Changing Your Pricing Mindset
On this episode The Price and Value Journey, host John Ray presents “Changing Your Pricing Mindset” to a group of business owners. John lays out mindsets that create problems for professional services providers, such as the mindset of comparison and the mindset of inadequacy. John defines and discusses what he calls “the generosity mindset” as an antidote. He also shares how clients decide to buy based on intangibles, having value conversations with prospects and clients, constructing proposals with a three-option model, and closes by answering questions from roundtable members.
John Ray: Hello, I’m John Ray on the Price and Value Journey. Recently I was honored to be invited to present to a private round table, organized and run by Terry Dockery, better known as Doc Dockery. He has a business consulting firm called The Resolve Firm and as part of his work he runs this private round table for business leaders and business owners, and occasionally he’ll have guest speakers in to come in and talk about various areas of
[00:00:33] expertise and topics of interest. He invited me to speak on pricing and value and other issues like that, and I gave a presentation called Changing Your Pricing Mindset. And in that presentation I covered issues like mindset and the mindsets which inhibit our growth and the generosity mindset to get over those
[00:01:01] inhibiting mindsets that hold us back. I also talked about the value conversation, how to construct better proposals and more.
[00:01:16] With Doc’s permission, I’m releasing the recording of that round table as an episode of the Price and Value Journey.
John Ray: [00:00:00] Okay. I’m going to talk about pricing mindset. And pricing mindset has a lot to do with you as a services provider, me as a services provider. If you’re a product provider, not so much, but we’ll talk about the difference here in a second.
John Ray: [00:00:21] So, here’s the obvious statement, in professional services, you’re not selling a product. So, you’re not selling a bicycle, you’re not selling apples, you’re not selling doggy treats, you’re not selling cans of green beans or craft beer, let’s say. What you’re selling and what your factory for amounts to is what’s between your ears. It’s the sum total of your experience, your expertise, what you bring to the table for your clients. And what that means is that you are the product. You individually are the product.
John Ray: [00:01:04] And that creates a big problem because, essentially, you’re pricing yourself. Now, you’re not pricing a third inanimate object. That bag of doggy treats or that can of green beans or that bicycle, you’re not pricing that. What you’re pricing is, essentially, yourself because everything that you’re offering that client is you, who you are, and what comes out of your head. And that’s a problem. It’s a problem because what gets in the way as a services provider, you being able to most effectively position yourself and price your services are mindsets, it gets into what’s in our head.
John Ray: [00:01:56] And here are a few of those mindsets that inhibit our growth that hold us back as services providers. One is the mindset of inadequacy. Another way to say that is the imposter syndrome, “I’m not quite good enough to be sitting in front of this client” or “I need to discount my services in order to measure up and to get this client to take a chance on me.”
John Ray: [00:02:24] That’s particularly a problem mindset with somebody that’s new in their business. I get the question all the time about should I discount my services when I’m first starting out. The answer to that is no, and we can get into that if you want to know more about that. But the mindset of inadequacy can even affect you as you grow and you start to take on larger clients. And you get to a point where maybe sometimes you come across a client, you wonder if you’re adequate to be able to handle that client.
John Ray: [00:03:01] The mindset of comparison. So, the mindset of comparison is really pretty simple, particularly in a social media soaked world. It’s, “Hey, I see someone else out there that doesn’t seem to have any warts, any problems. They’ve got slick social media images. They write well, blah, blah, blah. I can’t measure up to that.”
John Ray: [00:03:28] The mindset of binary thinking. Everything is black and white. There’s no gray. That kind of thinking inhibits our growth. The mindset of helping. So, the best example of this I’ve heard in the last few years is, I got invited to speak to a group of leadership coaches, and one of those coaches came up and told me that they are just on a mission to help everyone and they just do not believe in overcharging for the help that they want to be. Another way to say that is that’s the Mother Teresa syndrome. That’s nice and cute, but it’s not going to sustain a business longer term.
John Ray: [00:04:15] The mindset of scarcity. So, the feeling that the world is a fixed pie, that there are only so many clients to go around, and, therefore, whatever someone “takes from me” is something that I’ll never be able to replace. It’s seeing the world as I’ve got to get what I can get today and whatever client is in front of me, I have to sign up.
