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Pricing Strategy for Service Businesses

About this episode:

Set your price too high, and you will price yourself out of the market, and out of business. Set your price too low, and your margins will suffer, and so will your business. So getting it right is critical.

Setting your fees is supposedly more art than science – but it need not be. In today’s session, we’re going to explore how to getting it right: the strategies, and the tactical parameters.

Part 1

Part 2

Topics Discussed (with timestamps)

• What factors matter in the calculation of professional services fees? (00:54)

• What is the reaction that we want from a prospect when we share our rates with them? (03:34)

• Professional service rates as a reflection of the value you offer: How can we quantify the value we offer? (05:21)

• Effects of the lucidity of industry on pricing... even though work effort may be the same (10:52)

• How should projected costs affect current pricing of services? (14:52)

• Milestone Payments: What can we do to reduce friction for receivables?(16:38)

• Transparency or Overshare: Should we show clients how our service fees are built? (18:14)

• Sharing per service fees vs hourly rates (24:27)

• Billing Language: "Fees" vs "Investment" (24:57)

• Should offering an hourly rate always be an option for clients that feel most comfortable with this option? (Eg. government contracts) (27:11)

• A/B Testing on Pricing: How do professional services execute this? (30:31)

• Volume Pricing: For professional service firms, the bigger you get, the more complex your business gets, so where is the benefit in offering volume pricing?(32:30)

• Price per participant pricing (00:12)

• Subcontracting: Is there a standard industry amount for subcontracting work? (02:31)

• The connection between pricing strategy and marketing strategy (05:01)

• How can we communicate that we are a high-end brand (and worth overpaying for) (10:06)

• Contextual Buying: We know buyers like to compare different prices, so why not always offer multiple price options? (14:56)

• Evaluating your rates when buying cycles are long (20:45)

• Would you recommend that leaders experience working with a pricing consultant? (23:34)

• Inflation and its effect on professional service fees (25:38)

• Do you think professional service providers are actually clear on what their real hourly rate is? (30:48)

• Where should our focus be when it comes to our pricing strategy? (33:46)

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