This is my Sales Philosophy of Charging More.
It is incomplete because it is impossible to compress a career lifetime of the science and art and put it into the briefest space. The bullets below give more insight than excess words would. It allows the reader to think and remember the essence of the thing. It is confined to only what I know about: Selling complex professional products and services into a new or mature market. It is the architecture of the factory. the mechanics of an assembly line and its stations.
- Market leading incumbents have operational excellence and leverage, secret sauce that takes economic cycles and management generations to mature
- Intimacy is every market leader’s and incumbent’s vulnerability. This is because once they have squeezed basis points improvements out of their internals, they turn to increasing shareholder value by re-allocating internal resources to new client acquisition. Staffing ratios are shifted to the aggressive intake of clients and servicing is deliberately scaled down and workloads increased. Intimacy is lost.
There are two opposing business models that can lead a market:
- Low cost, convenience. This model relies on tremendous prospect velocity and high conversion ratios. When the new entrant freezes their offering into a low-cost commodity, it reframes competition from quality to price.
- High cost provider, high fidelity. The luxury side of the market, social cache, the high bar. Pricing on the high side of the industry par gains credibility, authority and assures the prospect of the vendor sustainability.
In a mature market the new entrant should charge the same as the incumbent market leader.
- Until the new entrant can compete with a broad suite of house owned and operated ancillary products, they must de-emphasize website aesthetics and promote an intimate customer service experience.
In a new industry, new market, new offering, the new entrant must jockey to secure the first mover advantage and preserve distance from competition.
- Create the industry language and jargon
- Create the industry association. Build a wall (new entrant requirements for transparency, audited financials, certifications, etc.)
- Create a unique billing and pricing methodology
- Charge the maximum the market will tolerate. This is very likely much more than you think achievable. You must have rigid client selection and pricing discipline. Marquee prospects only have power if you give it to them. Marquee clients always leave and become somebody else’s marquee clients and they will become a testimonial for your competitors.
- Reinforce the social cache of the brand. Emphasize the impact that the best of breed has on how the company is perceived internally/externally.
- Prospects will not share with you that they are accustomed to poor service from their vendors. No matter who they are, their calls are not getting returned promptly. This is because if they are with a major, fail safe, market leading vendor they are just one of tons of other marquee clients.
- Great service is the discretionary effort of someone who has attached a part of their identity to a job exceedingly well done. Clients pay more for discretionary effort.
There are three types of clients:
- Those that are outrageously unprofitable. It is hard to fire these clients because of the hole that they would put in revenue. Also they would become the ‘anti’ testimonial in the marketplace. Many professional service companies with an exaggerated urgency to bring on clients, wind up with a book of adverse selection, clients that can’t be fired and won’t leave.
- Clients that are outrageously profitable. These clients can be pilfered by competition armed with a spreadsheet. These clients have typically been with the provider for many years and their condition is accidental. Their prices kept on going up and they never stopped to smell the renegotiating coffee. Correcting the overpricing and keeping the good will of the client is a challenge.
- Client that are ‘right’ priced. These clients can leave but don’t. They will take meetings with vendor competitors, they love to haggle but they aren’t leaving
Renewals should be a dedicated team that is bonused by retention and increase in margin.
- Client rates should be increased on their anniversary. Sales people are not good at doing this because they are emotionally tethered to the client and will resist passing on a higher cost
- The assigned customer service people should not do this because of their ongoing proximity to the client. They can easily be transformed by the client into the client’s advocate, they will amplify small customer grievances and argue on the client’s behalf to keep costs low, they become a part of the clients vendor management system.
Products should be articulated and exactly priced before being sent into the wild. If you rely on the market telling you ‘what it is’ you will forever be pivoting to the appetite, delusions and financial generosity of the prospect.
Charging a premium does not happen accidentally. All the company must be aligned, role play, practice. Every person and process has to be regulated into a premium product/service.