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How the Customer Decides to Buy with Sean D’Souza – 096

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In The Brain Audit, Sean D'Souza uses an analogy of 7 bags, or pieces of luggage, to explain the sequence the brain goes through during the buying process. Open the bags one at a time, in the right order, and the customer will buy. Skip a bag or alter the sequence, and the customer cannot finish the steps to make a purchase.

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Start with the Profile, Problem, and Solution

  • What is the most important thing you can share about pricing?
    • You are charging less than you should be.
    • The real estate agent, buyer, seller, and counsel all have different prices for the same house on the same street in the same market.
    • You can get a lot more based on your uniqueness.
    • You can get a lot less if you don't put that uniqueness forward.
    • Uniqueness is the 7th bag in The Brain Audit.
  • What is The Brain Audit?
    • It is a system that shows what happens in your brain during the buying process.
    • The analogy is that you put 7 red bags on a flight and after the flight lands you wait for your bags, but the 7th never comes out.
    • When do you leave the airport?
    • Most people don't because something is missing.
    • Customers haven't bought or have hesitated because you haven't removed the 7 red bags from in their brain.
    • Buyers go through the same steps regardless of the price of the item.
    • Customers don't buy because you haven't provided information in the correct sequence.
    • If you make the best offer in the world, but if it is in a different language, you still won't get the buyer to purchase.
  • What is the first step in the sequence of the brain?
    • The first step is identifying the target profile.
    • Traditionally people identify a large target audience or a persona they create of someone who doesn't exist.
    • A target profile interview beings with, “What frustrates you the most?”
    • You get the real terminology, frustration, and emotion from your target.
    • You first have to find a real person and discover what his biggest problem is.
    • Drive home the problem to understand how it makes the real person feel and determine the consequences of how he feels.
    • The first 3 bags unpacked are:
      1. Target profile
      2. The problem
      3. The solution
    • Find someone who is very frustrated with a product or service if you don't have a large customer base from which to choose.
    • You can build your product on that one person.
    • The “good customer” doesn't exist; the person with a big frustration does.
  • Why is the problem before the solution in the brain sequence?
    • People tend to bring up the solution because you are taught to preach the benefits in sales.
    • Your brain looks at the obstacles the whole time, to keep you alive.
    • In doing so, it looks for problems, not solutions.
    • Solutions don't register spikes in your brain, but problems do.
    • Talk about the problem the target is having to get their attention.
    • You don't have to make it a negative approach.
    • Talk to the person like you would in reality.
    • The first 3 bags are used to gain the customer's attention.
  • What is a trigger?
    • It is a subcomponent, like something you would use for a tagline.
    • The trigger for The Brain Audit is Why Customers Buy (and Why They Don't).
    • What you need to include for a great trigger is the profile, problem, and solution.
    • The trigger instigates the conversation, with the logical response being, “How do you do that?”

Handle Objections With Testimonials

  • How do you turn objections into a marketing ally?
    • The next 4 bags eliminate the risks, starting with objections.
    • A series of objections occurs even with free products.
    • List the 6 biggest objections that are usually brought up and then destroy the objections.
    • The customer will realize that you have thought through it and become more comfortable.
    • Removing the objections so customers do not need to think about them.
    • Perception is an objection that may not exist.
    • Past experience is another potential objection, which you can deal with through testimonials.
    • You won't eliminate the objections, but you can reduce them.
    • The “unknown” is the last objection, but it could be anything, usually something you wouldn't expect.
    • The way you deal with an unknown objection is to explain better what the service covers to avoid disappointment.
  • What is the best way to create testimonials?
    • A testimonial is a full customer experience, not just a sugar-coating.
    • A reverse testimonial starts with something skeptical because you are tackling objections through it.
    • You start by asking what was stopping them from buying the product or service.
    • The second part of the testimonial is to remove the objection.
    • Get your customer to answer the problem, which provides proof to destroy the objection.
    • The testimonial is the flip side of the objection.
    • You want to correlate the objections with the testimonials.
  • What is your favorite question to ask for a testimonial?
    • “What would have stopped you from getting on the journey?” gives you great insight as to why a customer buys.
    • It provides you with an understanding of how to tighten up those areas.
    • Sometimes you might be able to eliminate the objection because of a testimonial.

Create Uniqueness to Complete the Journey

  • What is a risk reversal policy?
    • Risk reversal (bag 6) reduces risk.
    • There is always one risk bigger than all the other objections.
    • A risk for Zappos is that you have to try shoes on to see if you like them, and they fit.
    • “You like it or your money back” was not enough to tackle the objection because the real objection was the effort to exchange.
    • Zappos offered free shipping both ways to eliminate the risk of the effort and cost to exchange it.
    • Psychotactics created The Lawn Mower Guarantee: Run it over with the lawn mower and send it back.
    • The biggest risk was not that you couldn't get your money back, but that your request might be refused.
    • You have to find the hidden risk to address.
    • You can create uniqueness by branding the risk reversal.
    • Customers realize that you are cognizant of their fears through the policy you create.
  • What is the most common mistake when creating our uniqueness?
    • Trying to find your uniqueness is a common mistake.
    • You can list all you can do and then narrow it down to one thing, and that might work.
    • The best way is to invent your uniqueness.
    • He suggested a writer set her uniqueness as delivering the article 3 hours before deadline every single time.
    • The ioSafe‘s uniqueness is that is indestructible.
    • Structure your product and service around that uniqueness.
    • Psychotactics' uniqueness is that it doesn't give you information, it gives you a skill.
  • What is one of your best stories about creating value for a customer?
    • You have to be more than a business.
    • To create value, you have to be a GPS.
    • When you plug in an address, a GPS takes you from A-B in the shortest amount of time.
    • Customers want you to get them to the end point the fastest, easiest way.
    • Be their GPS.

About Sean D'Souza

Sean D'Souza is the founder of Pscyhotactics, a marketing company in New Zealand. He is the author of The Brain Audit, which has over 800 testimonials. He also is the host of The Three Month Vacation, a podcast that teaches why Sean takes a 90-day vacation each year.