John Ray: [00:04:45] So, it’s mindsets like this that inhibit our growth. So, to get past this, I think what we have to do is we have to understand there are two distinct perspectives that exist for our clients, our prospects, the community, our network, and us as a service provider. We’re the business owner and we’re looking at ourselves and our expertise. We look at our certifications and, of course, we’re swimming in some combination. Each of us have some combination of some mindset issues that affect how we look at our business.
John Ray: [00:05:27] Clients, however, have an entirely different perspective. They don’t see those mindset issues that we have. And a lot of them really don’t care about our expertise and certifications. What they care about is solutions to their problems. And they are sitting in front of us for a reason that goes beyond the things that we like to talk about, which is our expertise, our qualifications, degree, certifications, past clients, et cetera. Those aren’t the same perspectives.
John Ray: [00:06:11] Here’s my solution to this, if you will, or the way I think about it and my philosophy about it in terms of what I see as work for me and many others. And it’s really making it about others in terms of the mindset you bring to the table. So, those clients, prospects, referral partners, community is creating a generosity mindset around that entire ecosystem, if you will. And not leaning into those mindsets you carry in your head but the needs, hopes, desires, wants, dreams of that person sitting in front of you, whether they’re a client, a prospect, a referral partner, or a member of your community.
John Ray: [00:07:05] And the generosity mindset has a number of different characteristics, but here are just a few. It’s empathetic. Generosity is something where you’re standing in the shoes of someone else and thinking about their needs and wants first. You’re thinking in terms of how you empower others to improve their lives and their businesses and create transformative outcomes for them, both professionally and personally. It’s not transactional.
John Ray: [00:07:42] So, sometimes when you hear some people say I want to help, the way they frame that sometimes can be transactional and it feels that way and people smell that, “when you want to help” but there’s a catch. And I think the companies that did particularly well during the pandemic were those that helped without a catch to it, if you will. Those that had a catch to it, consumers, the rest of us, we all smelled that out. And people are very smart and they see through that.
John Ray: [00:08:30] So, generosity mindset is not transactional. And, again, it’s about empowering others. I feel so strongly about that, I have said that on here twice. But maybe it’s all summed up in one of my favorite books, The Go-Giver by Bob Burg. And he says, your influence is determined by how abundantly you place other people’s interests first.
John Ray: [00:08:55] And you can put income, you can put your value, you can put a lot of different nouns in there in place of influence, and they all come out the same is that the extent to which you place other people’s interests first is the extent to which your business ultimately will grow.
John Ray: [00:09:16] Now, here’s the beautiful irony of this. We as business owners, we see ourselves in a certain way and the clients view us as outcome deliverers. And what they’re looking for is value received, and their perception of value received is really how they’re looking at us. And they’re looking for transformational outcomes. And the value of those outcomes are always more, worth more to them than what we see. They see more value in us as services providers than we see in ourselves.
John Ray: [00:10:02] Now, why is that? Let’s talk about the lottery. This is a good way to explain intangible value. So, we’ve had several billion dollar lotteries, and the odds of winning $1 billion lottery are about one in 300,000,000. So, one piece of paper that you receive after standing in line for however long you have to stand in line to get one of those pieces of paper, that’s a statistically worthless piece of paper. That’s what the odds of one in 300,000,000 amount to.
John Ray: [00:10:42] Well, people are obviously buying those tickets for some reason. So, what are they getting if the chances are overwhelming that they’re buying something that they’re not going to receive any money back from? What they’re receiving are hopes. Hope springs eternal, as it will. They’re dreaming of what they’re going to do if they win.
John Ray: [00:11:07] Identification. Identification is, “Hey. I’m standing in line with all the people in my community.” Fear of missing out, “There’s my wife right there who texts me and says, ‘Hey, did you buy a ticket for the billion dollar lottery?'” So, there’s the fear of missing out. We can’t win if we don’t play. So, all of those benefits are intangible benefits, and that’s the reason people buy. They get something out of buying that ticket that goes well beyond the value of the ticket or they wouldn’t buy.
John Ray: [00:11:42] So, the point of that is that clients buy based on intangibles, not just tangible value. They buy based on intangibles. And if you want to characterize what those look like, it could be things like fulfillment, you feel more educated, for example, because I have engaged in the service, or identity. Identity may be a plain baseball cap is worth a whole lot less than one that’s got a Georgia Bulldogs logo on it. There’s identity.
