Justifying Your Price and Monetizing Your Efforts

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Some of the most common questions I get from new consultants are:

  • How much can I (or should I) charge for my services?
  • What is the best way to present my prices?
  • Will clients really pay that much?

The worst thing you can do is present your price or fees out of the box without justification, reason, or comparison. An effective way to answer the price question is to show your client the return they will get for the investment they make, and more importantly, what will it cost them if they fail to take action. Here’s an example to illustrate my point:

Let’s say you’re making a presentation for a 3-hour, 1-day a week, 4-week workshop, and the price you charge is $3,000. While it may sound like a lot of money at first glance, it is actually only $750 per session (4 sessions at $750 = $3,000). So what will it take to make this an attractive price and a no-brainer for your prospect or client to make the decision to become involved?

In this example, let’s use just one strategy… the number of leads… and not even consider any of the other methods of increasing revenue. And for illustration purposes, we’ll say that the client sells a product or service for $150, with a 50 percent profit margin, and they close one-third of the leads they generate.

If we can generate 30 new leads per month (that’s just one new lead per day), let’s see how it works out (using their current price point, conversion rate, and profit margin):

30 leads X 33.3 conversion (one-third) = 10 sales X $150 = $1,500 X 50% profit = $750.

As you can see in this example, they could recover the price for one week’s training with just one new lead per day, and not making any changes in any other area. This calculation was done assuming one purchase per year per client. If they buy more than one time, the numbers get considerably better. And if we carry out the numbers in our example for the year, it amounts to an extra $39,000 in profits for a $3,000 investment ($750 x 2 weeks = $39,000). Of course, if we made changes to some of the other areas (such as increasing the conversion rate, the transaction value, the number of times they buy, the profit margin, etc.) the results can go through the roof.

So the next question you may ask is, “How do we generate an extra 30 leads per month?”

Actually, there are several ways, and in our TopLine training workshops we discuss this in detail, and in the materials you get in training there are lots of examples. But let’s talk about just a couple here.

If your client is running a print ad, what can be done to improve the results of the ad? Can a picture or graphic of some sort be added that will catch the reader’s attention? Can the headline be improved to be more interest-generating? Are they using testimonials of other satisfied customers? Are the benefits (not features) the buyer will get clearly spelled out? Are they benefits that the reader wants and will do anything for? Is there a clear call to action that tells the reader what to do next, and is so compelling that they HAVE to do it? There are a number of other areas to consider, but often, little tweaks to just a couple of areas of an ad can produce big results.

How about other forms of advertising… radio, television, cable, websites, etc. Are what they’re doing in those areas as effective as they can be? Are they tracking the results so they can see if things are working or not? Can small improvements or tweaks be made similar to what was done with the print ads? Can they run another ad in another publication? What about joint ventures or strategic alliances with centers of influence? Are they using those? What about networking groups or professional organizations? Do they belong to any of these? And if so are they active and using them as actual business-generating vehicles and not a chance to get out of the office and have lunch with their friends under the guise of “doing business?” How about referrals? Do they have a proactive, systematic way of generating referrals, and are they actively using that with every client and prospect? I’m not talking about word of mouth here… I’m taking about a SYSTEM that they employ EVERY time with EVERY client, and that produces measurable and quantifiable results.

These are just a few areas to consider, and chances are they’re not using all of them, and for the ones they are using my bet is that they’re not using them as effectively as they could be. We’re only looking for one more lead per day. That’s not a lot.

Now let’s look at another idea. Let’s say a business has two salespeople who each sell $600 worth of products or services per week. That comes to $1,200 in weekly sales, or $62,400 in annual sales. At a 50 percent margin, we have $31,200 in profits. If we could increase each salesperson’s productivity by just 10 percent, we would produce another $3,120 in profits. (That’s an increase of only $60 per week in each salesperson’s productivity.) An increase of $3,120 in profits easily offsets the $3,000 fee for your services.

So how to increase sales production? Here are a few ideas:

Are the leads that the salespeople are working with qualified and likely to buy? Are they the right targeted candidates? Can the quality of leads be upgraded? Are the salespeople using the right sales scripts (opening statements, rapport building, qualifying, interest generating, needs and wants analysis, and call to action)? Have they written down all the possible objections or questions the prospects have given them in the past, and built them and their answers into their script? (If you bring up a question or objection and answer it, it removes it from the prospect and they can’t raise it… it’s already been answered. But if the customer or prospect brings it up, they feel like the have to defend it. Best to remove it from them in your presentation.) Are the salespeople following up promptly and often with meaningful and relevant information with those they don’t close? Are there systematic processes in place to make sure it gets done and that no one or nothing falls through the cracks? Are the salespeople rewarded or compensated fairly and timely for meeting and/or exceeding their production goals? Are their products and/or services priced right, and is there an incentive for the customer or prospect to not only buy, but to buy now? How about for the salesperson… are there incentives for them to sell more products or larger quantities, or to more customers? Again, it doesn’t take much to add just 10 percent to sales.

 We’ve talked about how to justify the prices you charge using some simple examples. The actual numbers you use will certainly vary, but now you have a model to use for your own calculations. What we didn’t discuss, is what the cost to the client will be if they don’t use your services. That’s easy to figure out with the models we’ve used.

It’s long been proven that people are more motivated by the fear of loss than the desire for gain. If they don’t take advantage of your offer, they really haven’t lost anything… not yet. But it’s easy to show they what they could gain, and then point out what they will lose if they don’t take action.

I hope this has given you a few ideas that you can use. As always, I’m very interested in you and your success, and am here to help you in any way I can. Please let me know what I can do for you.

Martin Howey, CEO
TopLine Business Solutions

 

 


4 Comments for this entry

  • Jeff Mikles says:

    Nice job, Martin! Hope you’re feeling better. We head to Phoenix next week for some family birthdays. Hope the weather cools off a bit.
    Jeff

    • Martin Howey says:

      Hi Jeff… Yes, I’m feeling better. Things are getting much better now that I’m finished with my chemo treatments. No luck on the weather, though… still supposed to be around 100 degrees when you get here. But it’s better than 112! Thanks for the connection, and I hope all is well with you!

  • Joe Tufo says:

    Martin,

    You do a great job of breaking down complex issues into bite sized pieces that are easy to digest and understand. Thanks for your wise advice.

  • Martin Howey says:

    Thanks, Joe… So nice hearing from you. It’s been a while. I appreciate your very kind words. Please let me know what I can do for you!

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