Money Talk to Convert More Prospects
Hello and welcome to AAR Partners’ new biz quick tips shared exclusively with our AAR Agency Growth Program Partners.
You spend hours on prospecting and pitching a new client and it often feels like it all comes down to one question: “What are your fees?” And no matter how often we ask prospective clients to circle back after reviewing all proposals if the fee is too high, they do not.
In fact, AAR Partners recently pitched for B2B client in the automotive aftermarket and it was down to two finalists: AAR Partners and the unknown X. After speaking with procurement and highlighting reasons why AAR Partners’ pricing is value-driven but underscoring that we would consider sharpening the pencil after they compared the two final fee proposals, he decided to go with the lower bidder. His answer as to the rationale for not selecting AAR Partners, “Your fees were too high.” Even though I asked, he didn’t bother coming back to discuss how we could adjust the price… once the “sticker shock” hits, it’s often too difficult to change someone’s mind.
So how do you tackle the money talk with prospects? We often avoid it until after we’ve obsessed over every last detail showcasing our decades of relevant expertise, skills, capabilities, resources, USP, and so much more… right?! Then comes the biggest hurdle: your fees.
There are many solid pricing strategies such as:
- Competitive-Based
- Dynamic Pricing
- Price Plans
- Cost-Plus
- Incentive-Based
- Value-Based
I will say what doesn’t work too well is sharing an itemized list of fees for all services. Viewing options in an itemized list is daunting. The more numbers there are the harder it is for our brain to process them, so it makes complete sense to present them to the prospect in one, clear figure.
With an itemized fee list, it’s just a bunch of numbers thrown at them to figure out, make them recoil and start searching for cheaper options.
You’re inviting the client to pick apart your fees; it’s hard for them to think about anything else.
The second issue is a psychological problem called loss aversion. The theory is that the psychological power of loss is double that of any gain.
What does that mean for your cost estimate?
It means that your prospect reading the itemized list will experience a perceived loss at every line with a price next to the service.
Instead of itemizing, think about showing your fees as a pricing bundle. Give the prospect a benefit-reminding-title (such as: increasing online leads package) with the total fee next to it. Then highlight all of the services underneath the fee showcasing all added-value and reminding them that your fee is an investment rather than an expense without any return.
But when should you start talking about money?
The answer? At the start. Don’t wait.
I’ve recently read about a PR agency that was growing very quickly due to one change in the way they tackled the money talk. They tell all prospects they only work on retainers and the bare minimum fee is $10,000 per month. They LEAD with the price tag. I also had a discussion with a mid-sized media agency who also leads with their service fees.
Their philosophy is simple. The prospect can either afford them or they can’t. If they can’t then they don’t waste weeks-worth of time on prospects whose budget is not in their ballpark. Instead they spend 100% of efforts on prospects that can afford their services, which gives them a 90% close rate!
It may seem awkward, but when you’re upfront with your pricing, you get down to business right away, allowing everyone to skip the price dance at the beginning. It’s better to discuss budget upfront before negotiating on the specs of the project because even if you agree on that perfect solution, it isn’t going to magically transfer money into the prospect’s bank account or add a budget line item.
Of course, you must have defined price points organized into “packages” to help prospects organize, focus and narrow in on the most appropriate SOW for the project at hand. These “packages” will act is a guardrail and starting point for every prospective project and will also help set expectations… which is the other 50% of the battle when speaking with prospects.
There you have it. That’s my counsel on this topic and I hope it helps. Look out for more of my new biz quick tips shared exclusively with AAR Agency Growth Program Partners…