John Ray: [00:12:21] Nostalgia, that may be an old soft drink that people have nostalgia for or an old type of food or a place or what have you. Enhancement, something that enhances my life in some way, whether that’s through knowledge or pleasure or what have you. Rituals, the place I drive by every day or the same coffee place I go to every day for my coffee or what have you. And indulgence is how I reward myself. So, whether that’s my favorite restaurant, my wife has her favorite place to go get a facial, what have you.
John Ray: [00:12:58] These are intangibles that have nothing to do with your service per se. So, let me explain how this works in real life. So, this is my friend Gloria Mattei. Gloria is the owner of Nothing Bundt Cakes, which she’s got now two locations, one here in Alpharetta and one in Sandy Springs. And Gloria came on my show and the first question I always ask on my show is the elevator pitch question, let’s tell folks about how you serve everyone.
John Ray: [00:13:32] And the first thing that she said on my show was we deliver joy. See, she’s positioned herself in an entirely different place than the sheet cake makers at Walmart and Kroger that are right around the corner from her locations. And when you see her product – you can get a sense of it here in one of these photos – you can see why people light up when someone walks in the room with one of her cakes. So, yes, she does deliver joy.
John Ray: [00:14:05] And the other intangibles that she has as well that she likes to talk about is that she’s a locally owned business. So, she’s not a unit of some corporate entity that’s located out of town. And she’s very active in the community in terms of supporting local charitable causes. So, when you support her business and you buy joy from her, if you will, you’re supporting local, charitable causes.
John Ray: [00:14:35] Here’s another example closer to home in professional services. Roger Lusby and Frazier & Deeter – they do a show with us, they’re a client of mine – he had one of his clients on, a fellow named Chuck Walker. And during the show, I asked Chuck, I said, “Tell me about Frazier & Deeter and how they’ve helped you build your business, and what it’s like working with Roger Lusby?”
John Ray: [00:14:58] And he didn’t say anything about the quality of his tax return, or the quality of business advice, or anything like that. Although, Roger has been a long time provider to him and so he must be doing a great job. The first thing he said was, “Roger has a calming effect on me.”
John Ray: [00:15:19] He says, “Sometimes when you talk to Roger, I don’t really come away with anything, maybe necessarily, although I usually do. But he helps calm me down because I’m an excitable guy and I get mad when I get a notice from the IRS or I’ve got a business problem or something like that. He just talks me through and calms me down.” That’s a complete intangible that has nothing to do with the quality of the tax return preparation or the business advice itself.
John Ray: [00:15:53] So, this – what I call – generosity mindset, how does it play in terms of how we have real conversations with real clients? It starts out by having a value conversation with a prospect that talks in terms of looking at that conversation from their perspective. We’re not pitching. We’re not selling anything. We’re just having a conversation to see if I’m the best fit because I may not be. And if I’m not, we’ll find someone else who is. Oh, and by the way, we will only enter into this relationship if the value that I provide is more than the price you pay. Everyone will say yes to that because that’s what people are looking for. Always.
John Ray: [00:16:47] And when you have a value conversation with a prospect, you want to get strategic so that you can ask a whole lot of questions that may or may not necessarily apply to your service. But what they do for you is allow you to get to what the real underlying dreams, hopes, needs, concerns of that client really are. And you allow clients to brain dump with the reasons that they called you, but also the things that are going on in the back of their head that they may not think are germane but actually truly might be.
John Ray: [00:17:33] Some of these questions I like to ask are questions like What’s keeping you up at night? What are you procrastinating about? That’s always a great question. My favorite is, How does your spouse or your significant other feel about your business? And I wrote a LinkedIn piece about this, so if you’re already following me on LinkedIn, you can find it there. It’s a newsletter I released last week. My newsletter is called The Price and Value Journey, and you can find it there.
John Ray: [00:18:06] But it was about a client meeting I had with a fellow that called me to come in and advise him on his business. And he was going on and on about how this and that was going well, and he had these multiple locations, and what great things he had done. And it was getting to the point where I was wondering why I was there.
John Ray: [00:18:27] And then, his spouse came in. And we introduced and she asked who I was, and I told her. And she said, “Oh, my gosh. Thank you so much for being here. We’ve got all sorts of problems and our books are terrible. We don’t know exactly what we’re making. We don’t know what the business is worth. Our retirement is sunk into this business and we don’t know what all that’s going to end up being worth.”
John Ray: [00:18:53] Guess what? Truth blew in the room when she came in. And, suddenly, I had a clear picture of what the needs, hopes, and desires of that client were that her husband really didn’t want to get into voluntarily.
