Selling consulting services at premium prices

in On Entrepreneurship

Recently, a friend and business associate paid $4,700 to an I.T. consultant and computer reseller. So what, you say? It’s interesting because it was the highest bid he received for the solution, and the next closest bid, from a professional and capable company, was $3,500, over $1,000 less!

Why did my friend, Tom, choose the higher priced consultant over the cheaper one?

You might think the higher price included a superior technical solution. It didn’t. The technical solutions were identical. You might think the lower priced companies had poor customer service, or didn’t show up for an appointment on time. Nope, that’s not the case either.

Three factors made the difference for Tom.

  • First, Tom runs a high-end medical office. The vendor he chose had specialized knowledge about his business, and proved it by telling Tom about the impact new hardware would have on the industry-specific software his office ran. The competition made Tom feel like he was “just another business,” and that they didn’t understand what made his office unique.
  • Second, the vendor didn’t try to hide his high price. He told Tom, up front, that his bid would be more expensive than the competition. But he didn’t stop there. He explained the reason why his solution was more expensive, and why it would actually cost Tom less money and frustration in the long run.
  • Third, the day before Tom met with the vendor for the first time, he received a Federal Express package. Inside, he discovered a large binder filled with photographs of the vendor with his smiling clients, and letters about the great job done. On the cover of the binder was a large Post-It note with the handwritten words, “Tom, I’m looking forward to adding you to this album.” (BTW, this is one of my favorite marketing strategies for consultants and consulting firms — it makes an enormous impact and, in many cases, can “sell” your solution well before you arrive for the appointment.)

What is the lesson here?

The real reason people buy “cheap” advisors and consultants

When clients choose a “cheapest-price” option, there is a temptation to label them as “cheap.” Nine times out of ten, that conclusion is dead wrong.

Clients choose the cheapest price option because you haven’t given them a compelling reason why it makes sense to pay more. With no other difference to measure options by, all that’s left for the client to compare is price. When it comes to value, perception is reality. And when all solutions appear equal, why would they choose anything other than the cheapest option?

5 smart-marketing consultant questions

I want to leave you with five questions you can use to find compelling ways to make your business and solutions stand out to your customers:

  • What specialized knowledge does your business have that can add value to what you sell?
  • How can you present yourself as a specialist to your best and most profitable customers?
  • What can you package with your solutions to make the perceived value to be higher? A day of training, a newsletter, a special advisory service?
  • How can you guarantee your solution to prove you back up the higher value you present?
  • How can you prove you are worth higher prices? And do you have thrilled customers to prove it for you?

{ 15 comments… read them below or add one }

1 MrLoftcraft November 24, 2009 at 3:43 am

Being a professional will always make you the first choice, but offering all those happy clients photos surely sealed the deal. But in the end, it is very important to offer exactly what your client needs and if you manage to do that, well, you will have a happy customer that will recommend you further.
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Trianz

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2 Lori July 21, 2009 at 9:59 pm

Your post is right on.  Demonstrating value is key.  Timing is also critical.  A service provider needs to know the difference between being response (demonstrating follow-through) and annoying (to clients who are slow to respond or lack follow through themselves).

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4 Anonymous December 16, 2008 at 6:41 am

A fantastic article.

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5 Anonymous December 16, 2008 at 11:41 am

A fantastic article.

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6 Anonymous November 19, 2008 at 6:52 pm

Thanks for sharing the article.  As the saying goes, you get what you pay for….

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7 Anonymous November 19, 2008 at 11:52 pm

Thanks for sharing the article.  As the saying goes, you get what you pay for….

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8 Anonymous August 21, 2008 at 7:39 am

very interesting….

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9 Anonymous August 21, 2008 at 12:39 pm

very interesting….

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10 Anonymous July 30, 2008 at 10:43 pm

The psychological impact of higher prices is a powerful tool for any consultant, especially if you’ve got a good pitch prepared to explain the difference between your prices and the other guy’s.  It’s easy to advertise your service as the most affordable service available in your field, but often the better business plan involves developing a precise strategy for offering compelling reasons for a client to pay a little bit more.  Thanks for the great post!

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11 Anonymous July 31, 2008 at 3:43 am

The psychological impact of higher prices is a powerful tool for any consultant, especially if you’ve got a good pitch prepared to explain the difference between your prices and the other guy’s.  It’s easy to advertise your service as the most affordable service available in your field, but often the better business plan involves developing a precise strategy for offering compelling reasons for a client to pay a little bit more.  Thanks for the great post!

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12 Anonymous July 11, 2005 at 11:07 am

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13 Anonymous July 11, 2005 at 4:07 pm

The Carnival of the Capitalists for the week of July 11, 2005
Economics.  Business.  Marketing.  Investing.  Technology.  Real Estate.  That and more in the July 11, 2005 Carnival of the Capitalists, which sets up its tents at Multiple Mentality this week.——-

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14 Anonymous June 29, 2005 at 4:06 pm

Bravo!  It’s the consultant that realizes he/she is not bidding on price, but value.  Leave the prosects that are shopping on price – they are the future headaches of your competition.

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15 Anonymous June 20, 2005 at 12:06 pm

Premium Services for Premium Prices

Michael Cage writes: Clients choose the cheapest price option because you haven’t given them a compelling reason why it makes sense to pay more. With no other difference to measure options by, all that’s left for the client to…

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