Question

Topic: Strategy

Need Feedback On A Pricing Strategy

Posted by Anonymous 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.
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RESPONSES

  • 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 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 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 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.
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