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NAWBO: Pricing Your Services Right

NAWBO: Pricing Your Services Right Facilitated by Martin McLaughlin Mosaic Partners LLC mmclaughlin@mosaicpartners.com 610.918.9171 Fall of 2005. SEI INVESTMENTS. HPCII. Mosaic Partners – Same Pricing Issues that You Have. Service Pricing Challenges.

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NAWBO: Pricing Your Services Right

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  1. NAWBO: Pricing Your Services Right Facilitated by Martin McLaughlinMosaic Partners LLCmmclaughlin@mosaicpartners.com610.918.9171 Fall of 2005

  2. SEI INVESTMENTS HPCII Mosaic Partners – Same Pricing Issues that You Have

  3. Service Pricing Challenges • How does marketing and selling services differ from marketing and selling a product? • What is the impact on pricing services? • What can I do to overcome some of the inherent challenges associated with marketing and selling services?

  4. Service Pricing Challenges Intangibility Services cannot be seen, tasted, felt, heard, or smelled before purchase Inseparability Services cannot be separated from their providers Services Perishability Services cannot be stored for later sale or use Variability Quality of services depends on who provides them and when, where, and how By P. Kotler

  5. Service Pricing Challenges Intangibility Use cues to make it tangible Inseparability Increase productivity of providers Services Perishability Match supply and demand Variability Standardizeservice, production & delivery By P. Kotler

  6. What are Your Great Challenges Related to Pricing? • Are you perpetually lowering your prices? • Are you feeling like you are not getting enough compensation for your efforts? • Do you have little idea how to price a contact? • Do you feel that pricing is more art (guess work) than science (cost, customer, or market based)?

  7. The “Science” of Pricing Select a Pricing Objective Determine Demand Estimate Cost Analyze the Competition Select a Pricing Method Select a “Final” Price Justify Adjust

  8. The “Science” of Pricing • What are you key cost / margin / profit inputs to generate your selling price? Fixed Cost Don’t change with volume Variable CostDo change with volume • Salaries / Payroll • Website Hosting • Rent • Utilities • Office Equipment • Insurance • Marketing Cost • Advertising & Promotion • Contractor Cost • Sales Commission • Office Supplies

  9. The “Science” of Pricing

  10. The “Science” of Pricing – Know Your Competition • Traditional • Capital Structure • Business Model • Market Segment / Position / Target Market • Value Proposition • Offerings • Pricing Model • Partnerships (Clients and Go-to-Market) • Emerging • Technology • Globalization • Product Commoditization

  11. The “Science” of Pricing, Method • Standard Pricing Formula (pricing floor to stay in business) • Breaking Even • Pricing for Desired Profit, Cost-based • At the Competition (sustain market share) • Similar Size, Structure, and Offering • Impact of near perfect information and alternative revenue streams • Below the Competition (build market share – difficult to sustain) • Obtain best prices to lower your cost of production • Minimize overhead • Limit supporting services • Promote / advertise based on price • Find customers that value low cost

  12. The “Science” of Pricing • Above the competition (skimming strategy) • Target customers that don’t value low cost • Differentiate on service, convenience, personal touch, etc. • Impact of near perfect information and customer segmentation • Impact of positioning your offering • Multi-level pricing (discounting for market penetration) • Higher hourly commitment, large scope, more complex, large clients – lower rate per hour • Entering new markets, lower rate per hour • Launching a new offering, lower rate per hour

  13. The “Art” of Pricing Rational Cost + Operating Expense +Desired Profit = Billing Rate Price Floor!!! Select a Pricing Objective Emotional Perceived Value? Expected Benefit? Personal Wins? Image Alignment? Price Ceiling!!! Determine Demand Estimate Cost Analyze the Competition Select a Pricing Method Select a “Final” Price Justify Adjust

  14. The “Art” of Pricing “You don’t sell through price. You sell the price!!!”Phil Kotler “You must never sell features and function” Marty McLaughlin InternalView ExternalView Fixed and Variable Costto Develop and Deliver Service Offerings. Based uponTarget Customer, Competitive Pricing, and Perceived Value. Pricing Zone toJustify and Adjust

