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Need Feedback On A Pricing Strategy

Posted by KSA on 4/10/2012 at 12:51 AM ET 2000 Points

Hello All,

I'm going to be offering a consulting service that consists of:

1. An evaluation that will identify all the things that need to be done to customize a system for the client.

2. An implementation phase

The pricing problem is that I won't know what is involved in the implementation until I get through the evaluation.

So, I could:

1. just price the evaluation phase with a proposal at the end for the implementation.

2. price the evaluation phase and a basic implementation that I could quantify, then provide a proposal for the entire implementation after the planning/basic implementation.

3. take a wild stab at how much it would cost to do a complete evaluation and implementation, however, different projects would have vastly different implementation plans.

Of course, however I cut it, the complete implementation is by far more expensive than the evaluation or basic implementation.

Have you developed a strategy you like for pricing a project like this?

Can you think of any other approaches?

If you put yourself in the client's shoes, what would you think of the alternatives above?

Personally, I'm not happy with any of the three. In another life, I used alternative 1. But, I was selling to large corporations who didn't blink at spending money to figure out how to spend more money.

I'm thinking that the attitude will be different with the small business folks I'm dealing with now.

Can you think of another name other than evaluation that would make it sound more like it should cost money?

Again, thanks so much for your assistance.

Posted by CarolBlaha on 4/10/2012 at 1:25 AM Accepted

Remember you are a consultant. And a consultative should not be pricing anything until they know the work entailed, that is a one by one basis.

I have worked for countless big and small companies, I don't know any that don't " blink at spending money to figure out how to spend more money". Maybe in the boom years, but now, don't think so.

You know why they did with you? Cause you showed them value. Do the same with the small businesses.

Now a small biz doesn't need the extensive discovery phase. In fact, doing a huge evaluation would intimidate them. They will see you in taking over and a small biz person is paranoid about that.

You need to earn their trust. Break things down to the smallest possible increment. If someone told me I need to spend X to figure scope of project, I'd say "see ya". I can tell you in 15 minutes my problem. So do small projects, show results and you'll get additional projects.

So no "evaluation" spend an hour talking and then find the issue that keeps them up at night. Price that project. Complete it, and provide justification on how you earned your fee. Go to next.
Posted by KSA on 4/10/2012 at 9:06 AM Author

Hi Carol, and thanks for your response. You're saying that I should just go for it and not play games with the fees.

Actually, I've been leaning that way myself. And, maybe it's not an evaluation. It's a planning phase that will result in a written description of how this "system" will work for a particular client.

It's really a roadmap that both the client and I can use to feel comfortable that the implementation of the system will be customized to the client's needs and successful.

Does that make sense? Is there a better way to present it besides roadmap? Any other ideas on how to position the planning phase?

Thanks!
Posted by Jay Hamilton-Roth on 4/10/2012 at 9:20 AM Accepted

Since it sounds like you already have a system, is there a way you can push the evaluation phase into a pricing menu (or guided web app, for example) for the client to choose from? You could offer an a lá carte option for owners to self-select their specific needs and a full menu for those that want a whole project?

Do you also already have examples of this working for other small business clients of yours'? Social proof (with examples) will help your prospects better understand the value you're offering as it applies to real-world examples.
Posted by KSA on 4/10/2012 at 9:48 AM Author

Thanks, Jay. The problem is that this is a new system for the client. They don't know what they need.

For example, one client might have 1000 contacts to convert to a new Contact Manager. Another might have 5000 and another none.

But, I might be able to come up with a way to create various levels within that one step. I'll think about that. My knee jerk reaction is that the list of options might be formidable.

On another topic, One client might know how to categorize the leads in the new CM, some might have no clue and some might think they know, but their scheme won't be successful.

Those types of issues would be figured out during the planning phase, but maybe I can blend that into the conversion step.

It would be so much easier for me if I could just figure out what needs to be done, then present them with a very straight forward roadmap for moving forward. This whole issue is a bit crazy-making.

So everyone's insight is most appreciated!
Posted by Peter (henna gaijin) on 4/10/2012 at 2:32 PM Accepted

This is the opposite direction from what you asked for. And it is not clear what is involved in your evaluation phase, but it is very common for consultants (and people like layers and accountants) to provide a free evaluation meeting. if the evaluation is something that you can do without too much cost to yourself and can be done done relatively quickly, then perhaps you may want to consider giving free evaluations. of course, you tell them the basics of what needs to be done and your price to do it, but you don't give away so much information that they could do it themselves.

Whether evaluation is free or for fee, I would not provide a proposal for implementation until after you have figured out what is needed. Sounds like the prices are too variable for you to be able to provide a price up front.
Posted by KSA on 4/10/2012 at 3:14 PM Author

Hi Peter,

That's an interesting idea. Perhaps I could structure the evaluation to minimize the time I would need to be involved.

Hmmmm
Posted by stlubahn on 4/11/2012 at 11:05 PM Accepted

You might layout your best estimate of what the project will be in time and dollars. Make sure you have a number of milestones or checkpoints, and make it clear that you are going to do a billing at each milestone based on the cost of each phase.

That way, you can possibly give a fixed or fairly accurate price for the first few stages, and let the client know that at the end of each phase you will revise the estimate for the next phase. Also let them know that they can break the agreement at the end of any phase if they feel the pricing is too high, or they do not like the direction your project is heading.

Think of this as a conceptual approach, you might use a combination of his approach and what is being suggested by the others above.
Posted by CarolBlaha on 4/12/2012 at 1:24 AM Member

I think again, breaking it into the smallest projects can best ease a small biz owner into a project.

As above, most today provide free consultation to determine initial needs. Then, you provide your proposal. And as in your example, one client has 1000 contacts, another 5,000. I wouldn't call out "evaluation", I'd just blend the price into the overall proposal.

In the initial consult, you can determine # of records, # of fields and as someone who's done this before, you know an idea of work to be done. By presenting one price, you are assumptively moving past "evaluation" to "project", and the owner will be assured.

Breaking out evaluation as a separate line item not only alarms a client, but it gives them option to put brakes on a project that may not get past evaluation.

That doesn't mean you are locked in should the project go beyond norm. In your proposal detail the evaluation, this will help build value. Then state you anticipate a scope of project, and find the right wording that will advise going beyond is a change and can be priced as a add on. In my biz, its called a change order.
Posted by KSA on 4/12/2012 at 7:17 PM Author

Thanks to all for your time and insight!

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