Struggling to sell your data services? Try this price-anchoring technique

Back at the start of my data consulting career, my 'consulting fee system' took a fairly predictable path of:

  • Present my fee

  • Wait for intake of breath from client

  • Proceed to get beaten up on price

Due to an earlier smattering of experience in selling antiques, I was accustomed to protracted negotiations that invariably ended (begrudgingly) in a price cut.

So when I launched my first consultancy I assumed haggling over fees was an industry standard which I duly complied with.

(I had developed yet another limiting belief from my distant past that would take some years to discover and delete - read this article for more on Data Consulting Belief Systems).

My ‘discount-habit’ was eventually nipped in the bud after reading ‘Million Dollar Consulting’ by Alan Weiss.

Central to the author’s method is the strict adherence to the law:

Discount on value, not price.

The idea is a simple one: if a client wants to reduce their payment, you simply take away elements of value.

But there’s a catch - this approach only works if you drop a ‘dollars for hours’ mindset and start billing based on the value of the outcome obtained by the client.

It’s for this reason I place a strong focus on working with my coaching clients to devise a ‘primary offer’ or data service ‘product’ that is value-driven, not days-driven.

Here’s how it could work for your data consultancy…

Data Consulting as a Product

Imagine your primary offer is a data quality maturity assessment.

Your service examines the processes in a client organisation and assesses how well they are performing, where improvements are required, and what form these improvements should take.

Let’s put that service at £20K for a basic package in a mid-sized organisation.

By delivering this service as a ‘product’, instead of a day-rate, you can start to get creative with the deliverable and introduce some value-based packages or 'levels'.

For example, the basic ‘Bronze’ package could involve assessment across 3 departments and 3 systems.

The ‘Silver’ package could scale up to 10 departments and 10 systems, and so on.

You could even include a Platinum package that included not only a subjective maturity assessment but a physical data quality assessment of several systems to benchmark the actual quality of data compared to how well the organisation thinks it is performing.

The exact make-up of the service would be aligned to your abilities and market demand, but the result is a ‘solution ladder’ with varying levels of value.

So when you present your price and the customer baulks at the fee, you can simply reduce the value and move them down the solution ladder to a ‘product’ that fits their budget.

If you simply quote an estimate based on day rate and number of days, can you see how you’ve essentially limited your negotiation options to cutting your daily rate? When you're trading time, you end up with less cash in your pocket or less free time with your family or other essential activities.

Another benefit of striving to build a solution laddering approach, or value based offer, is that it introduces the concept of ‘price-anchoring’.

If you introduce three pricing options then the prospective client will subconsciously reference the highest price when evaluating the lower fees.

If your top-end fee is £50k for a ‘Platinum’ offering, but £20k for a basic ‘Bronze’ service, the lower priced package can feel like great value to the client (whilst delivering substantially more profit than a traditional day-rate model for your consultancy).

This is nothing new of course, we’re subjected to price anchoring every day, because retailers like Amazon know how effective it is as a persuasion technique.

price-anchor.png

Take the above camera on Amazon as a perfect example - spot the obvious price anchoring approach at play.

And if your kids play Fortnite, this phrase may be familiar...

“Dad, I need VBucks for a new skin, it's fine though because I'm getting the cheapest one"

Transparency is Vital

One thing you don’t want to try is fake anchoring:

“Good news, our data quality policy workshop is normally £20k, but because the clocks have gone forward, you can get it for £1,000, but only until Friday”.

The anchors you introduce must be fair and accurate, the options you present must be real options that reflect actual value added, or taken away, based on the levels of effort, resources, material and other variables involved.

How could you employ price anchoring in your data management business?

Pricing and service development is something I invest a lot of time in with my coaching clients because it benefits the companies who buy their data services, and of course the consultants themselves.

For the end customer, they get a clear outline of exactly what they’ll receive, making it easier for them to get buy-in and commitment. There are no grey areas and it demonstrates that the consultant is prepared to put some 'skin in the game' and share the risk.

For the consultant, it helps you to not only increase your income but continuously innovate and invest in your solution so that the quality of your offering evolves and improves over time.

How have you employed pricing techniques in your data consultancy? Can you think of ways to apply this in your business?

Please share your thoughts in the comments below.

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