Columns / Phipps: Value Pricing

Value Pricing: Step 3: Develop Service and Pricing Options

Last month, we discussed pricing the client rather than pricing the work. Once you have identified your price, should you then present your one price to the client and wait for a yes or no answer?

This method can work, but it will seldom help you achieve optimum results. Keep in mind that you promised to put the client in charge of the project. Giving them a yes or no, take-it-or-leave-it proposition means you have not given them the real, meaningful options that they need to be truly in charge. The good news is offering a prospective client multiple options gives them several ways to say yes and only one way to say no. Taking this approach also greatly increases the odds you will get the job.

Of course, the options have to be favorable for your firm as well as for the client. I recommend developing three different option packages and three pricing levels for each client (a total of nine possible option/price combinations). Which of the nine you choose to present to the client should be decided by internal forces, not external. The three pricing levels are:

  1. Rock bottom. This is normal profit. It’s never “break even” and never “so we can compete with the low-baller down the street.” You should never compete with another professional based on price alone. Ever.
  2. Regular. This price is one that allows you to make a good profit on the job. Keep in mind that the profit cannot be so good that it outweighs the value you provide on the project.
  3. Yippee. This price is appropriate when you and your services bring extraordinary value to the client. Be certain the client reaps handsome rewards from your work, and don’t be shy about making certain you are rewarded for making it possible.

In difficult economic times, clients will likely choose “rock bottom” options much more often than “regular” or “yippee.” That is understandable. But don’t make the mistake of prejudging your clients and taking the high-profit options off the table. Giving them the choice is giving them the power. You might be surprised at the choices clients will make if only you let them.

So how do you determine which services are part of which package? Each step up in price must be accompanied by an associated increase in value. This is one reason it is foolish to price “a survey.” You must first lay the ground work demonstrating the value of the different levels of service you can provide. Only then can you justify three pricing levels.

Clients must understand that achieving cost reductions mean compromising on value. Everyone wants to save money; few are willing to give up perks they view as “essential” to achieve those savings. As a case in point, how many cars without air conditioning are sold in the United States? The percentage is very small. Almost everyone gets air conditioning because they see the value for the extra money.

Take a hard look at the services your company can and should offer. Certain services are required to meet the minimum acceptable level. Anything required by the standards of practice in your jurisdiction sets the bottom level of service you can provide. In some areas, required items include services such as marking corners with a tag identifying that you have done the work, or recording a plat showing your results. Put together a list of those items. Here is a partial list of services you might include.

  • Research current deed
  • Research adjoining deeds
  • Develop a written proposal detailing work agreed upon and cost for same
  • Take field measurements
  • Monument all corners
  • Tie flagging so that all monuments are conspicuous
  • Tag monuments with tamper-resistant caps
  • Analyze project deed and adjoiners for conflicts
  •  Locate and analyze readily apparent field evidence of use of the property by others
  • Prepare a final report showing results and discuss the report with the client in your office or by phone

The exact nature of the work proposed will dictate the items that are included on the list. Include all the basics, even services that are easy to miss, such as developing a plan to accomplish the work. Of course, that plan is the same plan you need to develop the pricing options, but there is no reason to hide this from the client. You have every reason to tell them how much effort you are expending on their behalf.

Once you have your basic list, it is time to create list No. 2. Add extra items and services that go beyond the basics. Here you want to demonstrate additional value and involvement--extra attention the client will receive for the higher price they will be expected to pay. Clients who want this level of service will receive everything on list No. 1 plus these extras. Items on your second list might include:

  • An electronic version of the report sent to the client
  • Meeting with a company representative onsite to discuss the results
  •  An outline of property overlaid on an aerial image of the property
  • A disc with photographs of each of the property corners and other important features
  • A framed copy of the map suitable for hanging

You get the idea. The point is that each of the items on this list should have some added value for the client. (Remember that you were listening to what the client wants and values during Step 1.)

Finally, develop a third list of items that go well beyond anything minimally required. Some of these will be “over the top,” but that is the whole point. Most will add to your costs, but so what? If you spend an extra $500 to provide an item to the client and charge them $1,000 for that item, the extra cost does not matter. This is one of the key psychological hurdles that must be overcome when implementing value-based pricing. It does not matter what it costs you to provide a service as long as the client values that service enough to pay the cost plus your profit.

Not every client will want the items on this list. In fact, the percentage who choose this third package option might be very small. Even if you go a year without any clients choosing the items on this list, do not stop creating and presenting it. The critical role for this list is that it serves as a sharp distinction between this level and the basic level. At the very least, having this level will drive more clients to the mid-level.

Fill out each of these lists with as much detail as possible. Include everything you have done, might do or could consider doing. Not every client will need to see the entire list. Which items become part of the three options list you will ultimately present to the client will be addressed next time.

Larry Phipps is a North Carolina licensed land surveyor with more than 20 years experience owning and operating a surveying business. Additionally, as president of Land Surveyor’s Workshops (www.landsurveys.com), he has spent the last decade traveling and teaching at conferences around the U.S. His goal is to help surveyors be better at the business of surveying. Recently, Larry Phipps and Carol Hiatt Huff formed T. P. Consultants, a company that works with surveying firms on reducing liability and implementing value based pricing. T. P. Consultants and Land Surveyors Workshops can be reached at 800-533-4387.

 

Sidebar:

The Importance of Professionalism

Have you ever given a prospective client a price within the first five minutes of an initial phone conversation? If so, shame on you!

You should never give a price without digging deeper into the situation and listening carefully to the client so that you can develop a solid understanding of their needs and wants--Step 1 in the process. Additionally, the sooner you price, the lower the price will be. Hidden in this dynamic is that the sooner you give a dollar figure, the more people will think that every “survey” is exactly like every other “survey.” When every item is exactly like every other item, it is a pure commodity. Surveying, of course, is not a commodity.

Almost as bad as giving a price in the first couple of minutes on the phone is sending out a plain old Quickbooks Quote with a couple of lines and a dollar figure. When you do that, you have made all the decisions for the client; you have broken your promise to give them the power to choose. (OK, they can choose to go down the street, but if they are a client you truly want, that isn’t a good thing.)

Keep in mind that everything you do--every telephone conversation, every email, every visit to the site--is being judged by the client. Seldom does a client have the background to judge you on the things that really matter. Details such as research, thoroughness of field recon, quality of measurements and foundation for conclusions are foreign concepts to most clients, so they often make decisions based on other less important factors.

Appearance matters. Your letterhead is important. How you present your maps is important. This is why sending your client a Quickbooks Quote is such a terrible thing; you are essentially telling them that you do not care enough to spend the time necessary to create a form that looks professional. Regardless of the quality of your work, the simple truth is that you will be judged by appearances.

Be professional in every aspect of your business, and your services will automatically demand a higher price.

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