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Pricing Strategy for Outcome, not Budget: My Moment of Revelation

Note: For more blog post goodness from Mirasee, check out Danny’s guest post about the keys to success on Shake Off the Grind. Please take a minute to read it, and leave a comment! 🙂

It was getting close to 8pm and I was sitting in my parked car wondering how I got into this mess.

I had stayed several hours beyond the agreed upon consulting time with my client and I was late for dinner. The wife was ticked off, and I was tired, hungry and very, very frustrated. Despite being late and already in the dog house, I sat in my parked car for another 45 minutes.

This was no way to run a business. I knew that I had to fix it, or else.

Some months before that, I proudly put out my small business coaching / marketing strategist shingle. I was an entrepreneur once again, doing something which I really enjoyed.

I Was Thinking Too Small…

But, like most start-up business, I was thinking small – too small. I wasn’t even soliciting small businesses by the strict definition of any business with under 100 employees (in fact, a 30 person company would have been ideal). Nope, I was going super small: solos and start-ups.

As a result of this, the products and pricing were small, too. I was offering stuff like “one-hour elevator speech consultations” and “core marketing message” consultations for $149 (further discounted to $99 for the referral clients of certain non-profits) or half-day consultations for $495. It made sense, I reasoned – this is what they could afford, so I had to make packages to fit their budget.

So that is how I wound up in my parked car that evening. I had just walked out of a “half-day” consultation that really took a lot more time than a half a day. There was so much to do if we were going to make a difference, and it could not be accomplished in just 4 hours. You see, these hour-long and half-day gigs, unbeknownst to me, seemed to come packaged with the expectation that I can fix their entire marketing in that one hour or half day or whatever it was.

Which of course, is impossible.

So, being who I am – someone who loves helping and supporting people to their success, which is my purpose and my value proposition, I went above and beyond what was agreed upon.

But in four hours, that value proposition is stretched to the limit. How can you fix years of awful marketing in four hours? The answer of course, is that you can’t.

So sitting in my car, I started to think about what got me into this situation. After some time I had a bit of revelation. It was so simple and obvious and I still remember that eureka moment (the other eureka moment was when my thinking was confirmed to me by one of my mentors, Kevin Nations).

My Moment Of Revelation…

My revelation: These piddly services are not solving the customer’s problem. They are just satisfying the customer’s budget.

Wow. Now if you’ve already been down this road, then sorry for wasting your time so far. But at that moment, for someone who had not “clicked” yet this hit me like a ton of bricks, so if you are there right now I hope this is as moving for you as it was for me. As I sat in that car, I realized that I wasn’t helping anyone get results with these packages.

Then I started thinking: What if budget was no option? What would I do? What package would I put together if there was no limit?

I started the car and drove home. After having some dinner and telling the wife how much I love her, I sat at my desk and designed the package I would love to offer – a complete coaching package that included creating the marketing foundation, an ideal customer profile, powerful messaging, strategy, tactics, calendar, an implementation action plan and creative consultation with pros for design and copywriting. A package that would take months to implement, but at the end of it was damn near guaranteed to get results.

Then, I priced out that puppy. My eyebrows shot up. I remember thinking that I will see how this’ll go with my next prospect meeting due to happen the next day.

The Next Day, I Met With A Prospect…

The next day I listened to the prospect (you always listen to the prospect), customized my preconfigured package to fit their need and without batting an eye, said:

“Mr. Prospect, to achieve the result you want, this is what you need in my professional opinion (list it all), which will solve the following problems for you (list them all), which will give you your oh-so desired benefits of (list them all). Your investment to get me onboard to consult you to achieve this result for your business is $8,000.”

I shut up and waited.

He asked me a few questions and accepted.

This prospect was not bigger, nor did he have more money that the one I had given my soul to just 16 hours earlier for a fraction of the price. Not at all. In fact, I’d put them at the same level of business growth stage and level of success. But the right combination of client profile, client motivation and desire, packaging and sales combined to create a great sale for me and an eye-opening lesson.

Ironically, This Was Much Easier…

Ironically, I was much more confident selling the $8,000 package than the $149 one. I was always worried that the $149 would not deliver and that came through in my sales pitch, but since I had no such concern with the $8,000 package, I came across as confident and very self-assured.

In the end, my conclusion was that by having these “small” packages, I was actually doing my clients an terrible disservice. I thought I was doing them a favour and doing the right thing from a business perspective by offering packages that fit their budget. But what’s the point if it doesn’t get them even 10% of the way to where they need to be to see any sort of positive result?

Has anyone in the history of the world ever told a heart surgeon, “I don’t have a budget for all four blocked arteries, can we only do two for now?” Has any heart surgeon ever responded, “Well, I can understand your constraints, sure I’ll just do half the surgery, then.”

Ludicrous!

It’s is vastly more ethical and professional – not to mention lucrative and effective for all involved – to make packages that will get the client his or her desired outcome in a most spectacular way.

