Time old sayings such as “you get what you pay for” and “buy cheap, buy twice” still apply to contemporary business models. Remember, that when planning out your proposed pricing that coming in too low is just as dangerous as coming in too high especially if you’re looking to seal the deal with big companies and clients. Big companies have bigger budgets that they’re actively prepared to spend. Think about it, someone who is financially comfortable is more likely to invest in Porsche than a Kia; if they find a Porsche for the price of a cheaper car, they’re more likely to think “What’s wrong with it?” rather than “What a bargain!”. The same goes for the services that they’re looking to invest in.
Each pricing models comes with its own pro’s and con’s. We’ve provided a summary for you to get an idea of which model would be more appropriate for use in your business proposals.
Chinese Menu Pricing
Chinese menu pricing, if you didn’t know the term, is where everything is clearly and definitively priced—and by everything, we mean everything, so that the client knows exactly what they’re paying for in exacting detail. Whilst these models contain a list of easy to understand pricing, it’s not always the best option for businesses and can do more harm than good. Sure, it’s clear-cut, honest and accurate, but to your clients every item will be seen as a direct cost which will make your clients consider what they want, and more importantly what they don’t want.
This method makes it far too easy for the client to focus on the cost instead of the service, which tempts clients to shop around for alternative solutions because there’s no value added to the cost. It’s going to be better for your business in the long run to price your assistance more generally, since the client isn’t just paying for your services; they’re paying for your expertise and your time, too.
Tiered Pricing/Price Packaging
Tiered pricing or unique bundles which form a complete package are much harder for your clients to scrutinise and pick apart. Rather than just a price tag, you’re offering value from giving clients a clear idea of what you’re offering. However, there is also a downside to price packaging: whilst Chinese Menu methods can appear as though you’re begging your clients for their investments, price packaging can come across as an ultimatum. You’re asking your clients to work with you for a certain cost or go elsewhere.
To offer a successful price packaging solution it is advised that you get a good idea of your clients’ needs for you to show how your services will help drive the results they’re looking for. Make your tailor-made package stand out to clients by showing how each item is fundamental achieving the results that they desire through your service. Listing a bunch of services under a price-tag can be less desirable than the Chinese Menu proposals.
Giving your clients options is always recommended. Allow them to decide for themselves which of your packages suits their needs more through introducing Basic, Complete, and Platinum level services. Take a look around the web and you’ll find these package deals everywhere—that’s because they work exceptionally well. You’re letting your clients know that spending more isn’t always just an added cost, it’s a benefit. Everybody you work with has their own budget, so by creating more than one option, there’s more of a chance that your proposal will fall in line with what they expect.
Tailor made packages are also a fantastic way to give your clients the option to spend more money, unless you give them the option through your up-sell strategies it’s unlikely that they would even consider further investment without a prompt. It can often feel a little awkward to propose an up-sell, but it doesn’t have to be. Many businesses find subtle ways to suggest the benefits of further investments. Graded packages are a great opportunity to do just that. You’re showing that your client can choose to prioritise whether they want to save money or opt for a premium service, which is better than only offering either great value for money or expensive, but top quality, work.
Value based proposals work solely on the value of your service to the client. When executed properly, value-based proposals can create a strong sense of partnership between you and whoever you do business with. To create a successful value-based proposal you will have to consider how to position and market your business, then highlight how you will handle sales conversions, manage and deliver projects.
Opting for value-based proposals over Chinese Menu Pricing and Tiered Pricing shows a level of maturity in your business it demonstrates that you’re a professional that is experienced when it comes to managing an expanding business. Quite often, when businesses are starting out, they’re not too picky about who they choose to do business with, but this definitely isn’t the best message to put out there to your prospective clients. Value Based Proposals also suggest that you demonstrate expertise when it comes to solving expensive problems, which is only a good thing.
When it comes to value-based proposals it is the client that sets the value. Once you establish the value, you can move on to the cost. But remember all this is done before you send your proposal. When first targeting clients through this model it is vitally important that you do not chase them. This makes you seem rather desperate and also signals that you don’t know how to handle your business priorities. If your clients value your service, they will be the ones to chase you.
Whichever way you choose to price your services, though, there’s no better way to demonstrate good value than through delivering exceptional quality. So keep up the good work, and you can’t go wrong!