Mastering the Value Conversation
David gets Blair to expound on his statement that “the value conversation is where value pricing theory goes to die,” and how crucial that conversation is within the sales framework he lays out in his new book, Pricing Creativity: A Guide to Profit Beyond the Billable Hour.
DAVID C. BAKER: Blair, today we are going to talk about the Value Conversation Framework. Doesn't that just warm your heart?
BLAIR ENNS: Ah.
DAVID: It's like you want to get some hot chocolate, sit around the fire.
BLAIR: It was a great idea, just the way you said it. Maybe it was the word framework. Oh, really? We're going to talk about a framework?
DAVID: Oh, yeah.
BLAIR: How about we just talk about the Value Conversation?
DAVID: Okay, we could leave off the word framework.
BLAIR: I'll include the framework at some point.
DAVID: Okay, but we're going to start, because there's this phrase you use all the time. You use it so much, it's almost like ... You hate what's coming next, right? You use it so much, there's this little mental click. It's like, "Oh, Blair's going into that phrase" ... click.
BLAIR: Yeah, is it like my only joke? There are three types of people in the world: Those who can count and those who can't.
DAVID: Yeah, it's in the same category. It's not quite that good. No, this is a very good phrase, but I will admit to skimming over it, because I don't completely understand it.
BLAIR: Oh, okay.
DAVID: Here's the phrase: The value conversation is where value pricing theory goes to die. What does that mean?
BLAIR: Isn't that self-evident?
DAVID: It's not, because what's the difference between the value conversation and value ... Value conversation is a specific term that you're using, and I don't know what that means. I know what value pricing is, but what is the value conversation? It seems like that has a specific meaning in your head, but I don't know what that is.
BLAIR: Yeah, so why don't we talk a little bit about another framework? We're going to layer a framework over top of a framework. I think it's one we've talked about before, this idea of the four conversations. I see a sale as it's just four conversations. There are four conversations, and it's helpful for you to think of these conversations as four linear, discrete conversations, where there's a beginning and an end, and one follows the other in the same order all the time, and it's almost never the case that there are four discrete conversations, and they're not always linear like that, but usually, for the most part, they are.
If you see the sale as four conversations, then you can just ask yourself, "Well, which conversation is this?" Then, once you identify the conversation, you can identify the objective of the conversation, because each of the four conversations has a different objective. Then, you can use the framework for that conversation, because each conversation has its own framework. The value conversation is the third in that series of four conversations.
Very quickly, the others are, first the probative conversation, in which you prove your expertise to the client or the prospective client, and you move, in their mind, from vendor to expert practitioner. After that, we have the qualifying conversation, which is the prototypical sales conversation, where you have a lead. A lead is a clue to a possible sale. You have a conversation with the person that represents that lead, and you vet that lead against some standard sales criteria to determine if an opportunity exists and what the next steps are. That's where you're sifting through budget, decision maker, needs, timeframe.
The third conversation is the value conversation, which I'll come back to. The fourth conversation is the closing conversation. That's where you transition from the prospective client to a client.
The value conversation ... The objective is to uncover or determine the amount of value that you might create for the client, and therefore what fair compensation for you would be. That's the value conversation, so it's fairly standard. There's a uniform idea of the value conversation across all professional pricers or those who advise others on the subject of pricing. There's even a fairly standard framework for navigating the value conversation. I've simply just tweaked that framework a little bit.
DAVID: People can understand value pricing. They can embrace the concepts, believe in them, and so on, but if they can't master this value conversation framework, then it doesn't actually get applied. Is that a fair statement?
BLAIR: Yeah, so I tell the story in my new book, Pricing Creativity: A Guide to Profit Beyond the Billable Hour. I tell the story of I'm doing an all-day sales training event at a small conference of business owners of a particular profession, just tangential to the creative profession. A year or two previously, they'd had somebody come in and do that full day workshop on the subject of value pricing, so I said, "Well, how many of you are familiar with the theory of value-based pricing." There was about 30 people in the room, and everybody put their hand up. It's a small, tight-knit group. Everybody who was in the room that day had been there the year before.