John Ray: [00:19:10] I love to ask why questions, because why questions are catalytic. They cause people to think. So, when you’re in front of somebody talking about your business, Why are we doing this? What’s the end game? What do you think you’re going to accomplish out of this? What would happen if you just left things like they are? Why now? Is it really urgent that you do it now? You made this call to me or you’ve been referred in to me for a reason, why are we doing it now? And why did you wait so long to address the problem? Why me because I’m not the cheapest?
John Ray: [00:19:49] You see what I did there? I’ve positioned myself for a later conversation around price. Why not just handle that internally or do it yourself or hire someone else? So, why me? This is a very powerful question to ask.
John Ray: [00:20:09] Now, one thing about a value conversation is I think it’s not just a conversation you have with prospective clients. It’s a continuing dialogue, if you will, that you have with your clients. “Hey, how are things going? What are we doing right lately? Hey, we’ve cleaned this up or that up in your business, how has that transformed things that are going on in the rest of your business? Those kind of questions that you ask on an ongoing basis are really valued dialogue. And that value dialogue helps you later when it comes to having a conversation around raising prices.
John Ray: [00:20:54] Let’s talk briefly about proposals. The biggest mistake professional services folks make in offering a proposal is there’s one option and one price. And basically what you’re saying to a client is take it or leave it. It’s basically yes or no. It’s an ultimatum. That’s not a great message to leave.
John Ray: [00:21:15] What you really want to do is offer choices. And it’s really a recognition that different clients have different values. And clients like choices to an extent they can get confused with way too many choices. They’re relying on you as the expert to craft options that they can choose from.
John Ray: [00:21:38] Three is the magic number. So, it’s kind of a good, better, best model. Three is not overwhelming. And there’s a tendency to gravitate to the middle option. So, I advocate a good, better, best model. Good is your basic version of what’s requested by the client. Better includes a little bit more, so everything that’s in your good category plus additional benefits. Those benefits, by the way, may be, if you’re in the services business, things like your accessibility, how quickly you deliver the service, that kind of thing. So, it doesn’t all have to be additional things that you do. It’s how you deliver your service. And, of course, best is your velvet rope option, if you will.
John Ray: [00:22:34] Now, the biggest mistake that a lot of services folks make is they have one option, and that option is basically best. There’s no differentiation here.
John Ray: [00:22:47] Constructing a proposal, so I believe there’s just a few basic things that a proposal needs to have. Please do not put your qualifications, your picture, your degrees, anything about yourself in a proposal. That’s already settled. You wouldn’t have gotten that far if the client had any concern about that. So, please don’t put your team pictures, don’t put any of that stuff in there.
John Ray: [00:23:18] You simply reiterate the customer request, what did they originally talk about and what came out of that value conversation that you had. So, what you’re doing is you’re demonstrating that you were listening and you’re demonstrating an understanding of the client.
John Ray: [00:23:36] You provide options, recommendations. I call my proposals engagement recommendations or engagement options. I don’t like the term proposal because I’m an expert just like you are. And experts don’t propose, they give recommendations. So, when you go to the doctor, it does not propose to do something for you and you should be the same way.
John Ray: [00:24:03] And then, terms and conditions, that’s how you’re going to get paid. And that’s a pretty important piece of any document that you put in front of a client.
John Ray: [00:24:14] So, here’s just an example of a client that I worked with and what happens, the power of offering options. And this particular client, I can’t really get into the detail of exactly what they do, but essentially what they offered was an online coaching experience, we’ll call it, that lasted for a couple of hours and it was $800. Now, they didn’t price it by the hour – thank goodness. And by the way, you will notice that none of this really works that well if you’re pricing by the hour. That’s an entirely different discussion I’m happy to have.
John Ray: [00:24:59] But this particular client was thinking of it that way, if you will, and he was looking at the service that he offered in this experience and looking at it and saying I’m making $400 or $500 an hour, that’s pretty good money. And as we went into it and started thinking about it, what we talked about was what’s the perceived client value that’s coming out of that experience that you’re giving that client? And what we came up with were good, better, and best options.
John Ray: [00:25:40] And what was clear is what he had previously been pricing at $800 really had perceived value that was much, much higher such that he could justify a $1,500 price. We went through a whole exercise about what would be in his better option, what would be in his best option. I tried to get his best option a lot higher than 5,000, but he wouldn’t do that, so that’s as high as we went. But what we did was we came up with options that would allow him to put those in front of a client and let them choose what was the best fit for them.
