If Bob is a consultant and he charges £50 an hour for his time, he might cost you a lot more than Sue, who is also a consultant but charges £75 an hour.
That’s because Sue is well organised and very experienced in her field. Something that takes Bob 5 hours to do, can be done to a higher standard by sue, in half the time.
- Hiring the ‘cheaper’ consultant in that example would cost you £250.
- Hiring the expensive consultant would have cost you just £187.50 for a better service!
If you offer a great service and charge a higher than average price for it – make sure you explain this clearly in your marketing and in your negotiations. Once prospective clients or customers are aware that your higher than average price or fee could save them money and give them a better quality service, it’s a lot more likely they will hire you.
If you just quote a higher than average fee in your marketing, you will lose business needlessly!
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A good point well made as usual. It often amazes me the number of times that I’ve seen this in practice, across all sorts of industries. Having said all that, I’m not a big fan of charging hourly rates anyway as it rewards inefficiency
Good point Jim.
Another one is to make sure that you’re comparing apples with apples.
For example, some consultants quote their fees (and then expenses like travel etc need to be added) and others have an “all in” price.
It’s vital that you communicate why your fees are high (as well as low). It works this way when your fees are lower than the competition too – some buyers will be skeptical if you’re 25% lower than everyone else.
Once again, communicate the reasons why.
Whether you offer a low price or a high price, communicate the value and the reasons behind everything.
You cannot assume anything and cannot allow the buyer to put 2 and 2 together and come out with 4!
Sean
Sean McPheat
Both Stuart and Sean make some good points here.
Thanks for sharing!
I have always really struggled selling against cheaper prices. I wish I had found this post years ago. Thanks mate!!!
It always goes back to the old adage: You get what you pay for. And, rarely does the item that cost less end up being superior to the higher priced one. As you said, it’s just important to clarify why you’re worth the higher price. Nice article, Jim.
Hello Kirsti,
Thanks for the comment. It’s too easy to blame the consumer for being fee sensitive; when service providers are creating a problems for all looking identical. When price is all a client has to tell providers apart, they will use it.
I think the advice is good, the example not so much.
People who bill by the hour end up making less money the faster they work.
The point is not to focus clients on price. The goal is to focus them on values like quality and return on investment and how their business or marketing or operating conditions, whathaveyou, are improved.
Danielle,
Thanks for the comment.
You are disagreeing with the example; yet your comment agrees with my point – NOT to just quote a fee but to show the value.
You always focus on value. Quoting fees is pointless, unless someone knows what they are paying for (the value).
I think there are folks who may construe from the example that they should be talking about how much faster they work. That’s not necessarily or inherently the value and they run the risk of creating unrealistic/unsustainable expectations. That the issue I have with the example.
I definitely agree with you about not simply quoting fees. It’s always our job as the provider to provide proper context and understanding so that when it’s the appropriate time to discuss fees, they make sense to the customer.
Okay – thanks for the feedback anyway Danielle. By the way – how did you find this post? It’s had a stack of traffic over the past hour or two – I think it must have been in a well-read newsletter?
“Get to the Point” ezine from MarketingProfs:
http://www.marketingprofs.com/small-business/index.asp?nlid=1269&cd=dmo121&adref=NsbT189
Danielle,
Thanks for letting me know. It’s always great when they feature my work.
Thanks again Danielle
I’m shocked that any consultant would quote a fee in their “marketing”. I rarely ever find myself in a competitive situation with other consultants but when I do, I am never the cheapest and always win the client.
The main reason is that I go to great lengths to demonstrate that I fully understand the problem to be resolved (and much more in most cases) and therefore price is never an issue.
Of course, that is an over-simplification of what goes into the process of winning business but I think everyone will get the general idea.