  15. Physical and Financial The “Art” of Pricing Customers, People, Brand, Processes, Relationships & Intellectual Property CustomerFocused Solutions UniqueCustomerExperience Quality Products Quality Services CommodityProduct / Service Mosaic Partners LLC TM Increases Decreases Number of Competitors Price Pressure and Margin Erosion Reliance on Market Data Make and Deliver Mindset

  16. The “Art” of Pricing • Understanding Perceived Value to Push on the Pricing Ceiling • How do customers describe what they get for their money? • Do they quantify it in terms of dollar or time savings? • Do they gain a competitive advantage? • Is it more convenient to work with you then do it themselves or look for a competing offering? • What are your customer’s choices? • What are their business needs that you are solving? • What is the personal win that you are fulfilling? • Do they recommend you to others? • Do they buy from you over an extended period of time? • Do you know why you win and why you lose? • Do you always quote price with a value statement? • What do you do when clients push back on pricing? • Are certain clients only looking for lowest cost?

  17. The “Art” of Pricing - Market Positioning • Customer-based perceptions • Price-to-value trade-off • Two broad positions • low cost • Differentiated Pricing has as much to do with customers you don’t take as it is about customers you do take!!!

  18. “Customer’s Eyes” View x Differentiated Nordstrom 4 x Price Low Cost x Wal Mart 1 x Price Selection Quality Atmosphere Service Brand Value The “Art” of Pricing - Market Positioning

  19. The “Art” of Pricing, Market Positioning 2004 Nokia $46 Cable, Broadband AOL $23 Price NetZero Erols < $9 Community Experiences Access Content Value We live in constantly changing and intensely competitive markets We must constantly innovate and make price-value tradeoffs

  20. The “Art” of Pricing • People buy because of who you are – not what you do!!! Lighten up on the collateral material!!! • Price to attract the right types of customers!!! Your price says a lot about you!!! • Find a coach to help you through the selling and pricing process!!! • Stop making cold calls!!! • Reward retention!!! • Don’t let fixed cost impact your pricing!!! • Pricing isn’t so much about what you sell, but how you sell!!! • Pricing in just one of the other P’s of Marketing!!! • When in doubt…start high!!! When you take fees off the table – take value also!!!

  21. Questions? “?”

  22. Expanding My Brand Thanks!

  23. Our Methodology. Create Value Delivering SolutionsThat Matterto Your Customers Articulate Brand Strategy to Employees and Customers Assess Customersand Markets CommunicateValue DeliverValue Mosaic Partners LLC TM Align the Organization andProcesses Around Customers

  24. Our Process. • Understand needs of your Best Customers – Think Solutions, NOT Products! • Clearly Define Your Value Proposition within Your Defined Ecosystem! • Un-bundle Your Value – both Tangible and Intangible! • Re-bundle around the Personal / Intimate Needs of Your Customers, Business Partners, Channels, and Ecosystem! • Monetize Your Intangible Assets! Decide where do you need to Invest to Strengthen the Intangible Side of Your Balance Sheet? Focus on the customers’ problems, not your current offerings! Create Value

  25. Our Process. • Define the Solutions / Experience that You Want to Create for Your Customers? How can you help Your Customers Create an Experience for Their Customers? • Understand that Solutions will require you to Partner with other solutions providers – Build and Nurture Your Business Ecosystem! • Understand that Ecosystems Don’t Respond Well to Protectionism (within limits)! Challenge, Test, Push, Expand, Invade the Value of Your Ecosystem to Ensue Long-Term Health! • Make it Easy for Your Customers to do Business with You and Your Business Partners! Welcome Your Customer to Your Ecosystems “Roach Motel!” Develop processes that make it easy for customers to do business with you! DeliverValue

  26. Our Process. • Develop Your “Burger King” Story! What you advertise, what you sell, and how you make money are 3 different things! • Focus on Internal Branding! You and Your People are the best Communication Vehicle! Can everyone clearly communicate who you are, what you do, and how you are different? • Everything Communicates! Add Value in Every Conversation – It Will Come Back to You…Even If It Takes A Year! • Don’t Make People Guess how they can Help You! Develop a brand strategy that clearly defines who you are, what you do and how you are different! CommunicateValue

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