding the differences...
Why fixed pricing is always wrong
Or to be more precise… when you have a single fixed price
It’s always wrong.
Essentially it goes back to the basics of economics. I have always been fascinated by economics – so much so that I took a degree in it. One of the most important things I learnt was the theory of the equilibrium price.
Or in other words the fact that price should be set where the supply and demand curve intersects.
When you look at a visual representation of that it shows an area above the equilibrium price and below the demand curve that is the consumer surplus.
That is also the amount of profit available if we can tap into the fact that different customers will pay different prices.
You can watch the video here.
The concept of magic price
In a previous video I looked at the concept of magic price and how you figure out your magic price. I looked at the situation of you selling a tax return that costs you £50 in...
Taking the law of supply and demand to the next level
So what is a magic price
Essentially, it's the price that maximises your profit.
The law of supply and demand
When I started to study economics, even at school one of the very first things we learned was the law of supply and demand. That the point at which the supply curve and the demand curve intersect is the equilibrium – or ideal – price. The trouble is that while that works in theory, in practice it's difficult to measure.
If we could, if we knew, for example, exactly how many tax returns people would buy at £200 or £300, we could easily plot a demand curve. And then, if we worked out the profit for each price point, we’d end up with a bell-shaped chart. One that basically shows that a zero price – giving your stuff away for free, while still having to cover all of your costs – means you’d be making a loss.
Similarly, at the other end of the scale, if you price too high...
Debunking the myth of price sensitivity
One of the big myths I hear over and over again – and one of the main things holding us back with our pricing – is that our clients are price sensitive. But, as the Amazon number-one best-selling author of “Effective Pricing for Accountants”, I can tell you that they’re absolutely not.
Let me explain.
Most accountants and bookkeepers I speak to think their clients are price sensitive. But research by behavioural economists suggests that the number of price-sensitive people in society is about one in five, or 20%. And a typical example might be someone who’s retired, who collects the free newspapers and goes through them every weekend meticulously cutting out the 3p-off food vouchers.
So I admit all they care about is price. They’ve got time on their hands. But what I also know is that they’re not your clients. And, if they are, then you may want to revisit your ideal client process!
3 tips for pricing one-off jobs
When deciding how to price projects such as annual accounts it’s relatively easy. It’s repetitive, predictable and we are able to create a package solution to suit that makes it easy to price.
But what about when it’s a one-off job? How best do you price it then?
Here are 3 tips to help you do it more effectively:
Tip 1 – Establish the value to the customer
The one-off job, or special job, is just that – it’s unusual and so pricing for it is unusual too.
The first step therefore is in quantifying its value to the customer. What is it that they want you to do and – more importantly - why do they want you to do it?
Getting the answer to the second question will help you in determining the benefit to them of what they are asking you to do – and therefore the value to them. It may be subjective but that’s fine.
You need to create a picture of what’s at stake. That will help you work out...
Why believing in a market price could mean you’re missing out
As the Amazon number-one best-selling author of “Effective Pricing for Accountants”, I want to share with you why there's no such thing as a market price.
Often, if I tell an accountant they’re charging too little for something, that they should increase the price of doing a tax return, for example, they’ll say, "But Mark, you don't understand my client base. I’m charging the market price – I can’t charge any more."
But I’m going to tell you exactly what I tell them: that they’re wrong. That’s there's no such thing as a market price. And I can prove it.
Staggering results from benchmarking survey
In 2014 I was privileged to carry out the single biggest benchmarking survey of the UK accounting profession. In it, I asked 725 accounting firms a whole bunch of questions about how they price as a profession. In particular, I looked at 25 different accounting, tax...
Increase your sales leads – automatically
List building – building up your database of prospective clients, of those people you'd like to work with – is one of the fundamentals of marketing. Yet when I ask most accounting firms and bookkeepers how big their list is, typically it’s less than a hundred.
A list of less than a hundred severely limits your potential growth. Even sole practitioners should be aiming for a couple of thousand. But how do you go about reaching this?
You can watch the video here. And here are the steps you want to take.
Stage 1: Establish a system
The answer is you put a system in place that will nurture and grow your list. It’s what I see as one of the main strategies of social media, including the big three: LinkedIn, Twitter, and Facebook.
In addition you should have – actually, not should but must have – either a YouTube channel (video’s the most powerful form of marketing there is), or a blog. Or best...
How webinars can increase engagement – and conversion rates
Have you ever run a webinar? If you haven't, then it's time you did because they’re incredibly powerful. And, to help you get started, I’m going to share some key tips.
If you prefer to watch rather than read, you can watch my video here.
Live? Or pre-recorded?
The first big question to think about is whether you should run webinars live or pre-recorded.
Some great software exists that allows you to create webinars as videos and then run them on any schedule you like. Once a week, for example. People log in to watch the webinar, and it feels live. As a concept it has a lot of appeal. However, one problem I’ve found – and other people’s research bears this out – is that even though pre-recorded webinars may feel live, conversion rates are significantly lower.
Tip #1: Run them live
My first tip then is to run them live. That way, you can give whatever offer...
Events can help you win leads – and business
Have you ever spoken in public, or thought about speaking in public? If you haven’t, it’s a great way of establishing yourself as an expert and winning new business. But, incredible as it may seem, although the event lead-winning system has brought me hundreds of thousands of pounds of business over the last 12 months, I don't see any other speakers using it.
If you prefer to watch than read you can watch the video here.
The secret behind winning new clients…
If you've been invited to speak at someone else’s event, for example one organised by your local chamber of commerce or bank, what’s your primary goal?
Of course you want to add value. You want to deliver great content. And you want to be seen as the expert. But your primary goal is always to capture the contact details of everybody in the room.
But, before I teach you how to do just that, let me talk briefly about the three-tier event...
Find your niche to increase turnover and reduce stress
Today I want to share how you find your niche. But first, why is it so important?
Specialists earn more
You’ve probably heard many times that specialists make more money than generalists. And it’s absolutely true. Accounting professionals who specialise make more money. Whereas firms that take on anybody end up running themselves ragged, trying to deal with too many different clients and too many different services.
My tip is to make sure you're clear in your own mind about not only your niche, but the profile of your ideal client. And to help, I’m going to share the three main types of niche. (Just to make it easy, they all begin with S!)
Are there any sectors that you’re particularly interested in or already have clients in? It might be doctors or dentists, the legal profession or the IT industry. Think about the industry you’re most fascinated by and build on it.
Of all the...