Learning the Art of Frame Control with Oren Klaff – 093

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Oren Klaff is an expert at pitching and closing multi-million dollar investment deals. His closing rate is high because he has mastered the art of frame control. Frame control helps Oren capture and keep the investor's interest during a presentation. The same concepts apply when you are having a value conversation. When you encounter resistance from the customer, frame control can help redirect the conversation and stay focused on discovering value from their perspective. We include a live demonstration of frame control at the half-way mark and again 10 minutes before the end of the episode.

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What Is Frame Control?

  • What is the most important thing you can share about pricing?
    • Most the pitches that request Oren's help include features, benefits, and economics early in the presentation.
    • However, once you start discussing price, the meeting is over.
    • It is not a good method for selling products and services.
  • What is the “croc brain”?
    • Think of the mechanics of how the brain functions.
    • How you talk, speak and calculate come from the neocortex (smart part of the brain).
    • When you meet someone and start a conversation, the information coming from your neocortex is going to their crocodile (lower) brain, which manages new information.
    • The crocodile brain is wondering if the information is something it wants to eat or kill.
    • You have to work your way upward, past the crocodile brain, and into the midbrain before you earn the trust necessary to get to the neocortex.
    • Features and benefits cannot be understood by the crocodile and midbrain.
    • Tailor what you say to the way the brain works.
    • Once you have a good pitch, it should work for anyone.
    • Rock bands and comedians do not change their shows based on where they are performing.
  • What is frame control?
    • In any social interaction (which includes sales and business), you cannot have two different perspectives for the same product or service and achieve a deal.
    • A frame is simply a perspective.
    • Looking out different windows gives different perspectives, resulting in different emotions.
    • People have to look at the same deal from the same window.
    • Frame control is about getting people to see your highly differentiated service as high value and worth the high price by seeing through the same window.
    • Frame control is giving someone a lens to see what you see.
    • A buyer's frame is that he usually thinks that his money is the most important in the world and that he is in control.
    • Gain frame control through a process called “prizing.”
    • The prize to win in the meeting is you because you are the only one who can do what you are selling.
    • Communicate that theory clearly by avoiding status-reducing statements and controlling the meeting.
    • This method does require you to take a risk.
    • No one wants to come to a meeting to talk about themselves; they want to learn things they do not know.

[clickToTweet tweet=”Looking out different windows gives different perspectives, resulting in different emotions.” quote=”Looking out different windows gives different perspectives, resulting in different emotions.”]

How to Be the Alpha

  • Should you give a presentation or start by asking questions?
    • You should be able to pitch one-on-one with the power of ideas rather than decks.
    • Decks are used to get the meeting, but not necessarily at the meeting.
    • Getting asked questions can be laborious.
    • A cold read lets the buyer know it will not be a boring presentation, but rather you have done your homework, and you are willing to take risks.
    • The mind understands when you are taking risks.
    • When you as a seller use your intuition and experience to read the customer and tell the customer what you are seeing, it demonstrates a sense that you know what is happening.
    • Even if you get it wrong, you will get respect because you are taking a risk.
    • Avoid having the conversation that they have had five other times.
    • Skip the weather or sports talk, as it chews up time.
    • You only have about 20 minutes from a buyer before he starts to tune out.
    • Have an agenda and make the most compelling argument while the buyer can pay attention.
  • What are the common opposing frames and the proper response?
    • Technical and social games tactics are laid out in chapter 4 of Pitch Anything.
    • The most common frame is the power frame.
    • You can combat it with the moral authority frame.
    • It is slightly immoral for a large company to grind on a small company to get a financial advantage.
    • Large companies should want their vendors to be around and deliver for a very long time.
    • Small companies disappear when they do not have good margins.
  • What is a beta trap?
    • There are alphas and betas in the animal world.
    • In a business meeting, you know which one you are from your internal sense of who is driving the meeting.
    • Recognize it when the other guy has trapped you into a low-status, supplicant position.
    • The free 6-Minute Pitch course can help you figure out how to get out of beta traps.
    • Most presentations start with information, which creates analysis.
    • Analysis is done with the cold, unemotional part of the mind.
    • If you are trying to open or close with information, you put the buyer's mind in a cold state.
    • The goal is to capture the information with stories or narratives that are compelling and create a want in the buyer.

[clickToTweet tweet=”You only have about 20 minutes from a buyer before he starts to tune out.” quote=”You only have about 20 minutes from a buyer before he starts to tune out.”]

Why Now vs. Why Me

  • Why is “why now” important in a sales conversation?
    • Try to demonstrate how the world is changing, positively and negatively.
    • For example, the next generation of business will leave behind the executives who do not have basic computer skills.
    • When you demonstrate a new world order, then the customer wants to know what solution you have that fits in the new order.
    • Why now has to be characterized and structured into how things are changing in the macro.
    • You can approach it technically, economically or socially.
    • Why me is largely implied by your interactions.
  • What is the role of neediness in a sales conversation?
    • Neediness tends to show up at the beginning and end of a meeting.
    • The real meeting happens in 20 minutes; everything else is discussion, relationship, and rapport.
  • What is one of your best stories about creating value for a customer?
    • A customer shared his presentation to raise money for his company.
    • It was so bad that Oren asked who told him to do it that way.
    • The customer told him it was a board member who had used the method 15 years ago.
    • Oren's team was then able to help him fix the presentation to move forward more effectively.

About Oren Klaff

Oren Klaff is the author of Pitch Anything. At his day job, he raises funding in capital markets for Intersection Capital. He is also the co-developer of the Velocity, a proven framework to create a winning financial presentation.

The Mental Health of the Entrepreneur with Cory Miller – 091

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Mental health is a tabu subject. And that is exactly why Cory Miller is sharing his story. He went through a divorce, and one of the effects was depression. It affected his ability to lead his team and make decisions in his business. Fortunately, he had an attorney who recognized the symptoms and suggested he see a counselor. Now, on the other side personal tragedy, Cory is telling entrepreneurs to pay attention to their mental health. He has done what few people would ever do. He was interviewed for Inc. magazine about his experience and is speaking openly at WordCamps across the country about the danger of poor mental health to your business and family.

