Part 5 (1/2)
How can we deliver higher value, given what the clients truly need?
Once you have ful answers to these questions, you can thenvalue-based pricing as a strategy
Top Challenges Focus on Value It's hile to note that the top chal enges uncovered in our fee and pricing research for professional services fir:Uncertainty about what price a particular client wil accept (because you don't knoel you sold the value)
Pressure not to leave money on the table (because you think you sold the value-but you're not sure-so you're second-guessing your own fees and worrying they are too low)
When a firm is able to increase its perceived and real value to clients, it wil find that:Clients wil likely be wil ing to accept higher fees (though, granted, you may never know the exact fees each client wil actual y be wil ing to accept)
The fir money on the table, because it wil be
Clients wil pressure the firm less, because they wil have confidence in that fir on the value provided for clients and strengthening the overal value proposition of the fir services
Welesley Hils Group began working with a s to the insurance industry several years ago Let's cal the two main partners Bil and Sam Both Bil and Sa firularly commanded fees of 5,000 per day Unfortunately, these saer under their wel -regarded consulting firet clients anywhere near those fee levels Bil and Saative effectives of not having a brand
Fast-forward to three years later Since beginning to ith us, Bil and Saetand clear, conducted annual research to create cachet to al that they say, and built a regular ongoing coet o-to people for the types of services they offer
In other words, they have established a brand, which has established in the minds of their market that Bil and Saued and focused on the value, the focus on fees faded into the background; and they're now garnering ”wel -branded firreat service and value Theand brand work they have done over tier to do with business with And remember, this is a two-person firpays off inthe fees you know you deserve
6
Don't Worry about Your Competition (Let Them Worry about You) What, me worry?
-Alfred E New to beat your competition? What makes you better than your co factors between you and your coet asked these types of questions al the time from your prospects, your clients, and your internal staff Should you have answers?
Yes But don't overdo it
Over the years we have spoken with nuies, and the conversation inevitably turns to the competition We often find that the people who run services fir about, and angling against, other firet market Often it's just not worth the intense tiive it
These mistakes are understandable, but they're stilwe al have precious little of, we list the most co issues that wil er difference
Mistake 1: Over-the-Top Co plans list and describe page after page of information about their competition One plan we reviewed included: ”Over the past three otiation consulting fir with our unique positioning against each one”
Reaction: Obsessing about the coree is sih at an accountant who confidently stated, ”I have discovered that there are 62 other accounting firms in the state and can confirm that 51 of them offer a number of services similar to ours” Yet so plan afterplan as if it were a necessary co Reluctance Many services firms are reluctant to offer a new service that complements their current services because a competitor already offers it ”You see, we can't launch an intel ectual property law practice At least five other firms offer that in our market, and I learned in business school that first e If you're not number one or number two, you shouldn't launch into thefiry (IT) firms, financial services firms, and other professional services firms are not coke and Pepsi The market dynamics for services firms just don't work like this (See more about this mistake later) Mistake 3: Cliched Competitive Differentiation ”We at [na Services are the nuest differentiator is our people, who take a strategic look at our clients' businesses and blend people, process, and technology to create efficient and effective solutions for our clients' ic needs We're ic business advisors with the experience you need to solve your real problems” (This is real copy, by the way, and can be found on dozens of accounting firm web sites) Reaction: Copy like this takes up a lot of space and doesn't say y ”We have a unique y that al ows us to deliver projectssuccess There are five n, development, implementation, and measurement”
Reaction: Sure, it's unique-there's just one process exactly like this-but, with some variances, it's employed by hundreds of firms
Misconceptions about the uniqueness of the firrowth and success because they li of the people who run firms and practices Leaders spend days,to find the unique services they can offer while perfectly fine but not-so-unique services could produce a steady stream of revenue17 What, then, should fir Advice Yourconsultants wil advise you to:Be the first e over later entrants
Be nuh profit
Establish your unique sel ing proposition that other firly different fro unique is key to your success18 Do you think people in a six-person law fir money? They can, and they can do it in a market in which there are 200-person law firms that deliver similar services to similar kinds of clients
Don't Worry about Crowded Markets We can't tel you how h we have eaten at a good nuo; there are simply too many to count But we are pretty confident that there is not a boo row of authentic French bistros in Peru, Maine
If you're a human resources consultant and there are a multitude of human resources consultants that do what you do in the market in which you practice, it simply means there's a market for your type of services If you look for a unique space to create a ood chance nobody's there because nobody's buying
In the microeconomic technical sense, the coke-versus-Pepsi opoly, while service firopoly, you have a few top players with al the clout,to survive This doesn't happen in monopolistic coes in Miaood, food and labor costs are in line, and the newcoht
CHARACTERISTICS OF MONOPOLISTIC COMPEtitION
From a microeconomic perspective, there are four types of firopoly 3 Monopolistic competition 4 Perfect coiven to service firhout the book (be first in a market, be nuood advice for oligopolies but bad advice for monopolistic competition (ie, ies focus on oligopoly-Merck versus GlaxoSmithKline, HP versus Del , and Toyota versus VW These firopolies
Monopolistic competition-the type of firm most service businesses fal under-are characterized by:Many producers (firms) and many consumers (buyers)
Perception from the market that there are non-price differences between firree and are often termed as subtle
Typical y smal barriers to entry and exit (lots of firle)
A degree of control by producers over the price they can coe whatever they want versus perfect coe the same price as anyone else
With perfect coing (ie, price of pork belies on the exchange, price of corn that wholesalers are paying farmers on a particular day) These firms don't have to care much at al about other fir for price
Oligopolies live and breathe by their ability to beat the other guy It's a constant game of one-upmanshi+p Most service firms are somewhere in the middle
Enter a crowded market where there's a lot of business to be had and there are lots of clients with needs, and (assuood chance you can thrive Open a French bistro in Peru, Mainegood luck sel ing foie gras
Change the Question fro someone for a job at your firm It's perfectly reasonable for the candidate to ask you, ”What differentiates you frooes with your clients and prospects You orical y to your coainst a specific competitor And on and on about your coer on about competitors The more you talk about them, the more you validate that your client, prospect, or staffyou to theood salesperson, take control of the questioning and you wil take control of the conversation For exaht answer, ”Wel , we have a very robust research division that keeps us on the cutting edge of the supply chain field and” to e, none of our competitors do In fact, they quote our research to make their points; but at the end of the day, we're the source and the leaders
”I don't knohat they do with our research I knoe do, however, and how it makes our clients' lives better Here's a specific example from your industry”
Drop the Cliches When you do answer the question, ”What makes you different?” don't answer, ”Our people, process, and technology are efficient and effective We are the best; we are unique and cutting-edge; we push the envelope, go the extra mile, are client-centered, and so on”
If you do, you'l sio (You don't believe us? Google buzzword bingo, and see what co hile19 Overcome Your Greatest Competitor-Client Indifference Final y, and perhaps most important realize that for most product companies, the competition is another product company For many service businesses, the stiffest co at al or the desire of your client to ”just do it with in-house resources”