In fact, I would say it is your responsibility to create a package that will serve them the best way possible. Anything less, especially under the pretences of “meeting the client’s budget” is a compromise of your professional opinion for what is needed to achieve the client’s desired result.

Create Your Pricing Strategy For Outcome, And Nothing Else!

Forget making packages to fit their budget. Pricing strategy that is created for budget is crap. Price for outcome – that’s the ticket.

Will some people turn down your premium package? Of course! But you didn’t want those clients anyway. They aren’t the ones who are going to be good clients. The right client will compare the outcome to the investment, realize they desire the outcome so much and will pay you to help them get it.

If that wasn’t great enough, here is an additional nice bonus. The minute I started charging thousands instead of hundreds I observed the following very desirable effects:  Clients were always on time. They gave me their undivided attention. They had all their homework done. They never were late paying me.

Wow, I thought. Why the @#$% didn’t I think of this sooner?

I’ve never looked back. That was almost 3 years ago.

Why I’m Sharing This With You…

I share this with you because you might be where I was back then. If you aren’t, then hopefully, it was a rueful and amusing read for you because you’ve probably been there and have since side-stepped this pile of doo-doo.

But if you are in it, then I hope this was a wake-up call for you as much as it was for me, 3 years ago, sitting in my parked car, contemplating all this. Learning how to set prices isn’t easy – but it makes a HUGE difference.

You deliver immense value. And there are people who are ready and willing to pay to receive it. Go out and serve the world in a big way – it’s your calling and your responsibility!

What do you think? Do you agree? Have you had this awakening in the past, or are you having it now? Please leave a comment and let me know…

About Peter Vogopoulos

Peter Vogopoulos is a marketing and business coach, university lecturer and co-founder of Firepole Marketing.

17 thoughts on “Pricing Strategy for Outcome, not Budget: My Moment of Revelation

  1. Peter, I really enjoyed reading this. Thanks for sharing your personal story instead of coming out with generic BS that a computer could write.

    A few weeks ago, I was preparing to offer my consulting services on my blog. I got my copy all written up and set up the pricing options. I was about to publish it on my blog but then thought to myself… What the crap am I doing? This is not enough money for me and this is not enough of a service for my potential customers. I scrapped the whole idea. Now is just not the right time, and I’m glad I realized that before pulling the trigger.

    Anyway, thanks again, Peter. Great stuff. Post enjoyed and retweeted.

    • Thanka for stopping by, Tristan. Thank goodness you had your moment before you were too deep into it! It sucks to find out you are working yourself poor later, then sooner. Glad you liked it, and remember, go do great work and get paid well to do it, yeah?

  2. “These piddly services are not solving the customer’s problem. They are just satisfying the customer’s budget.” So true, so obvious, yet somehow so difficult to reach this conclusion.
    Satisfying the customer budget is either taking their money without giving them anything of value, or giving them a lot for free… Thinking about it – both bad for ones reputation…

    Thanks for the post 🙂

  3. I love serendipitous validation! I’m actually stepping out of that pile right now and completely revamping the way I deliver my coaching to clients. I realized that I was horribly and unfairly under estimating my right people. Sadly, I’ve under estimated their commitment, their passion and their ability. No more! I’m aiming to have the new coaching packages on my site by the end of the week.

    Thank you so much for validating my crazy, hair-brained idea to scrap it all and rebuild a solution that should work better for everyone. 🙂

    • It’s a realization that we all come to eventually – almost like a rite of passage. 😛

      Thank you for stopping by, and for sharing your experience with us. I’ve clicked through to your site, and I really like your stuff. I’ve subscribed to your feed, and I look forward to reading more. 🙂

  4. Great post Peter. I am curious how you seeing this strategy fitting into the overall client acquisition process. If you have an existing relationship with a client, you have trust, and you know this is what they need, then it sounds like a slam dunk. But what if this is a new prospect? Perhaps the potential client is someone who reads this blog but doesn’t have any first person experience with your work. Suppose you make the $8k pitch to that person and the response is, “How about we trial just one of these goals for $300, and if I like the results I will consider the full package?”.

    Do you take that person up on the trial run? What is your thought process, pros and cons?

    Thanks

    • I think that has to be decided on a case by case basis, depending on what can really be done for the $300 – for example, if instead of a whole website design and branding project, they want some quick and dirty keyword research to do the rest themselves, then maybe.

      But in most cases, when clients say “let’s try the $300 version first”, what’s really standing behind that objection (hint – see this post: http://www.firepolemarketing.com/blog/2011/01/22/fire-proof-selling-post-5-of-7-why-we-love-objections/) is that they don’t trust you yet, and they want to test you out. You should be establishing that trust and credibility before asking for the sale, but if you haven’t done it yet, then you aren’t going to do it on a $300 project that can’t really deliver proper results, so I’d say walk away.

      Peter, what do you think?