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Get to Know Your Customer

  • What is the most important thing you can share about pricing?
    • Pricing is a part of a larger negotiation between the buyer and seller.
    • When you offer significant value, price does not matter; it is just a formality to pay it.
    • Price is the start of a negotiation.
    • It is bigger than a negotiation over a number.
    • It is a negotiation of value between buyer and seller.
  • What is the foremost pricing lesson you have learned at iThemes?
    • Know your customer to the core.
    • Provide exceptional value for the community to make their lives awesome.
    • Think of the core thing that you are trying to solve.
    • iThemes tries to save money, prevent loss of data and offer peace of mind.
    • What are the customers‘ obstacles, and challenges?
    • What is the customer's journey?
    • What obstacles that arise could our products solve?
    • Those answers direct product development, the sales page, and technical support.

[clickToTweet tweet=”When you offer significant value, price does not matter; it is just a formality to pay it.” quote=”When you offer significant value, price does not matter; it is just a formality to pay it.”]

Understand Value Like the Customer

  • What is the value conversation for a risk management product like backup or security?
    • BackupBuddy was created because a dedicated server crashed, without a backup.
      • Cory personally lost photos and blog content that he can never get back.
      • There is no number that he could assign to that loss.
      • He asks his customers, how much do you value your online work: website, e-commerce data, blog posts, comments?
    • iThemes Security was created because one of his websites was getting nailed with spam and bad login attempts.
      • Cory did not even understand how bad his site was being attacked.
    • These products are like insurance.
    • Empathize with the customer's journey.
    • It helps if you have your personal stories to relate.
  • What is the correct balance between gathering and implementing feedback?
    • The vocal minority tells you what is critical and what they want.
    • The majority is silent.
    • Customer empathy and understanding their journey is the key.
    • A translator between the customer and the developer is important to avoid disconnects.
    • You do not want the customer to talk directly to the developer becasue they speak different languages.
    • The technician and the customer perceive value in different ways.
  • What is the advantage of having a “customer advocate” on your team?
    • You have to step your game up to know and serve your customers better than the competition.
    • You want the customer to feel an empty void if you are to leave.
    • He is conducting his own iPhone vs. Android comparison to make sure he understands his customer's perception of value.
    • Get as close to the customer's experience as possible.
    • Understand whatever affects your customer and then think through the future and lead them.
    • iTheme's purpose is to take customers from transactional to transformational.
    • They want to go from making a profit to transforming lives, by making sure their customers are in the best place possible.

[clickToTweet tweet=”When employees know their leader is maintaining his health and happiness, they are more confident.” quote=”When employees know their leader is maintaining his health and happiness, they are more confident.”]

Your Mental Health Is Important

  • Why is mental health important to an entrepreneur?
    • Cory was interviewed for an article in Inc. magazine, Why This Entrepreneur Is Talking to the Tech World About Mental Health.
    • He is a voracious reader and shares articles with team members to increase their quality of life.
    • Entrepreneurism is a tough sport; most family and friends do not understand.
    • He shared his story publicly, including his mental health and divorce, and most people had no idea.
    • He wanted others to understand that they are not alone.
    • He was helped greatly by some experiences, and if he did not share them, it would be a tragedy.
    • The key is empathizing with your fellow human being; just care about people.
    • He chooses to use his time, talent and treasure to serve other human beings by making their lives awesome.
    • He was divorced and suffered low-grade depression.
    • The statistics for entrepreneurs shows he is not alone.
    • His attorney suggested he go to see a counselor.
    • His biggest fear was feeling vulnerable; he uses a digital journal to help.
    • Building intricate, healthy, loving, reciprocal relationships around you is important.
    • Four times a year, he calls his counselor to get a professional opinion, where he can unload his baggage and leave it at the door.
    • He sets time alone with his family and team to pour into each others' lives.
    • It makes you happier and healthier when you decide what you will and will not allow into your life.
  • What is the impact of good and poor mental health in your business?
    • At one point, his team was concerned.
    • He realized he had a responsibility to the people in the families supported by the business.
    • He had tried to skate by on his ego and pride, but he has committed never to try to do it alone again.
    • Healthy relationships and a professional counselor have made a big difference.
    • Being mentally healthy as the leader of the company makes his team better.
    • When they know their leader is working to maintain his own health and happiness, they are more confident in what the business is doing.
    • You have to be responsible for your happiness.
    • That responsibility applies to your team members too – you cannot carry them.
    • Six Pillars of Self-Esteem is a great book that he wished he had read as a child.
    • It helped him take responsibility of just being himself.
    • “Show up filled up” (Kary Oberbrunner) to take care of yourself, your family, your team and your customers.
    • Your health and happiness have to come first, or you are no good for your spouse, your kids, your team, etc.
    • Your customers and team, deep down, can see that things are not fully right.
  • What is one of the best books you have read about mental health?
    • He bought The Happiness Advantage for his team.
    • Share around your dinner table with your family 3 things that you are thankful for every night.
    • His favorite book is Six Pillars of Self-Esteem, about leading cautiously and accepting your feelings.
    • He has recommended reading on his site.
    • Books are a very cheap way to gain amazing wisdom.
    • By putting them on your Kindle, you can take them with you anywhere.
    • He has over 300 books on his iPhone so he can carry the wisdom with him.
  • What is one of your best stories about creating value for a customer?
    • Three years ago, he was at a WordCamp in New York City meeting with customers.
    • His wife asked him to share a story about how a customer's life was changed.
    • You can treasure the stories about how you are a part of a life transformation.

About Cory Miller

Cory Miller founded iThemes in 2008. iThemes was one of the first commercial companies in the WordPress space. Its mission is to make people's lives awesome. They have a core suite of products including BackupBuddy, iThemes Security, and Exchange. Before founding iThemes, Cory was the communication director of a church with a staff of zero.

