Wasn’t it just a month or two ago that the
point was being debated,
denied? Now the media and
other sages, at least,
if not the administration,
accepts it and is talking about
how long it will last instead.
In my business, the business of consulting, and of advising others on how to build and expand their consulting and professional services firms here and in Latin America, the first hint of a downturn gives clients an excuse to cry poor. Decisions are delayed, deals are backed out of, and pricing comes under pressure.
I had the occasion to have the pricing discussion with two different clients last week and it wasn’t pretty.
In one case, it’s the positioning discussion:
Where do I want to position my firm in the value proposition spectrum? Can I position different services and perhaps even specific proposals in a different way than my firm is perceived overall when it comes to pricing?
In the other case, it related to a project that I was working on as a stealth writer for another firm. The subject matter was very interesting, the experience good for me and my rate covered my time.
However, I am close enough to the primary firm to ask, “Did you price this to the client at a premium?”
1)There’s a non-negotiable time constraint for completing the work
2)The engagement requires specialized expertise
3)The expertise needed for the engagement is in very limited supply
The writing project was due on a Monday night. (We had received the request the prior Wednesday.) The subject matter was specialized. Few people know the subject matter, as well as both this firm and how to write well.
Sarbanes -Oxley testing and documentation engagements as well as the additional work required to be performed by the external auditors met all of this criteria, especially during the first 4-5 years. However, with Sarbanes-Oxley work, we saw a very broad range of pricing, from the
high “gouging” of the Big 4 to the
body shop pricing of the thousands of staffing firms that sprung up over night.
Why?
Well, David Maister talks about this today and links to a report for a site called
Rain Today.
Some highlights.
.
..Brand leaders were more likely to price their services at a higher level than their competitors in the market (42% of brand leaders were premium-price vs. 28% of lesser-known firms). And, they were more likely to actually get higher fees by up to 35%.
While most consulting firms (and consultants to consulting firms) criticize the use of discounting, 65% of consulting firms report that they do indeed discount their fees. Even the most profitable firms discount – 49% of firms, with 25% or more firm profit, report that they discount. The average discount level: 11.7%.
When it comes to premium-price firms and what sets them apart, it is not their size, the amount of repeat business they are able to get, or the region of the country in which they are located. As a matter of fact, none of these had an effect on a firm’s ability to charge premium fees. The factors that matter most to premium price firms are how valuable their work will be to the client upon completion, and whether or not the firm can deliver superior results versus the other providers – 36% find this “extremely important”
Go
here for Maister’s summary of some of the key points from the report on his blog.
Go
here for a chance to buy the report.