John Ray: [00:26:21] So, right out of the chute, the first client he put this in front of chose the better option for $3,300. So, you don’t need me to do the math on this. That’s over four times the revenue you would received otherwise. Here’s the deal, the first bullet point is the most important to me, that client received much more value than they thought possible. They’re the ones that selected that. He didn’t. They selected that.
John Ray: [00:26:58] So, what he was doing by simply offering one option at a much lower price, he was not offering clients the value that they wanted to choose. So, it was really was all about them. And when he made it about them and gave them choices, those choices inevitably end up working out better for him as well. So, it’s happier client, happier consultant.
John Ray: [00:27:30] So, I’m going to take questions at this point because I’ve hit a lot of this at a real high level. And what I find is it starts generating questions and I want to get to that. But just real quick, you can find out more about me at pricevaluejourney.com. That includes my podcast. And I also have a book coming out later this year, it’s called – ironically enough – The Price and Value Journey: How to Improve Your Confidence, Your Value, and Your Prices Using the Generosity Mindset Method. So, that’s the name of the book, and here are some of the topics, whatnot, that you’ll find that I’ve addressed in my podcast and I’ll be addressing in my book as well.
Speaker 1: [00:28:18] John, how did you know that you could drop that last bit about the sky’s the limit on pricing your professional services? Right at the time when Terry had stepped out of the room, we really appreciate your ability to deliver that message when he couldn’t hear it.
John Ray: [00:28:34] Timing is everything, right?
Speaker 1: [00:28:35] Yeah, yeah, yeah.
Speaker 2: [00:28:36] John, I’ve been thinking of engaging in myself because I feel like I’m not charging these guys merely —
Speaker 1: [00:28:42] No. No. I already cut that off because you were out of the room. There was a whole bunch of caveats on there that you didn’t hear.
John Ray: [00:28:55] Well, I’m interested in your question. So, what questions can I answer?
Speaker 2: [00:29:00] I have a question for you.
John Ray: [00:29:02] Please.
Speaker 2: [00:29:02] But it’s very [inaudible]. So, I used to cut my teeth doing Fortune 500 consulting. I was traveling a lot, and my kids were growing up without me, and I was making a lot of money, but I was miserable. So, I decided to move downstream to the small business market and focus on the Atlanta region, basically to get out of hotels and off airplanes.
Speaker 2: [00:29:23] And it has been a pricing dilemma. What people used to pay me just to have access to be able to call me was a whole lot more. And it’s funny because it’s a different market of people in the smaller companies, they’re not as comfortable asking for help. The corporate guys get used to bringing in experts. And small business people – we’re talking about that earlier – they want to do everything themselves, they have a hard time asking for help, et cetera.
Speaker 2: [00:29:54] So, finding a pricing model that works in that market has always been an ongoing debate with myself about, “Damn. I’m worth more than that.” But then, what can a small business person realistically spend that makes sense for their budget where their kid doesn’t have to do without braces or that sort of thing? Anyhow, I’m sure you deal with small businesses and entrepreneurs that are scaling up their businesses. And I don’t know if that’s a question, but it certainly is an ongoing concern just for these guys and for myself as well.
John Ray: [00:30:29] Yeah, I mean – go ahead. Someone else had —
Speaker 1: [00:30:33] No. I’d like to hear your response.
John Ray: [00:30:35] Okay. Yeah. So, there’s several things there. So, one is that the caché and the authority value of the business card that you used to have is not with you anymore, so that’s one thing. And, yes, that can be a negative because people by McKinsey, let’s say – I’ll use that term – they buy the security of McKinsey not the consultant. In the small to medium-sized business market, they’re buying the consultant.
John Ray: [00:31:13] So, here’s a couple of things. One is that, when you come in with an hourly price to someone like that, the problem with an hourly price to a small to medium-sized business owner is they’ll tell you, “Hey. I’m not making $500 or 750 or 1,000 an hour.” Whatever you’re charging, they immediately look at that and say that makes no sense. And, of course, quoting an hourly rate is not the final price anyway, because they don’t know how long anything’s going to take. And, frankly, it really doesn’t matter how long it takes. It should not matter to them. What they care about are transformational outcomes, not how long it takes you to do it.