A Masterclass in Creating Options with Keith Perhac – 080

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Keith Perhac is a technical marketer, a combination of a software developer and a conversion optimization specialist. He works with SaaS companies and internet marketers to develop automated evergreen sales funnels. He helps convert the traffic that comes to your website into sales. Keith has built two companies around this specialty: SegMetrics.io, which is the reporting that should come with Infusionsoft, and SummitEvergreen.com, which helps marketers create online courses.

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Start by Focusing on Value

  • What is the most important thing you can share about pricing?
    • Recognize the value of what you are selling through the eyes of the customer, not your own.
    • As you become better at your skill set, the value of that skill seems to diminish.
    • There is an intrinsic value over and above the hard work that goes into it.
    • See the potential value that your customer sees in it.
    • It is easier to do this in industries where you are providing direct value.
    • You have to determine what the ROI is for your customer and how you can deliver it consistently.
    • Determining financial value is very straightforward.
    • There is also non-tangible value, such as creating an internal business process, that allows the customer not to waste time.
    • Raising your price is all about how you position what you are selling.
    • If you do not value what you do, then you cannot see the value through the customer's eyes.
    • The more you charge, the more valuable your customers think you are.
  • Why is it hard to focus on value instead of the craft?
    • You are predisposed to value something for which you pay money.
    • The trappings around IBM are what make it valuable, not the software itself.
    • You have to determine whether or not what you are providing to the customer is the right solution.
    • Everyone tends to value their craft over others.
    • Talking with customers is the best way to avoid the knee-jerk reaction that your offering is the right solution.

[clickToTweet tweet=”If you do not value what you do, then you cannot see it through the customer's eyes.” quote=”If you do not value what you do, then you cannot see it through the customer's eyes.”]

Then Create Options and Bundles

  • What is your experience with offering tiers (options) when pricing?
    • The two main strategies when pricing a product are:
      • Tiered pricing
      • Price anchoring
    • Tiered pricing is when you have the same product at a basic level, silver level, and gold level; each level adds more value at a higher price.
    • It gives everyone who is willing to pay an option.
    • Having a range, lets you offer a product for each person who is a potential customer. (Nathan Barry‘s books)
    • Three is the magic number for options.
    • When you have one product, the option is buying or not buying.
    • When you have three products, there is a 75% chance of yes and only 25% chance of no.
    • Adobe is a great example of people who would go to extremes to hack a product because it was so expensive.
    • Adobe made people choose between “I am a professional and want to do things now” vs. “I have a hobby and do not have any money to spend”.
    •  Three targets to hit:
      • Have more time than money
      • Have more money than time
      • Time/money are almost equal
    • Price anchoring is the reason that the Apple Watch has a $10K version; it anchors the $500 watch.
    • The price can anchor both ways.
    • When something is too cheap, people do not trust it.
  • What are the advantages of bundling products and services?
    • Bundling takes other products and services and combines them into a new product that helps the customer succeed faster.
    • It is a great way to increase the value of your product instantly.
    • Bundle in supplementary information that helps the customer speed up; you can add tools (checklists, worksheets, templates, coaching).
    • Add interviews of people who would be interesting to your customers.
    • When you interview someone who has an audience, you get to borrow his audience.
    • We know Richard Branson because he puts himself out there and has social proof.
    • When people have heard your name a lot, they start to equate you with success and trust you.
    • Position yourself in such a way that you are the expert, such as Peter Hoppenfeld.
    • It gives you the swagger and ability to charge more because customers are more inclined to purchase from you.
    • Positioning comes before options, tiers, and bundling.
    • Target yourself down to a specific industry and you can sell more.

[clickToTweet tweet=”When you have 3 products, there is a 75% chance of yes and only 25% chance of no.” quote=”When you have 3 products, there is a 75% chance of yes and only 25% chance of no.”]

Real-World Tiered Pricing

  • What is SegMetrics.io?
    • It is the reporting that Infusionsoft should offer out of the box.
    • If you are doing business online, you want to find out how much a lead is worth.
    • A lead is someone who opts into your site or list from a specific source.
    • The product can track when someone hits your site to opt-in to the first sale to repeat customer.
  • Why do you offer four options for SegMetrics?
    • Normally, they would just offer Startup, Professional, and Business.
    • There was a group of people who were just getting started and could not afford to spend $100/month.
    • The number of contacts in your Infusionsoft account is an easy-to-understand metric to segment people by.
    • How often your data gets updated is another way to balance the offerings.
    • They balance on time and success.
    • If you have more than 300K subscribers, there is another option to contact SegMetrics directly to have a customized solution.
    • Pricing is contextual.
    • Your audience dictates success; you have to validate it.
    • Marketing is applied psychology.
  • What is one of your best stories about creating value for a customer?
    • While working with a customer on a launch, the shopping cart broke for 2 hours during a critical sales process.
    • Rather than give up on lost sales, they contacted the people who could not complete their purchase and gave them another opportunity to take advantage of the offer.
    • From one email, they made an additional $50,000.
    • It is important to note that every mistake can be turned into a success.
    • Very few mistakes are completely unrecoverable.

About Keith Perhac

VeraSage State of the Union 2015 with Baker, Kless & Chisholm – 069

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This episode of the Art of Value Show is a live recording from the bi-annual VeraSage Symposium, which was in Boston, MA. The distinguished panelists or VeraSagi are Ron Baker, Ed Kless, John Chisholm and Kirk Bowman. This episode will be rebroadcast on The Soul of Enterprise with Ron & Ed and Pricing Power by Steve Major.

