Let Marketing and Business Development Lend a Hand
Price is a component of the buying decision. You aim to make it less of one, but when all things are created equally, price is typically the tie breaker. This leads to spreadsheets with multiple variables, guesstimates on hours and blended hourly rates all with the hope of coming up with a price that makes the prospect happy and satisfies your firm’s realization goals. All of this work is done at the engagement level by a partner or partners who will oversee the engagement.
That’s quite different than how things work in corporate America where pricing often falls to the marketing department. (It’s one of the four Ps of marketing: product, price, promotion and place.) With fierce competition comes creativity on pricing. From loss leaders to premium pricing to penetration pricing, there are many options for how to set price. This article won’t get into the different pricing options (including value pricing which should be your ultimate goal), but ways you can improve profitability with better pricing to begin with. And that begins with tapping your marketing team for help.
Marketing and business development executives have insights that can help you set price. Your BDEs talk with potential buyers every day about budgets and pricing and relay that information to marketing. Marketing prepares proposals firm-wide and knows what has worked well in the past. They both coach partners through opportunity pursuits and have a deeper level of understanding on what buyers are looking for, how a competitor may bid and unique approaches others in the firm may have used. Harnessing this combined knowledge will improve the pricing strategy.
Here are five ways to price better:
- Ask About Price During Pursuit. The price for your service has to be at a level the prospect is willing to pay. This may or may not compare to the hours you’ll have into the work times your billable rate. You should always discuss price with a prospect early in the sales process; they should never see pricing for the first time in a proposal. Sales professionals are often more adept at starting the pricing conversation, so use them if you have them. The key is asking the right questions and listening.
- Gather Collective Insights. You’ll also want to look for pricing trends and this data rests outside of one partner’s individual experiences. Perhaps a certain buyer group wants to pick their own level of service. Or they want a fixed fee. Or they don’t understand what they are getting for the price paid. This is valuable information that will let you develop or tweak your approach. You have to capture the insights from everyone in your firm who is talking price and analyze it as a whole when setting your strategy.
- Use Uniform Pricing. Ever hear of a pricing manager? Basically this position, popular in law firms, stems from the belief that someone needs to the difficult task of ensuring your pricing philosophy is properly applied across the company. While your CPA firm may not be ready to hire this position, that doesn’t mean someone shouldn’t own the pricing role. Price is a fine balance between growth, risk and profit that requires strategy. You don’t want to leave margin on the cutting room floor.
- Implement Productization. One trend gaining in popularity is the concept of productizing services. Basically, this is making your intangible service look like a tangible product. You put it in a “box” and “label” it so people know what they are getting. Typically, these come with set prices. Maybe you develop gold, silver and bronze packages where the buyer gets a little more with each level and the pricing increases accordingly. Buyers like having this choice and are beginning to ask their accountants for it.
- Solicit Client Feedback. The key to any solid pricing is to know what they buyer is willing to pay. The best way to do that is to ask. When you are developing a new offering, price is part of the development process. Make sure you ask “How much are you willing to pay for this?” when you test a new potential offering in the market. This information will allow you to adjust the offering as needed to deliver something at the price is client is looking for. And if that price is more than what you have in it, go for it. Who says you can’t have greater than 100 percent realization.
Pricing should be a firm-wide strategy and not an individual partner decision. No matter what pricing approach your firm chooses to adopt, it needs to apply to all your clients. Realize that your marketing and sales team can add value to the process from research to testing to documented pricing models. Marketing intelligence is just that—intelligence. Use it to your benefit.
Price is an important part of your growth strategy. Contact us to learn how we can lead your firm to greater growth and profitability.