Then I said, "Okay, keep your hand up if you practice value-based pricing in your firm today," and 29 hands went down, so 30 people, trained to the extent that you can train anybody in a day. Really in a day, you're going to be taught the principles and maybe get a little bit of practice. It wouldn't constitute full training, but you are given the information, like if you read a book.
Many people are familiar with the principles of value-based pricing. Many people have read the books. Many people have listened to podcasts, watched videos, et cetera, and tried to apply it in their firms. In the creative professions, in particular, very few firms are able to price, based on value. We should come back to that and talk about, really, what is value-based pricing. Very few are able to do it. The reason why they find it difficult is this is tacit knowledge, the ability to have mastered that conversation, comfortably navigate through the framework to have these open, direct conversations with the right people at the right level of seniority. These are not pricing skills. These are selling skills.
That's one of the reasons why I wrote the book, is there are a lot of great pricing books out there, but I come at pricing from somebody whose core expertise is in the area of selling. You cannot really experience pricing success without some level of sales success. Those two subjects are really intertwined, and if you want to break out negotiating from selling, those three topics are really intertwined. I say the value conversation is where value-pricing theory goes to die, because you understand the theory. You can read the book. You can listen to the guy at the head of the room for a day, and you understand the theory, but then you find that it's difficult to apply. It's difficult to get good at, right?
It's one of those subjects where you have to fail forward. You have to open yourself up to a bunch of awkward conversations. Some people have a natural predisposition or personal makeup, personality that makes it easier for them, but I've never encountered anybody who found learning the value conversation to be easy.
DAVID: Just in the interest of not letting you have too much influence over my life, let's pretend that I wanted ... That's easy for me to do, by the way.
BLAIR: Okay, I'm sure.
DAVID: Let's pretend that I wanted to learn from you, and I could envision a point in the future where I know all of this stuff, and it's such a part of me that I can just have these conversations very easily. Between now and then, like now I don't know anything, then I know this very well, can you envision me having a cheat sheet on my monitor that helps me say, "Oh, I'm in this part of the conversation, so I need one thing here. I need to get to one point. Now, I'd like to shift it to the next conversation portion"? Can you envision that? Is that really how it works on a day-to-day basis.
BLAIR: I've written a book on this. It's what we call The Secret Book. It's not for sale. It's actually a booklet. It's a small, little cheat sheet with the four frameworks for the four different conversations. It helps you. Okay, what conversation is this? What's the objective? What's the framework I'm supposed to be using? We give it to our clients who are at a certain point in our sales training program. Yeah, absolutely, I could see you using it. Until you've got the objectives and the frameworks memorized, I can absolutely see you cheating by referencing something on your screen.
DAVID: Keeping things simple is so critical. I remember having conversations with people about like, "What's the purpose of your website?" Well, keep it really, really simple. Think about your website as, to somebody who's coming there for the first time, everything is geared to gathering an email address, nothing else. Okay, now that you have an email address, everything is geared toward whatever. It's similar in these conversations, in that you give people tips to identify what part of the conversation they're in, and then what's the objective for each one? Is this the right time to talk about the four individual steps in the conversation framework, or is there something else you want to say to lead up to this first?
BLAIR: Let's get into it. I'll just reinforce the point that I can give you the framework here, and you can know the model, but the chapter in the book, it's in The Rules section, and the rules are things that you really need to learn to live by, when it comes to pricing. It's called Master the Value Conversation. It's not Learn the Value Conversation, because you're going to learn it from reading the book, but you won't master it until you've had between 12 and 40 value conversations. It's probably closer to 12, but if you're comfortable fumbling through three, four, five value conversations, the awkwardness tends to go away after that, and at some point it gets really easy.
You can look at the different strata of the successful clients, and you think, "Well, people at this low level tend to do these things this way, and people at this highest level tend to do these things the other way." I can stratify my clients based on just how they price, tendency towards value pricing versus pricing based on cost or inputs, but then, even among value pricers, there are lots of great ways to cheat at value pricing. You can become a pretty good value pricer, without mastering the value conversation, but the people who master the value conversation, they're at a whole other level, whole other level.