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  • What is the future of value pricing?
    • Ron Baker – It is incredibly bright and optimistic.
    • Pricing is now a profession and a C-Suite function.
    • Professional Pricing Society conferences are global with the US leading the way.
    • Because pricing is becoming so specialized, it is too focused.
    • The death of the billable hour is not within reach, but it is within sight.
    • Hourly billing has no enemies but is intensely disliked by its friends.
    • Ed Kless – There are a lot of people trying to make pricing too much science, rather than art.
    • John Chisholm – Pricing has to be a core competency in business school.
    • Law firms are still challenged by value pricing and it is the exception rather than the rule.
    • Value pricing changes everything about your business.
    • It is a management innovation, not a just a business model.
    • In technology, there is a group that is ready for something different, but they do not think business should be that hard.
    • Change is occurring with the firms who are receptive.
    • Ed Kless – Value pricing can end project management as it is known today.
    • Earned value is a 9-step process to compute value that is being taught to project managers.
    • The predictive market is an idea where people “gamble” on when a project ends.
    • Project management is being made too complex.
    • ROWE is a results-only work environment: Every position in an organization is defined by the results that are expected to be achieved.
    • Leaders do not want to define roles by results because it is too hard.
    • Measuring the input is an illusion of control.
  • Thomas Bowden – Is pricing art or science?
    • Tim's Vermeer used scientific techniques to create art.
    • Ed Kless – The real concern is that once you input numbers, people believe then that it must be scientific.
    • Ron Baker – It is not 100% art. You need some numbers behind it, but you still need judgment.
  • Wes Higbee – What is the connection between price and purpose?
    • There is a level of competitiveness involving purpose.
    • John Chisholm – There is something more important than money.
    • The big corporations are starting to tap into social responsibility.
    • Ron Baker –  Wealth gives us the freedom to be more purpose driven.
    • It is more prevalent for knowledge workers to look for a purpose now.
    • Conscious Capitalism, by John Mackey, CEO of Whole Foods, has an analogy for profit: it is like red blood cells in your body.
    • Ed Kless – Corporate responsibility seems to be more marketing hype rather than reality.
    • In the professional sector, most people come to their profession for a purpose, not for profit.
    • Ed Kless – It is astrology to measure profit per year and offer discounts at the end of a month.
    • The market pays you what you think you are worth.
  • Andrew Belack – How can we price complex financial planning?
    • He is going to offer more robust financial pricing and asked for help.
    • Ed Kless – Be sure to offer choices.
    • Kirk Bowman – Show his pricing to others and get their feedback.
    • You never get paid a price you did not quote.
    • Ron Baker – Everyone sucks at pricing themselves.
  • Chris Farmand – How can we recruit the next generation of knowledge workers?
    • Ed Kless – The nay-sayers cannot be ignored to save the next generation.
    • John Chisholm – Asks his trainees why they did law in the first place; half answer that they do it for justice and the other half do it for profit.
    • He sees them being manipulated by the system, but if their sole purpose is to make money, probably no one can help them.
    • If they want something greater, then they can be helped.
    • Ron Baker – The generalization by age is bunk; it is not an age thing.
    • The Millenials understand they are knowledge workers, not service workers and see no connection between inputs and value.
    • Do not discount laziness as a reason not to embrace value pricing.
    • Once someone experiences a value pricing firm, the employee is not going to want to leave.
  • Andrew Robertson – What are some misconceptions about value pricing?
    • Many believe that value pricing is about charging more, or is about a fixed-price agreement.
    • Now is the time to look for new ways because of the disruption that is happening in Australia.
    • Technology, automation, and outsourcing are hammering future profits.
  • What is your favorite takeaway from the VeraSage Symposium?
    • John Chisholm – Aligning compensation models with the value you are creating.
    • Do not complain about being shackled by the billable hour, while enabling the behavior by continuing to accept bills that exceed the estimate or fixed fees that are not fixed.
    • Ed Kless – The only thing he underlined in his notes is the word, flourishment: we want people to live their dreams.
    • Ed Kless – Time is not money, but money is time: it represents our discretionary time and how we can choose to use it.
    • Ron Baker – Proud that you can have a discussion about the link between digestive problems and time sheets.
    • Kirk Bowman – The idea of how your business is a value economy; i.e., how do you compensate your team when they see how you price your customers?

Pursuing of the Economic Buyer with Higbee & Riopelle – 065

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Wes Higbee is a software consultant from New York. He has been interviewed on the AOV Show before about software consulting, agile development, and customer value. Matt Riopelle is a creative consultant from Austin. He was a guest on the AOV Show previously to discuss the importance of pricing. Wes and Matt practice value pricing in their businesses and frequently teach others how to implement it.

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Defining the Economic Buyer

  • What is the economic buyer?
    • Matt – It is someone who has the intent, the authority and the ability to purchase.
    • Wes – It is the person with authority and accountability.
      • Authority means that someone can make the decision to move forward and can get the money.
      • Accountability means that the person is responsible ultimately for the result of the project.
    • Kirk – It is an operational and a financial decision maker, and the same person could be both.
    • Wes – You need to understand why you need to speak to the economic buyer to stick to the rules.
  • What is a typical job title for the economic buyer?
    • Wes – Job title is a good way to gauge but do not dismiss someone as not being a buyer, especially in a small company.
    • Sometimes a President or a Vice President in a large company might not have the authority or accountability you would expect.
    • Ask “who will approve the project” to uncover the final buyer.
    • The title can be helpful, but it can be deceptive.
    • In an organization under 50 people, you usually want to talk to the owner.
    • In a large organization, there can be more than one buyer with different titles that have the authority and a budget.
    • Matt – Knowing titles and organizational charts is much more important in outbound sales.
    • For inbound sales, you are usually only one person removed from the final buyer.
    • Listen to the name and titles of others who might be involved.

