Great post today on Charging Value Based Fees, by John Jantsch of Duct Tape Marketing. Here’s the main idea:
If you provide a service, and you charge for your service by the hour, you’re headed for trouble. You are essentially selling a product with a limited supply. The only way to increase your business is to raise your rates. But even that will catch up with you because, at some point, the old apples to apples comparison with a competitor will check your growth.
The answer is to sell a result for a fee or sell a package for a fee, much like you might sell a product. See when you sell a product, nobody says “I’m not paying you $5000, it only costs you $10 to make it.” You price it and they decide if they value it enough to buy it.
This one is, in fact, dear to my heart because I made the transition from business plan consulting to business plan software. It took years. And it was well worth it. And it moved my business model from selling hours (well, days, actually) to selling boxes, meaning products. That was a very good thing; and Palo Alto Software is the result.
John suggests you choose one of two possible paths:
1) Build a brand that speaks to a narrow market so thoroughly they are willing to pay a premium to experience it.
2) Create and document results so completely that no one will ever blink when you tell them your fee for the result.
And, if you go to Duct Tape Marketing and take a look at what John’s been doing, you’ll see that he practices what he preaches.