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Charging Based on Value



Most people plan their pricing from the perspective of cost when they should be pricing their offerings based on the value they create. Perhaps you’ve heard the story about a guy who takes his car into the shop, watches the mechanic as he fixes his engine in a jiffy, and says, “Wow, that was easy. How much do I owe you?”  The mechanic says, “That will be $100, thank you.” Shocked, the customer says, “But you just tapped the engine once!”  The mechanic confidently replies, “I charge a dollar for the tap and $99 for knowing where to tap.  So would you prefer to pay in cash or with your credit card today?” 

When setting your pricing, take the time to view the transaction through your prospect’s eyes.  By doing so, you’ll be in a better position to help them realize that they are at great risk if they don’t buy from you.  And once you do an honest assessment of the value you create, be sure to ask for what you’re worth.  If you don’t, you may not have enough revenue to provide the level of service you pride yourself on providing this person after they become your client.  Your pricing model needs to be a win-win for both parties. 

When I started my formal selling career in Los Angeles many moons ago, I said to myself, “My goal is to make every one of my clients twenty times what I make.”  It was just a rule of thumb; however, I always aimed to meet or exceed that lofty goal.  Decades later, our sales professional workshops give people much more than twenty times the value of what they pay for our training.  I was particularly gratified to hear one of our graduates last year say that the training we provide “has the potential to change family trees.”   He continued by explaining that earning a better living opens the door to better schools to send your children, to enhanced cultural opportunities, and perhaps even to a larger number of children you feel comfortable raising! 

Here’s a quantitative example of what I’m talking about… Last year I had coffee with a former graduate of our Boot Camp while we were both attending the LIGHTFAIR conference in San Diego.  He had taken our Boot Camp in the same city in the prior year.  Since he didn’t serve customers in SDG&E’s territory, he wasn’t able to take advantage of that utility’s tuition incentive, which would have substantially reduced the cost of attending the Boot Camp.  And since he was from out-of-state, he had travel costs to pay as well.  When everything was said and done, he had invested about $7,000 to get himself from the Midwest to California to take the class.  And by the way, he didn’t ask his employer to reimburse him for any portion of that cost. He just considered it to be an investment in his future. 

Less than a year later, he had increased his company’s lighting retrofit revenue from $730,000 a year to nearly $700,000 per month, and he was set to finish the year at about $4 million in sales.  In the 7 months following his graduation from the Boot Camp, his company had hired six more sales people – all of whom were gradually learning to sell the way he had learned to sell – and the business was growing phenomenally.  Seeing all of this success unfold before his eyes, the owner of the company came to the next Boot Camp himself and brought the rest of his salespeople with him.  Why?  At that point, everyone at the company had realized that the benefits of learning how to sell efficiency effectively would far outweigh the cost of the Boot Camp tuition and travel expense.  

As an epilogue to the story, I subsequently learned that the company’s forward-thinking employee who had started this ball rolling saw his personal annual income rise to six times what he was earning prior to the training, an increase that was much, much more than 20 times the cost of attending. 

Keep this example top of mind as you consider the value you create for your clients.  What value can you bring to the table?  Once you’ve done the math and can confidently defend it, use it to your advantage when setting and negotiating your pricing.  Doing so makes all the difference in the world when it comes to making your pricing a true win-win for you and your clients.

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Posted by Mark Jewell