The Importance of the Economic Buyer

  • Why is it important to talk to the economic buyer?
    • Wes worked with the wrong person, only to discover that the decision maker did not have the project on his radar.
    • If he had pressed, he might have been able to get to the person setting the priorities so that he could help with the actual priorities.
    • Kirk – Why is it was in the best interest of the customer for a provider to speak to the economic buyer.
    • Matt – If you are trying to offer the maximum amount of value to the customer, you have to talk to the people to whom it matters the most.
    • If you cannot talk to the people it impacts the most and understand their motivation, then it is a waste of time.
    • If the customer is going to trust you to create value, you cannot effectively do it without talking to the decision maker.
    • Matt said that he would talk to as many people in the organization as possible during the discovery process.
    • If you come in at the wrong place, someone may be able to articulate the value, but that person might not have the authority to help the people who ultimately need help.
    • Kirk – It is a waste of time, energy, effort, resource, etc. if you do not talk to the right person.
    • It is easy to go to an organization with an hourly rate and enter the company at any level.
    • As a result when the organization changes, the customer relationship gets pushed down to lower levels.
  • What are some questions to determine if you are talking to the economic buyer?
    • Wes has four questions from Alan Weiss:
      1. Whose idea was this project?
      2. Whose budget will support this?
      3. Who will you turn to for approval?
      4. Who can veto this process?
        • The authority to say no does not mean they can say yes.
    • Matt – Listen for queues in addition to those questions.
    • If someone brings up another person in the organization, then you can ask about that person.
    • Matt – Is this something you would bring up during the first call?
    • Kirk – Simply ask, “Where are you in your decision-making process?”
    • Talking to the wrong person can lead you astray because the objectives you get are not the same as the decision maker.
    • Matt – As you look to provide value, spending time with the right person becomes more crucial.
    • With a small business, you should be able to define the person (economic buyer) within 30 minutes; a larger business might take 15 minutes more.
    • If it takes longer than that, it is probably being resisted.
    • Wes – If you are talking to multiple people, you have a problem.
    • Individuals make a decision, not a committee.

Resistance and the Economic Buyer

  • How do you handle resistance to talking to the economic buyer?
    • Kirk – First you need to determine if you are the person who can help them.
    • If the person resists, their reason is usually emotional.
    • With resistance, Wes throws it back to them with a simple “why.”
    • Helping people is not pleasing people.
    • By asking why, rather than answering questions, you can get to the root of what the objection is.
    • Kirk – For example, “Can you tell me why prior experience in your industry is important?”
    • Blair Enns in Win Without Pitching Manifesto says our job is not to convince the customer to work with us, but to see if we are a good fit.
    • You can break the ice with a gatekeeper, but Matt sees these obstacles as red flags.
    • If there is resistance, it is probably not a fit.
    • Trust is important. If it starts with a fight to get to the right person, it is a bad sign.
    • Wes – It is imperative to plow through the gatekeeper to help people.
    • Remember that you might be dealing with one bad apple in an organization. Keep looking for the good apples.
    • If the buyer is not open to conversation, then the company by not be the right fit.
    • You can give people options when you want to talk to someone else to get them talking about when or how rather than “if”.
    • Try to talk to the person making the decision alone.
    • Determine if the gatekeeper perceives you as a threat.
    • If you can get someone to uncover his fears or threats, you can often assuage his issues.
    • Matt – If your position is that you want to make the people you work for look good, it can do a lot for the relationship.
  • Should you ask about the budget when talking to the economic buyer?
    • Matt does not have a great answer and has done it both ways.
    • The inherent problem can be how you position yourself.
    • Kirk – It helps to ask about the budget.
    • Wes – Wait for a signal to see if the person is price sensitive before asking about the budget.
    • If someone has not even thought about the budget, he likely has not thought about the true need.
    • Psychologically, when you hear a number, even if it has nothing to do with the conversation, it can anchor the price.
    • Matt is concerned that he might undervalue himself based on their budget.
    • If he exceeds the budget, then it appears as though he has not listened.
    • Value the investment that both parties make in putting together a proposal.
    • Always clarify if the person has no budget at all.
    • There is no basis to talk about a price until the value has been identified.
    • A stated budget is rarely the exact amount of money they have to spend on a project.
  • What is the risk of submitting a proposal if you do not talk to the economic buyer?
    • Wes speaks to the perspective of the risk of submitting a proposal if you have not spoken to the buyer.
      • The buyer can be blindsided.
      • The buyer does not care because it is not a priority.
      • You are being hired as a set of hands rather than a brain.
      • The conversation will focus on price rather than value, the further you are from the buyer.
      • 90% of the time you submit a proposal, you will be told no or will not get a response.
    • Matt – Decide if you want to be a proposal writer or if you want to get paid to do the actual work.
    • Work on the problem, not the proposal.
    • You do not want to shock someone with a proposal.
    • Matt speaks to the risk if you get a “yes”, and you have not spoken to the buyer.
      • The project is moving forward without the buy-in from people who will have the most influence on the project.
      • You have been hired to do something that:
        • was not valuable to the company
        • solves the wrong problem
        • solves a surface problem
        • leaves money on the table
        • misses other opportunities, solutions and problems.
    • The risk to the provider is the lack of ROI.
    • The risk to the customer is larger because they are not going to create value to obtain the ROI they want.
    • Hope is not a strategy.
    • Wes – The ultimate damage is done to the customer.
    • The buyer needs to be committed to his success, and you might need to remind him how he said it would look.
    • It is bad for your reputation if you are not doing the work a buyer values – you can get pigeonholed.
    • Scope creep happens when you do not work with the buyer.
    • If your contact leaves, who will continue the project?
    • When you help someone, you have to be on a “mountain” to help bring him “up”.
    • You want to get permission to help someone, so you do not put someone “down.”

About Wes Higbee & Matt Riopelle

The Ethics of Price Discrimination with Rags Srinivasan – 064

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Rags Srinivasan is an engineer, turned pricing consultant. His epiphany came when he realized it is not about costs. Nowadays, he leverages an analytical approach on pricing. He has an MBA from the Haas School of Business at Berkeley, where he studied with Teck-Hua Ho. He is an avid hiker and said that if it is not longer than 8 miles, it is not worth doing.