DAVID: Hmm, is there any way to learn this without actually practicing on prospects?
BLAIR: Yeah, absolutely. We do lots of role playing on the subject in our training program. We do it in the events that we host. Role playing is super helpful, especially role playing in some of our peer group classes, where you've got people from other firms, and you're all role playing the same scenario. Somebody will bring a scenario to the table, something that has just happened to them, or a conversation that's about to come up. To see different people role play it, especially people from outside of your firm, where they don't have the baggage ... You know what you should do in a situation, but you can imagine the reasons why it's going to be difficult to ask directly about, "What's this worth to you, Mr. Client?"
BLAIR: Somebody who doesn't have the emotional baggage, it's easy for them to just ask the question and role play the scenario. Role playing is super helpful. It's the best thing that you can do short of actually having real life conversations.
DAVID: Yeah, because these people know the inside tricks, right? They know exactly how to screw you, so they're going to have a certain pleasure in screwing you in these role playing conversations.
BLAIR: Yeah, and maybe let's just build on that for a second, before we get into the framework. I'll just talk about why the value conversation ... Even if your intentions are good, you've memorized the framework, you know what to do, and you're willing to ask the brave questions, sometimes these value conversations can fail miserably, and the biggest reason is you've got somebody at the table, on the client's side of the table, who is not charged with future value. It's really hard to have a value conversation with somebody, who's really just managing a process and a budget.
DAVID: Hmm, right. They're not high enough on the decision-making chain, so to speak.
BLAIR: Yeah, you don't have senior decision-makers at the table, either because the initiative that you're discussing, the potential engagement, just isn't strategic enough in nature, or you haven't gotten to the appropriate decision-maker. If you're dealing with a middle manager, they often are not at all interested in having a value conversation, because they don't have the ability to bring further resources to bear, so they're thinking, "Well, what does it matter what I think the value is? I've got a budget, and if you want the job, you've got to come in under that budget."
Those are the experiences where a neophyte value-based pricer is practicing the value conversation on somebody who is not in a position where they're actually in charge of future value creation. They're just in charge of managing a budget. These are the early conversations that really discourage people, so if you can just recognize that that's the big place where things go wrong, beyond your own inexperience, the big thing is just not having the right people at the table and trying to have a value conversation with somebody who's just not open to it.
DAVID: That is so important, because you might read some signal from that conversation and mistakenly apply to all of those conversations, without recognizing that you're talking to the wrong person, so whatever early conclusions you drew are not legitimate, because you didn't have the right decision-makers at the table.
BLAIR: Yeah, so selling ... If you look at the people who are the most natural salespeople, they're people who have high autonomy scores, so they're not very systematic or routine. They don't need to see the steps laid out in front of them. You've, many times in our podcast, used the line, "Diving off the diving board and inventing water on the way down ... I'll just figure it out when I'm in the middle of it," really, natural salespeople, they're wired that way. People who find sales ... People who struggle with it tend to be the people who need more visibility into what's going to happen next. They need to map out all of the possible scenarios where things could go wrong, because if they get something that they hadn't considered, they can't think on their feet quickly enough.
Those natural salespeople, who are really good at thinking on their feet, they tend to do well at the value conversation, because you can't just memorize the framework and ask the questions like you're checking things off a list. You use the framework, but you really need to feel your way through it. You really need to be receiving signals from the buyer on their openness and willingness to go to certain places and infer from that their ability to actually pay for value.
DAVID: Ah, that's interesting. If I could insert something about personality profiles. If we think in terms of DISC language, that would be the S or the process side of things.
BLAIR: Very low S, right?