      • That’s a great question, Gregory. If I got that from the prospect, I need to recognize two things:

        1. I did a lousy “pain” step of the selling process and I should think about what went wrong when I debrief myself. I probably didn’t get deep enough into what this problem is costing them, not just in money, but in headache, lost potential etc.
        2. There is a hidden objection there, just like Danny also mentioned. I’d probably say, and have said something like this:
        “Mr. Propsect, we could do that, but can I ask you a question? Let’s pretend I accept and we work on the $300 project. And it works great. But it still hasn’t solved your problems of [pain1], [pain2] and [pain3]. What happens next?”
        “Well, then I guess we would move on to phase 2”
        “Oh I see. We move on to phase 2…. *pause*…. I don’t understand, why don’t we just do that?”
        There is usually a lot of hemming and hawing that will go on here, so you have to rush in with a life-preserver:
        “What would starting with the $300 project give you that doing the whole thing would not?”
        Here I would want to identify the trade-offs in his/her head. Is it finances? Believability. I’d work to get to the objection and then bust it: If it’s finances, we can talk spaced out payments. If it’s trust, I’d break out the guarantee.
        “Mr. Prospect, here is how I work. I believe marketing is a long-term project and I like to be engaged with my clients for the long-term to help them achieve their goals. I understand that you have some hesitation and would like to test the waters with me first”
        Assuming nothing I have said so far will work to reassure him (testimonials, examples, case studies, etc.), then we’ll go with a guarantee:
        “Let’s do this: We agree to the full program – we both demonstrate our commitment to achieving the objective – and start with phase 1. If by the end of phase 1 you are not satisfied, you owe me $300 and we part as friends. I wouldn’t want us to work together if aren’t 100% satisfied. How does that sound?”

        The hardest question is if you ask me know “If push comes to shove, would you still do the $300 project”. That’s such a hard one and I hate to say it depends, but it does. I’ve gotten better and better and sniffing them out. I can usually tell if there is motivation and the money behind it at this point, or if I am being strung along. If I really did think that this is what is needed to satisfy the buying process of the prospect, then I would say yes. Certain behavioral styles (google: “DISC profiles” and look at the “S” and “C” profiles), need to reflect on decisions and need reassurance that their decision is a quality one. If I have detected that this person is indeed of that style, I’d probably factor that into my final decision.

        Okay, that was loooooooooong. But I could talk about this stuff forever. I hope this was sorta helpful and not just a ramble. 🙂

        Peter

      • I am with that it is all about trust and if you are making the BIG pitch before trust is established then you are fumbling the process. Let’s generalize the question to “How do you establish trust?”. Obviously this is going to vary depending on context but for many people, going from reading blog posts or consuming other promotional material to an $8k commitment is a big jump in trust. The upsell is one way to build this trust, right? Start with a small commitment and build up.

        I’m just trying to get a sense of the appropriate context for this post…how are you going about working up from new prospect with only superficial trust to prospect ready for the big pitch?

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  6. I’d say I’m standing in the pile of you-know-what as we speak.
    I’ve been writing all my life but the business aspect is new and I’m still just getting my feet wet. Every client is a brand new challenge, and I’m relieved when they’re happy with my work! Just this morning, I completed a $50 on-line dating profile re-write and my client was thrilled. He even said that his new profile made him want to date himself. That’s high praise. He owns two local restaurants so naturally, he now trusts and likes me, and knows that I’m the real deal, so hopefully I’ll be doing more work for him in the future. Plus we’re in a referral group together, so he can sing my praises to everyone there. When THEY decide they want to use me, I better have a big proposal ready for them, right??
    For now, I’m offering ‘a la carte’ writing gigs to encourage people to work with me–of course hoping that it leads to a bigger gig down the road. But, I do not yet have a big package deal like you describe, although that is the direction I am moving in. I can’t ‘play it small’ for long. I figure while I learn the ropes, the small gigs are ok….but very soon, I’ve got to step up and MOVE up! Thanks for sharing your insights!

  7. Hey Peter
    Thanks for this awesome post.
    In Kenya, where I’m from, price is usually the deciding factor, even for clients who can afford to pay top shilling for great outcomes. One net effect is that clients are being shafted because they pay for peanuts yet they expect grapefruits. And then they complain about poor workmanship.
    Anyway, recently, my biggest writing client wanted to contract me to edit some stories for 10 days in November. I thought of the outcomes she expected (concise stories, sexy headlines, etc), then I named my price. As expected, she caused a riot and because she’s my best client currently, I reduced my price by Kshs5,000. Still, she caused a riot. I stuck to my price. The riot continued. Then I walked away. Even though I lost that editing job (and the much-needed income for Xmas!) I’m glad I stood for pricing for outcome, instead of pricing for budget.

  8. Thanks so much for writing this article! It is definitely an eye opener for me. I’ve always struggled with pricing and out of fear or lack of confidence under price my services and end up frustrated. At the moment I have a deal on the table that I can’t close yet because I can’t come up with a price.
    What I do is a bit new and many people don’t understand the wok I do in social media.
    Thanks again.

  9. Thank you so much for writing this, Peter! This is such a revelation for me. I was thinking too small! I would like to write a lengthy comment, but I am too excited and want to apply all the things you’ve shared in this post. Just dropping by to say thank you.

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