John Ray: [00:31:55] And increasingly, with the way services are changing with AI and a lot of other tools, we can come up with diagnostic solutions faster than ever. So, it’s really incumbent upon us to get away from hourly pricing. But part of what I think you have to do is have that value conversation with clients.
John Ray: [00:32:20] And let’s talk about what this project is going to do, not just for you professionally and in your business, but what is it going to do for you personally. So, what I tell people in my pricing consulting is I’m the difference between somebody being able to vacation in Rome, Georgia versus Rome, Italy. That puts it in an entirely different frame of mind. That gets into where the spouse wants to go for vacation, or whatever, and doesn’t want to get stuck on vacation. I call it a confidence crutch. That’s what you lean on. You don’t lean on the service itself. You lean on the value of the transformation.
John Ray: [00:33:11] So, that’s why value conversation is so important and that you continue to dig on, let’s say, we get this project done and it’s going to cost your business to make X more in revenue. What’s that going to do for you? It allows us to hire more employees so we can expand, maybe expand our sales force. What is that going to do for you? And you keep digging into that. And there’s value that comes out of that, that is not just tangible but intangible. And it’s a multiple, a big multiple of whatever it is you’re charging.
John Ray: [00:33:53] So, what that does is it makes your fee, whatever you decide to charge, an investment in an outcome. And it also creates room for you to improve your price. Now, there’s a lot more to it than that, but that’s the best answer I can give in just a couple of minutes. Does that make sense?
Speaker 1: [00:34:22] Yeah. Yeah. What’s got me thinking and marveling at this is how you took a concept that we were talking about pricing and pack so much more into it. This idea of the generosity mindset, which requires an attitude and behavior of empathy, I’ve written out a formula that you got me thinking about. And the formula is nothing but equals, so it’s not a real formula. Empathy equals respect. Respect equals trust. And trust equals next. Meaning next problem, next opportunity, next whatever.
Speaker 1: [00:35:10] Because I’m already thinking past what we’re talking about right now. I know that we’re going to address what we’re talking about right now, but I’ve now blown past all of the, like you say, statement of work, proposal, et cetera, et cetera. I’m just thinking about where do we start on the next item?
Speaker 1: [00:35:32] And pricing isn’t even in the conversation at that point because they’re already trusting you to essentially price your services appropriately for them because you do everything else appropriately with them in mind. And like I say, you’ve just packed so much into a pricing parameter that is really helpful to think through what we perhaps stumble through as to what we think and how we deliver our services and how we engage with our customers.
Speaker 2: [00:36:08] John, I hope you heard that compliment.
John Ray: [00:36:10] Thank you. Thank you for that. Thank you very much.
Speaker 2: [00:36:13] We got about ten minutes left, but before you get away, I have decided to double the price of this group, and I want to thank you for giving me the confidence to do so.
Speaker 1: [00:36:22] That joke is already an old joke. I’m worried that long.
John Ray: [00:36:26] It’s an old joke, but I didn’t hear much of a value conversation that came out of it. That was a real truncated value conversation, Doc, so you’re going to have to do better than that, bud.
Speaker 2: [00:36:34] I skipped a few steps, I guess.
Speaker 5: [00:36:38] I got a question. You had talked about kind of the Goldilocks price and a good, better, best, and how someone who doesn’t have that today just has a best option. And I’ve seen it for myself and I’ve seen it for other people, where, when you take just that and then you start to build out the good, better, best very quickly, it comes back to wanting to just be nice to people. And if someone chooses the good, they continue to get the best treatment.
Speaker 5: [00:37:11] So, where someone struggles when they created this stratification into three levels, now a client comes in and chooses the lowest level, but the service provider still gives them the same level of attention and support as someone who chose the top. How do you help someone work through dialing down their service for scope creep?
Speaker 2: [00:37:35] Scope creep.
John Ray: [00:37:36] Yeah. There’s horror movies with that name, scope creep. Yeah. So, this is where you have to, first of all, document. So, this is why the engagement recommendations are so important because you’re documenting the scope. And if someone comes back to you and says can you do X, that’s in your better or best options and they’ve got your good option, then what you say is, “You know what? Here’s the thing, I’ve got folks that are paying for that and it’s not fair to them for me to give that away, because, essentially, it would be giving it away because you didn’t select that to begin with. And I understand why you want that now, so let’s talk about that. Okay? Let’s talk about what a different kind of relationship looks like.” That’s one way to address it is that, because what you’re getting at with that client is what’s fair. What’s fair?