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The Customer's Value Perception

  • What is the most important thing you can share about pricing?
    • There are no pricing problems; only segmentation problems.
    • Think about your end-customer first.
    • Value is in the perspective of the person with whom you are talking.
    • The value changes in context as well.
  • How does “list price” communication value?
    • Price is the method to capture value added by a product. The most common way to indicate prices to the customer is the list price, be it price tags in retail or invoice price in B2B transactions. – What is Price Realization?
    • When you purchase a mattress, you do not do the math on how much you are going to sleep and how much per hour you are willing to pay.
    • The list price is the high watermark that a customer needs to put in their mind.
    • Demonstrating different choices at different prices helps to educate the customer on the value.
  • How does a price war destroy value?
    • War results in destruction and casualties and price war leads to value destruction. – Dropped Mobile Profits
    • There is a misconception of success when you capture market share.
    • The causation effect is lost in the minds of people during a price war.
    • Market share at any cost is chasing the wrong target.
    • Which comes first, market share or profit?
    • Profit comes first as it creates value for the customer; value comes first.

Price Discrimination: Good and Bad

  • How does price discrimination help the customer?
    • Our Global economy depends on practicing price discrimination, in fact, it is arguable that without price discrimination some of us won’t be able to avail ourselves of certain products, including life-saving prescription drugs. – Aligning Price with Value Received
    • Price discrimination should be rebranded as price homogenization.
    • Almost every customer values a product differently.
    • If you provide a product that is the same price to all customers, 90% of them will not see the first for their needs.
    • In India, if you want to buy a name-brand drug, almost none of the people can afford it.
    • If it is a generic, it appeals to more people.
    • The ones who can afford it can still purchase the name-brand.
    • Price discrimination is not about squeezing every bit of consumer surplus from every customer (in one model it is). It is about getting customers to willingly pay the price they can pay and still feel happy about it. – Price Discrimination At The Altar of God – Revisited
    • If you take away the customer's choice, you are not practicing good pricing discrimination.
    • Let your customers self-select.
    • It is a $25 flat fee to have a Lexus or Corolla blessed at a Hindu temple.
    • The value of the ceremony is different to each owner.
    • The temple should offer the car owners three blessing options at different prices and let them decide.
    • You can light a candle at Notre Dame Cathedral for $0, but you are encouraged to leave donations.
    • Good price discrimination is practiced by providing small, medium and large decorated versions of the candles with price suggestions, setting an anchor for a donation.
  • Is charging difference prices for a haircut by gender good or bad?
    • Good and Bad Price Discrimination sites a bad example as setting prices for haircuts by gender.
    • The provider is looking at it from a cost perspective because cutting a woman's hair takes longer.
    • Providing different levels allows the customers to self-select.
    • While a “buzz and saw” will likely appeal to men, you are not taking the choice from any customer.
    • When you set a forced price for a woman, you are setting a price boundary that a man cannot cross.
    • Any time you take away from the choice of the customer you are practicing bad price discrimination.

Versioning: A Price Discrimination Tool

  • Can you explain the ethics of price discrimination?
    • Therein lies the tyranny of versioning. If one price is good, two are better but how you do it may not always be right. A versioning strategy that is profitable is not enough. – The Tyranny of Versioning
    • What can you do to prevent adverse self-selection for passengers on a train choosing between second- and third-class cars?
    • Removing the roof or chairs from the third-class cars raised an ethical question because the trains were maximizing their profit at the expense of delivering fair value to customers.
    • One size does not fit all – pricing is a practice.
  • Why did Telsa choose to omit a price (option) for a car?
    • Simple Price-Value Math from Tesla shows how vehicles with different features can provide options.
    • You do not want to have offer too many combinations.
    • Standard vs. all-wheel drive vs. battery life are the two options offered, to see where the customer gravitates.
    • 4 Costs of Versioning explains how being able to offer an option does not mean you should.
    • Offering too many options can be a mental drain on the customer.
    • Do not offer a version at the cost of ethics.
  • Debbie Hudson – What is the difference between a $1 coffee mug and a $15 coffee mug?
    • The difference is in the mind of the customer and the context of the offering.
    • When you are paying $15 for a school fundraiser, you are paying for more than the mug.
    • Products do not stand in isolation.
  • What is one of your best stories about creating value for a customer?
    • Five years ago, he was working with a customer to help decide how to price a SaaS product.
    • The challenge was that there was no product like it on the market, so everyone gravitated to things that already existed.
    • He suggested defining the segmentation first and then asking the customer what value they were going to get from it.
    • Once he helped with value mapping, there was a clear option of what the price should be.
    • He reframed the story and helped them get a better customer focus to determine the right price.

About Rags Srinivasan

The Psychology of Options in Pricing with Mark Wickersham – 061

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Mark Wickersham is the #1 Amazon best-selling author of Effective Pricing for Accountants. He ran an accounting practice for seven years and is now a mentor to over 150 accountants in the United Kingdom. He is also an avid cyclist.

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Price Has Nothing to Do with Cost

  • What is the most important thing you can share about pricing?
    • Pricing has absolutely nothing to do with cost.
    • In the 1990s, he believed you had to price based on time.
    • In 1999, he discovered a better way of doing things.
    • Pricing is about psychology, communication, and marketing.
    • As professionals, we are not taught those things.
    • Customers do not care about how many hours you spend doing the job; they only care about the result.
    • Hourly billing is commercially stupid because the evidence proves it.
    • When firms understand value pricing at a deep level (less than 10% do), they can get up to 100% higher prices.
    • Firms that price based on time are not focused on the value side of the equation; they are focused on keeping prices low.
  • In 2014, he surveyed 725 accounting businesses and asked how they priced.
    • He learned they charged a large range of prices.
    • A common accounting service is to act as the customer's registered address.
    • 68% of the respondents did not offer the service, did it for free or included in a bundle.
    • Only 32% charged a separate price for the service.
    • There are a lot of services that accountants give away for free because they do not know how to price it.
    • Of the 32% who charged for the service, the most common price was £100/year; they were just copying each other.
    • One firm charged £480 and had no problem selling it.
    • Mark taught a firm how to value price the service.
      • Four customers signed up and a fifth customer paid twice as much.
      • The firm was able to see an increase simply by charging for something it used to give away for free.

