Your Price is Not the Client’s Cost
Your price and what the client mentally weighs as their cost are two different figures, a vital concept for us as professional services providers to understand. (In this episode, I quote from Kevin Kelly’s post, 103 Bits of Advice I Wish I Had Known. You can find that post here, and there’s a ton of value in it, guaranteed.)
John Ray: [00:00:00] Hello. I’m John Ray on the Price and Value Journey. Kevin Kelly is the Founding Executive Editor of Wired. He’s a prolific writer, and a wise observer, and commentator of all things technology. For his 70th birthday, Kelly offered 103 bits of advice I wish I had known. What he calls Bits of Unsolicited Advice he’s compiled and added to over time.
One of those bits of wisdom involves pricing. What you actually pay for something, he writes, is at least twice the listed price because of the energy, time, money needed to set it up, learn, maintain, repair, and dispose of it at the end. Not all prices appear on labels, he says. Actual costs are two times listed prices. Now, these wise words are written from a buyer’s point of view, of course. Whatever business you’re in, it’s important to apply this buyer’s perspective to your own product or service.
What’s the cost of purchasing, which a buyer may be considering? What are not only the hard dollar cost, but as Kelly references, the cost, which are intangible as well? As professional services providers, if we’re not considering the cost of change and addressing it up front in our conversations with prospects, we’re missing out. Most prospects haven’t thought it through enough to think of actual cost being twice the listed price, but that prospect sitting in front of us knows intuitively there’s a cost premium, which is more than the check they’re writing to us.
For example, small business owners thinking about making a change with accounting services providers are inevitably thinking about what they’ve got to do to pull the records together for their new provider. The intangible cost that they are mulling could include the time necessary to get a new services provider up to speed, the unknown. It’s the devil I know versus the devil I don’t syndrome. The aggravation and frustration of making a change. It could be embarrassment about how shoddy their books are. Maybe it’s the fear of telling the current accountant that they’re getting replaced. Some of these intangible costs can be actively lowered by any of us as the services provider.
Technology has made transfer records, for example, quite easy. We can lower fear of the unknown and a potential aggravation by covering the onboarding process we have for new clients. Even for the embarrassment-related intangible, we can lower the burden, the intangible cost the prospect might be feeling by discussing how there’s nothing they have that’s going to shock us. So, they need not feel shame or guilt.
If this thought exercise is brand new to you, then talk with your clients and ask them what their reservations were when they brought their business to you. The value you receive from these conversations, I assure you, will exceed the intangible cost of them.
I’m John Ray on the Price and Value Journey. Past episodes of this series can be found at PriceValueJourney.com or on your favorite app. And we’d be honored if you’d subscribe to our series. You can also contact me directly. John@JohnRay.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 translate 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 1,300 podcast episodes.