Speaker 2: [00:38:43] Reciprocal empathy.
John Ray: [00:38:45] Yes. Essentially, that’s a good way to put it. And people want themselves to be treated fairly, so they understand, most of them do. The vast majority of people are going to understand that response. But the key is having the guts, frankly, to have that conversation. And a lot of times it’s just easier to do that because you want to please. We’re all pleasers, right? We want to please our clients. And there’s nothing wrong with that, but we don’t please by giving things away ultimately, because what we’re doing is, of course, we’re really changing the value perception that they have of our service and ourselves.
Speaker 3: [00:39:35] Related to what you just said, value and perception, on the last slide, I think the first bullet point was where you were saying when the client did the better option and you said that was a win-win for the service provider and the client. The first bullet point you said there is that something like the client perceives a much higher value.
Speaker 3: [00:39:58] Can you elaborate on that, why you say that? Is that because they picked the middle one, is it because it’s their decision, it’s a psychological thing that they’re saying, “Okay. Because this is my choice, and I had three choices, I picked what I perceived to be the greatest value.” How do you make that statement with confidence that because they picked it, they perceive it to be a higher value or the highest value?
John Ray: [00:40:23] Yeah. That’s a really important question. So, let me give an example here. And I know we’re running up on time, but this is going to be a quick example. So, let’s talk about coffee. I’m a cheapskate when it comes to coffee. Even the dollar cup at racetrack, I’m perfectly fine with the racetrack coffee, but I’d rather come to Doc’s office and let him buy my coffee. So, I’m a cheapskate when it comes to coffee.
John Ray: [00:40:51] My daughter wears out Starbucks every day for 5 or 6 bucks. The most expensive cup of coffee in the United States is a $75 cup of coffee from some farm in Panama. And it’s a one night only tasting blah, blah, blah. Who knew coffee is like wine? I had no idea. I’m not criticizing it. People see value in that.
John Ray: [00:41:14] There’s an example right there since we’re talking about the middle option, if you’re offering my daughter who wants to pay more than racetrack cup of coffee, then that doesn’t match. And she’s willing to pay more for what she perceives as more value. And that’s really what we’re talking about.
John Ray: [00:41:38] So, each of us have our own laundry list of services or things that we do for clients that people have different perceptions of value of. And what we’re trying to do is better match client perception of value with the particular mix of service that we offer. Does that make sense?
Speaker 3: [00:42:01] That’s a great explanation. The daughter wanting to buy the more expensive cup of coffee. But [inaudible] makes good sense.
Speaker 2: [00:42:09] So, what [inaudible] wants.
Speaker 3: [00:42:12] It’s the perception of what you’re getting because you’re spending more enhances – I think psychologically, part of what you’re saying is I’m getting a better value because I’m paying more for it.
Speaker 1: [00:42:20] Or I’ve figured out that this is —
Speaker 2: [00:42:24] Can the value be tied to whether the solution I’m looking for is a pain point or it’s nice to have?
John Ray: [00:42:37] Yeah. It makes perfect sense. And, yeah, thank you for that. Because, hey, pain, particularly with small and medium-sized businesses, that may be one of the hardest things we have to do when we talk to our business clients, is, they’ve been dealing with pain so long they’ve forgotten what it’s like to be well. And so, they don’t even know what that feels like. And you have to draw a picture of that.
John Ray: [00:43:08] But psychologically, pain avoidance is the biggest thing that makes us react to something. Only half the people in this country go to the dentist regularly. Think about that. They would rather avoid potential pain than deal with dental hygiene. That’s a powerful emotion. And if you can tap into that emotion with your service offering, it has powerful perceived value.
Speaker 4: [00:43:42] Yeah. Because usually when I deal with clients, I haven’t looked at it, unfortunately, from a value standpoint. It’s always been I have a Tylenol or a vitamin analogy, and I try to put them in one of those buckets to know if this will be a potential client or not. So, from hearing you talk today, I’m definitely looking at things a little differently.
John Ray: [00:44:07] And see, here’s the thing, our clients that we’ve had successful engagements with will tell us some of these things. And this is where you go talk to them. What did this engagement do for you that goes beyond just the engagement itself, and have that conversation. You’ll be amazed at what you find out. And you’ll also be amazed at what you find out, how people see value in you. They will come back with things like you had a calming effect or you had these other intangibles that are reasons why they did business with you or doing business with you, and it’s important for you to know what those are.