The Importance of Learning to Price

  • Why do entrepreneurs fail to learn pricing as a skill?
    • Of all the areas of business that you should learn, pricing is the most neglected.
    • Pricing has the fastest and best impact on bottom line results.
    • We can change how we price today and see results tomorrow.
    • In seven months, one firm who worked with Mark added £30,000 to its profits.
    • If you increase your average price by 33% and not lose a customer, you will double your profits.
  • What can an entrepreneur do today to start learning to price?
    • Ron Baker‘s book the Professional's Guide to Value Pricing is priceless.
    • There are dozens of resources available on Amazon and YouTube.
    • You need to commit some time to learn it.
    • You have to have determination and focus on getting pricing right.
    • Get over the things that hold you back and get in your way:
      • Lack of confidence is a big issue.
      • Lack of knowledge and systems also contributes.
      • Everyone believes they have price-sensitive customers. In reality, only about 20% of people who are price sensitive, and they are not customers of a professional business.
    • If you are an Apple user or Starbucks customer, you cannot be price sensitive.
    • Most people in society are value-sensitive.
    • They want as much benefit as possible for their dollar.
    • You purchase Apple products because of the perceived value.
    • Your mindset changes once you start focusing on value rather than cost.
    • If you communicate and add value, price becomes irrelevant.

Psychology, Options and Pricing

  • How does psychology influence a buying decision?
    • Accountants love systems, processes and checklists.
    • Without a process or system for pricing, it happens randomly.
    • When an accountant uses the 7-step Fastest Way to Double Your Profits, you are guaranteed to get better results.
    • Step 6 is to determine how you make the price seem tiny.
    • How you communicate the price is important.
    • “Chunk it down” is Mark's approach to breaking down the price as a monthly figure, rather than annually.
    • The Power of 9 is another psychological concept, e.g., using £499 rather than £500.
    • Left-digit management means since you read numbers from left to right, you place a greater emphasis on the left-most number.
    • If you are truly motivated to make your customer's life better, then you owe it to the customer to make your sales process compelling.
    • You cannot help your customer if they say no.
  • What is some of the research behind charm pricing?
    • There is a lot of research in pricing psychology, and it appears to be contradictory.
    • Left-digit management research is more compelling.
    • Mark has found that 7s work in his pricing.
    • Test different things and do not overuse a particular technique.
    • Every piece of research can have contradictions and might not apply to every industry.
    • A logical purchase would more likely benefit from verisimilitude.
    • An emotional purchase, like at a restaurant, would benefit from a more simple price, like ignoring the $ or £ symbol.
    • The psychology aspect is toward the end of the pricing spectrum.
  • What is more important than psychology when setting a price?
    • The first step toward value pricing is recognizing that different customers place the value on different things.
    • Most accountants now fully agree and accept that they have to move to value pricing, but they do not know how.
    • Most accountants are using fixed pricing, which is different from value pricing.
    • If you have a single fixed price for a professional service, it is guaranteed to be the wrong price.
    • There is a power behind having three choices.
    • Keep your base bundle the same price, but create a bigger, better solution for the higher options.
    • Providing three options allows the customer to decide which he should buy, rather than whether or not he should buy.
    • You can provide options for anything, including creative work such as logo design.
    • If you think it will not work, it is because you have not spent the time to creatively figure it out.
  • What is one of your best stories about creating value for a customer?
    • There are many examples on Mark's YouTube channel of inspiring accountant stories.
    • Sophia Botchway, a sole practitioner, was using Mark's software tool with her customers.
    • Sophia realized that she had been undercharging by 60-70%.
    • She used the process in 2 weeks with five customers, and everyone said yes.
    • She doubled her fee for an existing customer.
    • She signed up £10,000 of work in one week vs. her old way where it would have been £2500.
    • She now has the confidence, process and system to price well.

About Mark Wickersham

Pay What You Want Pricing with Tom Morkes – 016

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Tom Morkes is an expert at Pay What You Want pricing. In fact, he wrote a book on it. PWYW pricing lets the consumer choose the price to pay for the product or service.

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What is the most important thing you can share about pricing?

  • Pricing is marketing.
  • How you price your products and services is part of marketing, and therefore part of the sales process.
  • Pricing is essential early in the process, while you are developing a product or service.

What is Pay What You Want pricing?

  • Pay What You Want pricing lets the consumer/buyer decide the price of the product or service.
  • It doesn't work with commodities.
  • Marketing is more important with Pay What You Want pricing.
  • Some people will pay you more if you remove the fixed price.
  • The Vennare Brothers' The Hybrid Athlete inspired Tom's interest in this pricing method.
  • It is not relegated to products, but can also work with services.
  • If you can't express the value you are offering, this pricing method will not work.
  • Price anchoring is an important marketing technique for this method.
  • A blank space for people to put in any number is not the best option for more expensive products and services.
  • If you remove the caps (low and high), people will pay you more than you think they will. It will also remove the barrier to entry on the bottom end.
  • You have to be comfortable that some are going to pay less, but a small percent will pay dramatically more, offsetting the lower buyers.
  • You need to rely on the people who are generous to sustain you, which is a smaller percentage of the buyers.

How does Pay What You Want compare to other price concepts?

  • Crowd Funding is different from Pay What You Want, but they are similar and can learn from each other.
    • How do you show someone the value?
    • How do you encourage them to be generous?
  • Value Pricing and Pay What You Want use tiers or options.
  • TIP (To Insure Performance) is a combination of Value Pricing and Pay What You Want. TIP is similar to how bartenders and waiters price.
  • Pay What You Want Invoicing – Send a blank invoice and let the customer choose what to pay.
  • Experiment and try it out on small projects, like charging for parts and letting the customer pay what they want for service.
  • Some examples of Pay What You Want Pricing
  • Gumroad is an ecommerce site that supports Pay What You Want well.

About Tom Morkes