Welcome back from the Christmas and New Year break. I hope you are feeling refreshed and ready to go!
Our first series for 2014 is on the tricky issue of pricing your services. Almost every business I know struggles with this to some extent. It seems the more intangible the service (and financial planning is very intangible), the more difficult pricing can become.
Despite what other advisers might tell you, pricing is an activity that needs to be thought through for your business. Yes, your pricing might be in the context of the broader profession or even a local competitor’s pricing, but at the end of the day you need to believe in your heart of hearts in how, and how much, you charge.
If you can get to that place you are well away.
Everything I’m about to go through regarding pricing in the coming weeks is on the assumption you have done the work on: segmentation, understanding who you work for, what their top 5 issues are and that you have put together a solid proposition for them.
When that is in place, the pricing philosophy I’m about to describe will make perfect sense:
This is not just a throwaway line. In my opinion, it is the crux of your pricing strategy. It’s all about delivering value, and not what you consider to be value, but what the client (in fact, each individual client) considers to be value.
Here is a précis of client thinking in three easy steps:
1. What is my problem (and how bad does it hurt)?
2. Will your product and / or service solve my problem?
3. What’s it worth to me if it does?
All you need to do in order to price your service perfectly is find out the answers to each of these questions. Simple, eh?
You need to work through the questions in a different order from the client.
Their order is: 1, 2, 3. Your order is: 1, 3, 2.
1. What is your problem (and how bad does it hurt)?
3. If I can solve that problem for you, what is it worth?
2. Let me show you how my product and / or service can take away your pain and discomfort (and maybe even put some cash in your pocket).
The First Challenge
The first challenge is to identify the client’s problem (although when speaking with a client you never call it a problem, it is a challenge). The easiest way to find out what the challenge is, is to ask great questions.
Just as a doctor asks the patient what symptoms are presenting, you will need to do the same thing. As I covered in the Top 10 First Meeting Mistakes series, most advisers don’t ask nearly enough great questions to really diagnose the problem, and how bad it is hurting the client. This affects their pricing power (or closing rate) later in the sales process.
Once you’ve got the diagnosis correct, and you’ve established the level of pain or discomfort for the client, you can find out what it’s worth to the client to have the problem removed. This part is tricky because:
- The clients don’t always know how great things will be after you’re done, so they can’t put a fair price on it (the intangibility of advice).
- It can vary significantly from client to client.
- You can’t just ask “So what is it worth if I fix this for you?”
- If you do ask the “what’s it worth” question, some clients may fib (i.e. tell you a lower figure than is truthful).
Searching questions are much more likely to give you a flavour of what your worth might be to the client.
- What value can I add?
- What are the criteria for a good solution?
- What does good look like as an outcome here?
- Is there anything we can’t do?
- What are the implications of doing nothing?
- What have you thought of already?
- What concerns do you have about resolving this issue?
- How will you measure our performance?
If you can get a good handle on what value the client places on their issues being resolved by you, the better you can position your fees and charges in the final step.
If you are a good quality financial planner you will have a fabulous range of cures in your cupboard ready to prescribe to the client. Assuming you do, you can simply explain how you have treated many people with similar challenges in the past, and prescribe them a course of your most appropriate service package.
By understanding the clients issues deeply, and showing them the fabulous solutions you provide, you are now in an excellent position to tell them how much it all costs. Discussing pricing prior this point leaves you open to push back and difficult conversations resulting in you trying to justify what, and how you charge.
Next week we’ll dig deeper into the value you create for your clients and how this affects your pricing decisions.
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