Making money as a music teacher is tough, especially if you charge by the hour. That is why BJ Lee and his wife Sylvia decided to use a different business model in their vocal coaching practice. They wanted to price their services based on the results their student would achieve rather than the time for the instruction. They took the first step by offering a single customer 3 options. In fact, to hear BJ tell the story, he suggested to Sylvia that she provide options as he was walking out the door to run an errand. This single experiment has led to an 180-degree turnaround in their business. And BJ is willing to share the good, the bad and the ugly so others can learn from his experience.
The Start of Value Pricing
- What is the most important thing you can share about pricing?
- If you take a risk by offering multiple packages and prices, you create the chance to be blown away… or a chance to be mocked.
- Creating three packages gives you confidence.
- The middle package is what you know people want from you.
- The lowest package is the basic scope to get the job done.
- The highest package is an opportunity to offer the customer something he does not know is possible.
- To start, BJ and his wife offered something they had never offered before (create a studio recording in 6 weeks).
- The new customer took the highest option, which was 2 times more than what they would have been paid at their hourly rate.
- What was your first exposure to value pricing?
- BJ was interested in offering three options.
- The Basic, Premium and VIP Packages that they originally sold were based on time.
- Since they were selling “future time”, they felt trapped.
- The problem was that it was not results based. If the session was an hour and they reached the goal in 15 minutes, what do you with the rest of the time?
- Other students did not take advantage of all their paid sessions.
- Ron Baker calls fixed pricing based on hours, “hourly billing in drag.”
- What is one of your favorite questions to ask during a value conversation?
- BJ sees the power of questions and how they can guide a conversation.
- They open up the relationship between two people, conveying that you are genuinely interested.
- The customer discovers value through the questions, even if they do not hire them.
- You are human, not a commodity, with this method.
- Look at the value conversation as a way to create value for the customer.
- BJ started to convince his wife by offering options, which forced her to think in terms of what would be valuable to the student.
- It is a growing process, and they still make mistakes, but it is one of the most practical and effective things they have experienced in their business.
[clickToTweet tweet=”The highest option is an opportunity to offer something the customer does not know is possible.” quote=”The highest option is an opportunity to offer something the customer does not know is possible.”]
The Impact of Pricing on Results
- How has value pricing helped your wife improve her craft?
- When a student arrived at the studio, they connected via Skype. Then Sylvia became the remote producer of the track.
- She did not know she could be a producer, let alone virtually.
- Value pricing allowed innovation in the business.
- The student moved to another goal, to sing for her mother, which is priceless.
- What change was necessary to stop selling your time?
- Value pricing made them focus on objectives and results instead of selling time.
- It was amazingly freeing as they started to develop partnerships with their customers, rather than work as a commodity.
- Framing results can be somewhat intangible with vocal coaching.
- They take it as a project where the person has to perform a song in some specific way.
- There are also online courses where they can learn to sing on their own.
- They can say no to opportunities now because they are results-oriented.
- It is more fun to work toward something that is exciting, for all parties.
- With a flexible amount of time (15 minutes to 2 hours) for each lesson, you have the margin to prevent lessons being stacked on top of each other.
- Each student is assigned practice for home.
- If the student has not practiced, she sends him away to practice because his time with her is for assessment, not practice.
- They have been using this model for about 6 months and achieving higher results.
- What was a challenge you pushed through to make the switch?
- He was blamed for usury by a customer.
- He was having a value conversation about creating a website for the company.
- It is typical to get paid by the hour or on delivery in the film industry.
- He offered a value price based on a percentage.
- The company said it could not pay upfront, so he offered two equal payments at a 10% increase.
- He dug a deeper hole in trying to explain it to the customer.
- It was a referral from a friend. Otherwise, he would have walked away.
- The friend became the intermediary (and still is).
- They eventually agreed to pay and the customer loves the website.
- Not having to play debt collector is a huge a stress relief.
[clickToTweet tweet=”Price each option three ways, resulting in nine prices to help you choose per your intuition.” quote=”Price each option three ways, resulting in nine prices to help you choose per your intuition.”]
How to Create Three Options
- What is one of your favorite ways to offer options?
- There is no routine, yet.
- Recently a woman wanted training to sing at church with her husband in the worship band.
- BJ read Let's Get Real or Let's Not Play, and then asked about the customer's resources including:
- Who else is involved
- BJ discovered her husband was very involved and created a top package to included him, which the couple chose.
- They thought that it might even be something the couple needed for their marriage, based on the value conversation.
- How do you determine your prices?
- They are training themselves to use a grid; silver, gold and platinum with a price sensitivity scale (Neinbach model).
- You price each option three ways, resulting in nine prices to help you choose per your intuition.
- He knew once he heard about value pricing that it was an inner yes that he had to explore.
- He thought his problem met a solution that made sense of what was happening.
- How do you face your fear to implement value pricing?
- They are in a situation where if they did not try something, they would have problems paying the bills.
- Since they are in that position, they have to take risks.
- You cannot lose by offering three options.
- Do something to get started down the path.
- He recommends the following resources:
- It is a life-long learning process.
- Through immersion, value pricing becomes what you are.
- Being real, authentic and human toward other people is harder with hourly billing.
- Seeing the world in terms of value lets you serve them better.
- Value is in the stories that Jesus tells, including the poor woman who gave more spiritually (2 coins, which is all she had) than the wealthy man who gave a larger amount.
- Another Bibilical story, referenced in Today is Value-Pricing Sunday by Ed Kless, talks about a vineyard owner who hires people to harvest throughout the day. It demonstrates that time does not matter; it is the result.
- What is one of your best stories about creating value for a customer?
- A discovery conversation that did go well.
- A website needed to be redone, but the customer's long-time colleague died over the weekend.
- She did not want to delay the conversation, though.
- He had named the packages after one of her passions, James Bond actors.
- It made her smile, and she tried to guess them in order:
- Sean Connery
- Daniel Craig
- Pierce Bronson
- It was powerful to make her smile in the middle of a tragedy.
About BJ Lee
BJ Lee is a member of the Art of Value Society on Facebook. He and his wife, Sylvia, live in Hamburg, Germany. They started a vocal coaching company in 2013. She is the talent, and he is the business manager. Previously, he taught English for 10 years and has a Masters of Arts in Biblical Interpretation. He has learned the art of persuasion by parenting his 3 daughters.
- BJ's Website: stagebound.de (English translation)
- BJ on Twitter: @bj_lee_
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