VeraSage

Tom "Bald Dog" Varjan

Ed,

I usually offer three or four investment options.

Many years ago I used to offer one “take it or leave it” option, but then came Alan Weiss and sorted out my thinking. Since then I’ve been offering options.

The first one is almost always is a retainer. No project per se, just a as needed access to my brain whenever the client has questions or needs a second opinion on something.

Then I start with the lowest option, which involves a specific project, which is under budget.

The middle option is about on budget.

The highest option is way over budget.

As clients read the added value they get from higher options, they tend to choose higher options. It’s interesting how the budget gets disregarded as buyers recognise new value elements in the description.

I’ve also tried to present the highest option, but it often scares buyers away, and instead stepping down to lower option, they run away.

But the step-up version seems to work quite well.

Linda Kay

Interesting question.  We’re using the services/pricing levels approach in several situations.  In answer to the question, we haven’t considered listing the most expensive option first.  In presenting the information, Level 1 is the Basic option - the bare bones.  In Level 2 we add services or products for a middle of the road choice.  Then Level 3 is everything the prospect could possibly want plus a few other ideas.  We like the way starting with the basics builds from one level to the next. 

On Ed’s advice, we decide which level we want or expect the prospect or client to buy as we’re writing.  Most of the time our expectation is Level 2.  Occasionally we’re surprised with their choice and we’re fine with any level they choose since we’re making money on each level.

My question is do you put the pricing in the original proposal or give it to the prospect/client in another document?  We choose to leave the pricing off of the description of services.

Tom "Bald Dog" Varjan

Linda,

What I do is that I send the proposal without the investment options to make sure clients agree with the rest. Sometimes we massage the objectives, metrics or value. If they agree on this part, then I send the proposal with the investment options. But by then they understand the value.

Also, I usually ask for $500-1,000 before writing a proposal. I want prospects to demonstrate they are serious.

Ron Baker

Ed,

Interesting question.  There’s a lot of empirical evidence in sales that offering the highest option first is the way to go, which is why the car salesman or suit salesman will take you the most expensive item first.  It’s much easier to buy $25 socks after you’ve been shown a $3,000 Armani suit (even if you don’t buy it).  Or a $100 omelete after seeing the $1,000 one!

Things aren’t as settled in the PKF world, however.  Probably because we don’t have as much experience with this type of pricing as retailers do.

I have tried both ways, presenting highest price first down to lowest, and the reverse.  My sample size is too small to draw any definitive conclusions, but I must say I’ve had better luck with higher price first.

This run counter to Tom’s experience, however, which is why I don’t think this question is settled. Paul Dunn used to say state your price right up front, in the first paragraph of a proposal, and he swore by that advice, but as I recall, Paul didn’t use the options strategy.

Certainly offering options is much better than one take it or leave it option, which Weiss has proved quite well.  And I like Tom’s idea of charging for doing a proposal to test seriousness.  So many PKFs are so scared of even considering this, but it’s an excellent way to avoid wasting time being column fodder.

Another thought:  why is it that software companies present options in columnar form?  Maybe they know something we don’t about the effectiveness of that presentation?  Perhaps we should test that presentation as well.  I never have, but I’ve seen others do it, usually highest to lowest (left to right).

When to present the price is another interesting question.  Obviously, the seller controls when.  But I think it depends on how good the “conversation” has been between the two parties.  So I can see the logic of Tom’s approach to present value options without prices, but I’ve also done it Linda’s way, and have concluded it depends on how serious the customer is and the quality of our conversation.

Bottom line:  play around with it, and find out what works best for you.

Tom "Bald Dog" Varjan

I think great clients have different fee expectations from junky clients who are looking for low prices.

Great clients do business on a win-win basis. They know they get great return for a premium investment.

I’ll also change my approach, and start with the highest option and experiment with this approach for a while.

I’m also thinking of creating a document with some previous gigs and their fees. Then I can say:

Mr. Prospect,

You’ve asked me how much this gig would cost. I don’t know yet, but as a “ballpark” guideline, here are some previous gigs and their fees, so you can judge for your self whether or not the quality and standards of my services are too thick for your blood. As a general guideline you can expect 3-400% return on your investment.

Then I roughly describe each gig in one paragraph, juxtaposing the fee against the value the client derived from the gig, so the prospect can instantly assess ROI.

I’ve just come up with this idea by the previous comments, so now I can polish it, and see how it works. Great discussion.

Ron Baker

Tom,

That’s a great idea.  Mahan Kalsa advises to “test your price” without going a lot further, and that might be an effective way to do it.  We’d be interested in how that works for you.

Also, on how your experience goes with highest price first.  The reason it might work is because people who have the self-respect to present it that way are more confident professionals.

Tom "Bald Dog" Varjan

Ron said: Also, on how your experience goes with highest price first.  The reason it might work is because people who have the self-respect to present it that way are more confident professionals.

This is a brilliant point, Ron. I’ve never thought about it, but it makes perfect sense. Prospects instantly know what league they are about to start playing in and adjust their commitments and accountabilities accordingly.

This is just getting better. Thanks, folks.

Brenda Richter, CPA

Thanks for the great idea of putting the premiere service first.  I present my service options in matrix format showing how each service level gets progressively better.  So far, every time I’ve done this, the customer chooses the lowest level of service.  Next time I’ll start the other way, and show how each level of service gets progressively worse.

Ed Kless

Brenda,

Please let us know how it turns out. A sample size of one is not satistically valid, but it will be interesting to see how it goes.

One tip that some folks given me is to put the level of service you anticipate them selecting in the middle with a slightly higher price than you had hoped to get.

With the third or lowest price be sure to take away something of high value from the customer. This way, while they can choose the lowest price, the decision clearly impacts them.

Lastly, if you are not already doing this, present your options, in person if at all possible. If not, use the phone. In short, NEVER just send a proposal of any kind to a prospect and expect them to get back with you.