Maximizing Your Service Fees and Pricing

Transcription

1 Maximizing Your Service Fees and Pricing Presentation for: Service Strategies October 8, 2008 Mike Schultz President, Wellesley Hills Group Publisher, RainToday.com

2 Mike Schultz, President, Wellesley Hills Group Mike Schultz is world-renowned as a consultant and expert in services marketing and rainmaking. His practice focuses on strategy for service and technology businesses in the areas of branding, marketing, lead generation, and sales performance. Mike is also the Publisher of RainToday.com. He delivers over 40 speeches a year at major conferences for such organizations as MarketingSherpa, Business Marketing Association, Legal Marketing Association. Over 60 publications have featured Mike s work, including his research with RainToday. Mike has a forthcoming book with John Wiley & Sons on professional services marketing due out in Mike is an avid fly fisherman and teaches Kokondo Karate and Jukido Jujitsu.

3 Top Pricing Challenges Focus on Value Figure 3.1 Challenges in Pricing Decisions % Finding Each Factor at Least Somewhat Challenging 0% 25% 50% 75% 100% [ Uncertainty about price client will accept 77% Pressure not to leave money on the table 77% Pressure to compete on price - clients Work advances the firm's business Uncertainty about pipeline strength Pressure to compete on price - Difficulty scoping 72% 68% 65% 57% 52% Uncertainty on which pricing model to Uncertainty about ability to do work well Internal disagreement on how we price 34% 30% 26% % Extremely / Very Challenging 35% 28% 27% 27% 32% 24% 19% 12% 8% 8% N = 703

4 Clients Report Professionals Not Selling the Value Source: How Clients Buy The Benchmark Report on Marketing and Selling Professional Services From the Client Perspective.

5 Discounting and Underlying Fee Structure We are firm on fees and never discount. ~ Respondent, Fees & Pricing Benchmark Report % of firms reporting we discount - 65% of consulting firms discount their fees - Average discount 11.7% - Premium-price firms discount less often (55%) vs. (71%, 68%) - Most profitable firms (over 25% EBITDA) discount the least (49%) - Retainers and fixed fee used equally, premium price and profit leaders share underlying data less often

6 Discounting and Underlying Fee Structure Figure 3.8 Median Hourly Billable Rates for Strategy and Management Consulting Firms: Standard/Published vs. Actual/Realized Rates (USD) Standard Actual $0 $100 $200 Highest-level $300 $300 Upper-level $250 $275 Advanced-level $200 $250 Mid-level $170 $200 Entry-level $120 $140

7 Discounting and Underlying Fee Structure Figure 3.9 Median Hourly Billable Rates for HR and OD Consulting and Training Firms: Standard/Published vs. Actual/Realized Rates (USD) Standard Actual $0 $50 $100 $150 $200 $250 Highest-level $300 $300 Upper-level $250 $263 Advanced-level $200 $225 Mid-level $150 $170 Entry-level $100 $100

8 Discounting and Underlying Fee Structure Figure 3.10 Median Hourly Billable Rates for Operations Consulting Firms: Standard/Published vs. Actual/Realized Rates (USD) Standard Actual $0 $100 $200 Highest-level $275 $300 Upper-level $200 $250 Advanced-level $190 $187 Mid-level $150 $150 Entry-level $100 $125

9 Discounting and Underlying Fee Structure Figure 3.11 Median Hourly Billable Rates for IT Services and Consulting Firms: Standard/Published vs. Actual/Realized Rates (USD) Standard Actual $0 $100 $200 Highest-level $200 $220 Upper-level $175 $190 Advanced-level $150 $175 Mid-level $125 $150 Entry-level $105 $99

10 How Firms Find Competitor Pricing Figure 3.14 How Firms Acquire Competitor Pricing 0% 20% 40% 60% 80% Clients and prospects let us know how we compare 66% We engage in research to identify our competitors pricing and fees 39% Competitors publish rates on their websites and / or in their materials 22% We communicate directly with our competitors 18% Often made public through RFP process or similar announcements 17% Other 4% N= 646 N/A or Don t Know 13%

11 Client s View Us As Commodities!

12 Reputation and Brand We asked respondents to describe their company s reputation reach as either very well known (brand leaders) or not very well known in their target market. Very Well Known 27% Figure 6.1 Reputation Reach N=645 Not Very Well Known 73%

13 Do Brand Leaders Realize Higher Fees? Figure 6.3 Median Hourly Billable Rates - Standard/Published by Brand Reputation (USD) Brand Leaders Not Very Well-Known Firms $0 $100 $200 $300 $400 For highest-level $300 $300 For upper-level $250 $250 For advanced-level $200 $225 For mid-level $150 $200 For entry-level $100 $150

14 Do Brand Leaders Realize Higher Fees? Figure 6.4 Median Hourly Billable Rates - Actual/Realized by Brand Reputation (USD) Brand Leaders Not Very Well-Known Firms $0 $100 $200 $300 $400 For highest-level $250 $300 For upper-level $225 $250 For advanced-level $175 $225 For mid-level $150 $180 For entry-level $100 $135

15 RAMP Up Your Brand I know what they do. And how they work with companies like me. To solve problems like mine. I d remember them at the elusive time of need They re the leader Dying to work with them Very valuable Prefer I know who they are Memorize Articulate Recognize Brand RAMP SM

16 Reaching Out to the Market VALUE PROPOSITION Image Campaigning: Who are you... really? Firm s personality, values and proposition Identity Advertising Public relations Sponsorships Website / SEO / SEA Direct Marketing & Direct Contact: Why should I do business with you? Firm s POV on client business issues Speeches/seminars/webinars Direct outreach (mail/ /telephone) Relationship events / trade shows Publishing (articles, books, white papers, research, etc.) Sales Support: Can we do a deal? Account and opportunity pursuit Account teams/plans Sales collateral Proposals Client Extranet

17 Boston Business Journal

18 One More Ad

19 Example: A Common Language from Image to Offer Corporate High Performance. Delivered. By Service: Change Management The ability to manage change is a critical competency for high performance organizations. Accenture helps organizations manage the complex organizational and workforce transition By Industry: Financial Services Accenture's business and financial services consulting help banks, insurers and capital markets to enhance their performance to succeed in this highly competitive industry By Sub Industry: Banking: Accenture helps banks consolidate, rationalize and automate to outperform competitors Capital Markets: We help achieve operational excellence, setting institution on the road to high performance Insurance: Accenture helps achieve high performance, enabling market differentiation without back-office complexity

20 High Performance. Delivered.

21 High Performance. Delivered.

22 Well Known = Better at Lead Generation Source: What s Working in Lead Generation (RainToday.com, 2007)

23 Example Webinar and Seminar Marketing Share the value and vision of technology services through webinars and seminars Collected over 500 registrations for combined events using direct mail, , phone and partnership tactics

24 Targeting Makes a Difference Source: What s Working in Lead Generation (RainToday.com, 2007)

25 Sustaining Growth, Profit, and High Fees The Service Profit Chain Operating Strategy and Service Delivery System Service Concept External Target Market Employee Retention Revenue Growth Internal Service Quality Employee Satisfaction External Service Value Customer Satisfaction Customer Loyalty Employee Productivity Profitability Source: Heskett et.al, Harvard Business Review, 1994

26 Keys to Getting the Fees You Deserve 5. Value price 5a. Value sell 4. Don t just run the meter, use alternatives to the billable hour 3. RAMP up your brand 2. Establish a lead generation engine 1. To get the fees you deserve, deserve higher fees

27 Thank You Mike Schultz President, Wellesley Hills Group Publisher, RainToday.com x205