If any of these questions get your blood churning you might want to consider your current pricing strategy. Are all your services priced the same or do you charge different hourly or project fees for high level work? Routine work may only warrant standard industry rates but as the level of your value in your speciality rises, fees may need to be adjusted upwards. Complex, specialised work that requires a high-level of technical expertise and judgement would attract the highest hourly rate or project fee. Geographic market location, market position and size of client also have an influence.
The most audacious example of a high fee strategy in a field that requires a high level of judgement, creativity and strategic thinking I have come across is that involving a brand naming company. The agency did not particularly want the business from a client so decided to put in a bid at an outrageously high project fee. Work from similar companies was priced in the $15,000 range. The agency put in a bid for $150,000 – and won! Much is at stake when renaming a company and the company thought the highest priced solution would give them the best advice.
A high fee pricing strategy is very risky at best except in rare circumstances where you might use high fees to chase away business you want to avoid. On high-bid projects Howard Shenson, an authority on consulting, said: “This strategy is not suitable to pedestrian consulting assignments because you come off looking just plain expensive. If you go high and the client still wants you, the high fee is a sweet consolation for having to take on the work.” Very few have the audacity of a brand naming agency to raise the roof on its fees and win.
This is an extreme example of high pricing but what relevance does it have for service businesses? It would be crazy to mimic such a strategy unless your value offered was exceptional. For the service business or professional services firm who wishes to find out if they have certain services or expertise that can be priced at a higher level, it would be an idea to evaluate your services to see if you can “suck the marrow out of the bones”. In instances where you feel you have over serviced clients map out the entire project to identify its components and assign detailed cost estimates to each component. Value like beauty is in the eye of the beholder – think of examples in your own experience of how you would have paid a high fee to have your problem solved either quickly or effectively.
Let me illustrate with an example of my own to show just how valuable specialised advice becomes when you are desperate to solve a problem. This is a simple example but demonstrates the value of expert advice. Rust marks began to build on a square metre of tiling next to our bathroom shower. We could not replace the tiles because we had no spares. We stopped the source – the shower frame but it would be too costly to replace the shower. We would rather wait than replace the whole shower and retile the entire bathroom.
The first idea didn’t work
My first attempt to clean the rust off the tiles was with a household liquid cleaner and a cloth. I cleaned and cleaned but there was no difference.
The DIY expert gave unusual advice
Next, I went to a DIY centre where their expert on tiles suggested leaving Coke overnight on the tiles and wiping them in the morning. It sounded too good to be true and it was.
Books didn’t have the answer
I remembered I had a book “Stain Removal’ and looked up the listing on tiles. The advice was to use bicarbonate of soda, washing soda or borax. This advice didn’t work either.
What about the internet?
Why not look up rust stains on the internet. The best advice was to mix a paste of borax and lemon juice, rub it onto the tiles, leave it overnight to dry, then wipe it off. More useless advice.
Back to a hardware store
At another hardware store, the expert advised using a mortar cleaner. But the product had a mild acid which burns off the first layer of the tiles.
A solution from an unexpected source
While thinking through the problem, I realised that most products have general, wide use applications and I wasn’t going to find one that could remove rust from tiles. What about using a rubbing compound, I thought. I investigated but those available were for buffing up paintwork on cars.
Then I found a simple, inexpensive solution, experimented with it and it worked. I could have saved a lot of money had I been told about this solution in the first place. I would have gladly paid $50 up front to avoid all the wasted expense on different materials and use of my time. By the way, if you want to know the solution for removing the rust from tiles, e-mail firstname.lastname@example.org.
Now if you were in a similar situation where expert advice could save you a lot of money or conversely bring in money for you personally or in your business, how much would you be willing to pay?
In a soft economy, it’s easy to take the obvious route and cut your fee. But if your service or expertise is hard-to-find or, better still, exclusive, why not try turn the problem upside down and go high?
The benefits of high fees may seem alluring:
Clients perceive your service and expertise in a much more serious light.
- Your service or expertise is seen as being of a superior quality to your competition.
- Although the market for your high priced services and expertise will be limited, the service also adds a new dimension to your.
- You can turn away business from those clients you’d rather not do business with, especially those who try to chisel every cent from your project fee.
WARNING: CHARGE THE HIGHEST FEE AT YOUR PERIL
The caveat to charging higher fees in a down market is: think very carefully about attempting it unless you can absolutely provide the greatest value in your market or industry. If you do provide outstanding professional services that require a high level of technical expertise or skilled judgement and are not being rewarded, perhaps your service has a positioning problem. Remember Al Reis and Jack Trout’s “Law of the ladder’. What is your service’s position on the ladder in the prospect’s mind?
It can pay to examine closely your own personal services and expertise to see what could be repackaged and resold with greater value at a higher fee to a specific niche market. Make sure you test, test, test. Fish out where the demand is strongest for higher priced services – there are many places to look but the most promising are those companies and individuals who have or are undergoing huge pain in their business or personal lives or those who have bought such services in the past.