The key to improving your firm’s profits is to improve its pricing. Nothing can improve your bottom line more than improving the price you get for your services.
Says the author of Priceless, a new book that explores the power of pricing,
“Because profit margins are small to begin with, adding a percent or two can boost profits immensely. Very few interventions can have such an effect on the bottom line.”
Remember that estimating your costs is not pricing; it’s counting. More importantly, clients don’t buy your costs — they buy the outcomes you help produce for the brand. So as you begin thinking about how you’d like to be paid for an assignment, ask yourself these 10 questions:
Questions to ask yourself
- Who is the economic buyer at this client and will we have access to him or her?
- How profitable is this company?
- What level of marketing sophistication does this client have?
- To what degree do they have professional buyers (procurement)?
- At what price would this engagement be so expensive a client would not consider buying it?
- At what price would the engagement be expensive, but the client would still buy it?
- At what price does the engagement become inexpensive?
- At what price does the engagement become so inexpensive the client would question its value?
- What would justify a premium price?
- What costs can we afford to invest at the target price and still earn an acceptable profit?
As the buyer, it’s your client’s “job” to try to get the best price for your services. This means they’ll immediately press you to talk about costs. It’s your job to push back and steer the conversation to value. Here are some questions that can help:
Questions to ask your prospect
- How does your brand/company make money?
- What is the profit model for your brand/company?
- Based on your profit model, which of our offerings do you most value?
- What specific results do you hope our services will help you achieve?
- What have you identified as the drivers of success for your brand?
- How do you measure success today with your agency?
- Ideally, how would you like to measure success?
- If price were not an issue, what role would you want us to play in your business?
- What are the service standards you would like for us to provide you?
- What resources can we expect your organization to devote?
Studies show that just a 1% improvement in the way you price your services can result in at least a 10% improvement in profit. That should be a pretty good reason for your firm to take pricing more seriously.