Speaker 4: [00:44:57] Very helpful.
Speaker 1: [00:44:58] That phrase that you used is something I haven’t heard before that is especially powerful, why questions are catalytic. There’s so much there in those few words. That’s wonderful. Keep using it.
John Ray: [00:45:14] Yeah. Thank you. I mean, see, we’re sitting here talking about this intellectually, and, hey, I’m on a journey. We’re all on a journey. That’s why I call my podcast The Price and Value Journey. We’re all on a journey doing better about this, and I am too.
John Ray: [00:45:35] I’ll just throw this in, by the way, one change I’ve made recently and it worked quite well, when I went to raise the price for a client, I presented them a whole new set of engagement options. I didn’t come back to raise the price on the existing set of service deliverables. I gave them a whole new set of options.
John Ray: [00:45:57] And the basic option was what they had today where I had a higher price. And I went through that and explained the value that they had gotten out of. And so, I had a value conversation along the way and they had told me about all the things that had happened because of their consumption of that basic service option, if you will.
John Ray: [00:46:23] But then, I gave them a better and a best, “Hey, if you want more, here’s how you can get that and here’s the value that comes out of that, I think.” And guess what? They picked the middle option. So, I got a much more engaged client a much higher fee. So, think about using options just to be able to raise your price.
John Ray: And that’s it. And I want to thank again my friend, Doc Dockery for allowing me to repurpose the recording of that presentation as an episode of the Price and Value Journey. Doc does great work, and if you’d like to know more about him you can go to the resolve firm.com. That’s The resolve. R E S O L V E firm dot com. That’s the name of his consulting practice. Doc is also the author of “Leadership, Happiness and Profit :12 Steps to a High-Performance Business.” You can find that book on Amazon and it’s terrific. I can’t recommend it highly enough if you’re looking to be happy and scale your business at the same time, that’s Doc’s specialty.
[00:00:49] Check him out at your convenience. And folks, just a quick reminder that more information on The Price and Value Journey can be found at pricevaluejourney.com. You can find a link to our show archive there at pricevaluejourney.com. And of course, you can find the show on all the major podcast apps.
[00:01:11] You can also sign up to receive updates on my book that’s coming out later this year in 2023. It’s called “The Price and Value Journey: Raising Your Confidence, Your Value, and Your Prices Using the Generosity Mindset Method.” We cover a lot of the topics in that book that you’ve heard on this episode. So if you like updates on when that book will be released check that out.
[00:01:38] And if you’d like to connect with me directly, you can email me, john at john ray.co. Thank you for joining me.
About The Price and Value Journey
The title of this show describes the journey all professional services providers are on: building a services practice by seeking to convince the world of the value we offer, helping clients achieve the outcomes they desire, and trying to do all that at pricing which reflects the value we deliver.
If you feel like you’re working too hard for too little money in your solo or small firm practice, this show is for you. Even if you’re reasonably happy with your practice, you’ll hear ways to improve both your bottom line as well as the mindset you bring to your business.
John Ray, Host of The Price and Value Journey
John Ray is the host of The Price and Value Journey.
John owns Ray Business Advisors, a business advisory practice. John’s services include advising solopreneur and small professional services firms on their pricing. John is passionate about the power of pricing for business owners, as changing pricing is the fastest way to change the profitability of a business. His clients are professionals who are selling their “grey matter,” such as attorneys, CPAs, accountants and bookkeepers, consultants, marketing professionals, and other professional services practitioners.
In his other business, John is a Studio Owner, Producer, and Show Host with Business RadioX®, and works with business owners who want to do their own podcast. As a veteran B2B services provider, John’s special sauce is coaching B2B professionals to use a podcast to build relationships in a non-salesy way which translates into revenue.
John is the host of North Fulton Business Radio, Minneapolis-St. Paul Business Radio, Alpharetta Tech Talk, and Business Leaders Radio. house shows which feature a wide range of business leaders and companies. John has hosted and/or produced over 1,700 podcast episodes.
Coming in 2023: A New Book!
John’s working on a book that will be released in 2023: The Price and Value Journey: Raise Your Confidence, Your Value, and Your Prices Using The Generosity Mindset Method. The book covers topics like value and adopting a mindset of value, pricing your services more effectively, proposals, and essential elements of growing your business. For more information or to sign up to receive updates on the book release, go to pricevaluejourney.com.