At times, value pricing can seem complex. However, if you boil it down to the core elements it is listening to the customer, discovering the impact and then creating options. Matthew Tol is passionate about the fundamentals and believes you should expand discovery to include the meaning and feeling to the customer to fully understand the value landscape.
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Listen to the Customer
- What is the most important thing you can share about pricing?
- You are never going to get it right.
- Be approximately right, rather than precisely wrong. – Ron Baker
- It's about the customer and what he values.
- If you can articulate that, then he will get more involved in the engagement.
- There is a different price for everyone.
- You have to help the customer discover the value, letting him put it into his day-to-day work.
- Accounting looks backward telling you what happened.
- Value pricing looks forward.
- Be less prescriptive and more open to variables when you are pricing.
- It is a future-based process, to help the customer discover the value.
- You are never going to get it right.
- How do you help a customer see the hidden value?
- The questions that you ask that start with “what” and “why” help the customer reframe the problem.
- Prescription without diagnosis is malpractice.
- Many times the customer doesn't know what the problem is.
- You are a guide to help the customer diagnose, which is when you can help them discover the value.
- Challenge the customer's answers to your questions and reframe them in a different context to take the conversation to a higher level.
- If you aren't challenging a customer's thinking, you are just a robot.
- Listen to what the customer is really saying.
- Stop rushing to conclusions.
- It's better to have the humility to tell a customer that you will work with them to solve the problem, rather than being a solutionist.
- Listen to respond, rather than listen to react.
- Can a professional learn to ask probing questions?
- Recruit specifically for people who have the potential to learn the skill and then train them.
- Each person has to develop his own style, but it is about the outcome you want to deliver.
- Don't forget to allow for silence.
- In a vacant space, most people will start blurting out the real issue.
- You get a far better outcome by letting silence be your friend.
Discover Impact, Meaning, and Feeling
- How did you make the transition to value pricing?
- In 2006, he made the switch, after discovering Ron Baker.
- In a traditional accounting firm, you have to record your life in 6-minute increments.
- He was always the last to do his time sheets, even though he was a partner.
- He felt recording your time and multiplying by an arbitrary rate was a waste of time.
- One thing that he found offensive about time-based billing system is the flashes fo brilliance you get are not billed.
- When you get the 30-second flash of brilliance in the shower or while fishing, and how do you charge that customer?
- It doesn't value the professional.
- They no longer have toxic relationships with their customers since unexpected bills are no longer sent.
- Engineers and accountants created the billable hour system, trying to make everyone extra efficient, without considering effectiveness.
- Adding value makes a difference.
- Recording time you spend on a file doesn't matter; the decision you make as a consequence is what matters.
- Pricing on the result rewards the professional if he can do it faster.
- You can only flourish if you have time to “chase the rabbit down the hall”, which a time-based business does not allow.
- How do you approach having a value conversation with a customer?
- First, discover the real issue the customer needs to solve.
- Take the customer through questions in 3 major areas:
- Impact
- Meaning
- Feeling
- Take the conversation from external to internal to understand the value of undertaking the project.
- Once the value is discovered, the price doesn't matter as much.
- It's not about you; it's about the customer.
- If you've walked them through this process correctly, you will leave them wanting the value you are planning to create.
Create Your Best Option First
- What is one of your favorite ways to offer options to a customer?
- Start with the Works Burger – everything.
- Pare things out from that starting point.
- Place the highest value option first and then strip things out until you get to the base model, understanding what is missing.
- Try to repeat back to the customer what he wanted through the options, using his language.
- Communicate with the customer the way he wants to communicate.
- How can a counselor who helps men overcome porn addiction offer options?
- The Art of Value Society has a member who coaches men to overcome their porn addictions.
- He asked how to price it, and we made a commitment to discuss the question on the show.
- You're dealing with people on a personal level who understand they have an issue.
- You might need to go through a discovery process with them, to root out the deep-seeded issues.
- Take them through the impact/meaning/feeling steps before putting them into the program.
- The highest value should be shown first, rather than last.
- Talk to them about what the value is to get rid of their addiction, working with them to set the price.
- If you are using the same price for everyone, you are not making it about the individual.
- Some of the prices will be social service, and some will be far more profitable.
- Spend more time with the customer before you engage them.
- The quicker you engage the customer, the more likely you will have a toxic relationship.
- Putting the top package first should be the focus of what you're doing; if you aren't willing to go with it first, ask yourself why.
- Not having prices on the website is good.
- It is arrogant to productize knowledge-based, high-value items by putting a standard price on them.
- Don't be average: The average is where the best of the worst meets the worst of the best.
- What is one of your best stories about creating value for a customer?
- From a quantitative point of view, in reviewing a customer's tax return they discovered they could get $125K plus interest back from the government.
- The customer was happy, and they got a percentage of the refund.
- On an hourly rate, the customer's bill would have been about $300, but this enabled them to get substantially more.
- From a qualitative point of view, there was a company ready to fire two people with 40 years of experience between them, due to staffing issues.
- Once the problem was solved, they were able to keep the people.
- One was promoted into management and was able to create a substantial 6-figure product.
- It was a huge turnaround based on how to identify the person to put in charge of the project.
- Consider that the value you add isn't only quantitative.
- From a quantitative point of view, in reviewing a customer's tax return they discovered they could get $125K plus interest back from the government.
About Matthew Tol
Matthew is the founder of MTA Optima. He's a chartered accountant and a fellow Fellow at VeraSage. His most proud accomplishment is that he is a husband and the father of a pre-teen daughter. He loves competitive rowing, competing when he was younger and is now a coach. He is also a sports car enthusiast.
- Matthew's Website: mtaoptima.com.au
- Matthew's Email: matthew@mtaoptima.com.au
- Matthew's Twitter: @mtaoptima
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