DAVID: Yeah, exactly, they'd be low S. Traditional telemarketers are high I and high S together, those two things. That's what makes them successful. They're very friendly, personable people, who follow a process. What you're talking about are people who do not follow a process, and in this creative field that you and I both serve, I've never seen an effective salesperson with a high S, and high S is somebody who follows a process versus somebody who thinks on their feet. That's a low S person. It'd be interesting ... If we're talking about PI, that would be a C versus an S.
I know we made fun of the word framework, but I love the word framework, because framework is the perfect mix between somebody who has no direction and somebody who has step-by-step direction. Framework just gives you this direction that you're headed in. It's pointing you northwest, but there are many ways to get northwest. I love the word framework.
You call this the value conversation framework with four steps. I actually warm to that, because I think it's the best mix of not too much information and not enough information. Can we dive into those four steps now?
BLAIR: Yeah, and I'll just point out that the extreme version of a framework is a script.
BLAIR: When somebody's asking for a sales script, that's a sign that, "Oh, this is going to be problematic for people." If you're reading from a script, then you're not receiving. You're busy transmitting, thinking too much about what it is that you'll say, and you're not open to receiving. A framework is really, no matter how low your S is, no matter how — my world, I use an [inaudible 00:16:06] — how high your autonomy score is, you should be able to follow a four-step framework. Now, five steps ... That's probably, even four, I feel like, is pushing it. I've built on the standard three-step framework that's used across most of the value-based pricing world, so let's walk through those four steps.
The first one is to commit the client to their desired future state. Now, in other frameworks, that would be known as objectives. What are the business objectives we're trying to hit here? There is some nuance here. We call it desired future state, and we've talked about that phrase before on previous podcasts, because it's not just business objectives. If you focus just on business objectives ... One of the key principles in the book is that all value is subjective, even in a B2B sale, where it feels like most of the value that you're talking about, that you're trying to achieve or develop for or create for your clients is of the economic form that you can measure easily through cost reductions or revenue increase, but there's a third component of value that's known as emotional contributions to value that makes everything personal, all of the reasons why, the personal reasons why, somebody would choose to hire your firm instead of another firm.
They're the other things that you can do that are hard to quantify economically. We won't go too much into that. When you're thinking about the objectives that you're trying to reach through the engagement, I really want listeners to think past the stated business objectives and get to the desired future state of that individual.
DAVID: Even if they can't talk about those things? Can the individual talk about those things?
BLAIR: Well, it's interesting. I talk about this in the book. The first time the desired future state comes up is in the earlier conversation. Remember, the value conversation is the third in our four-conversation framework. Earlier in the qualifying conversation, you were uncovering the desired future state. When you're talking to an individual, typically in the qualifying conversation, you're more likely to have a smaller audience, or an audience of one. That's when you would probe quite deeply, and sometimes not necessarily directly, but you'd ask some really big open-ended questions, that we suggest, to get to something that's really important to that person, personally.
You might get an individual, who opens up about her career aspirations and how success on this project might get her promoted. Now, when you go back to the value conversation, the next conversation in our framework, we imagine we've got all the decision-makers around the table, which isn't necessarily the case in the value conversation, but it absolutely has to be the case in the last conversation, the closing conversation. Imagine you've got multiple decision-makers, and you're committing the client to their desired future state. You're essentially saying, "Okay, if I understand from our earlier conversation, this is the place you're trying to get to." You would not recap a person's individual goals, that they shared with you privately, in front of her colleagues.
DAVID: Right, I want to keep my job.
BLAIR: Yeah, and we can joke about this, but there are people out there who just really don't have the self-awareness to know when you can talk about these things and when you can't talk about these things. If you're busy working from a script and asking the questions that are in the script, then you might miss that one. That's the first step in the framework. Commit the client to their desired future state. Ideally, you've uncovered it in the previous conversation, and by committing them to it, you're saying, "If I understand you correctly, this is the place that you're trying to get to, where all of these things are true. Is that correct?" You hear ... The client commits to it, saying, "Yes, that's correct."
That's step one. The second step is to agree on the metrics of success. The client has committed to her ... Let's just say it's one decision-maker, for the sake of this conversation. She's committed to her desired future state, so when this engagement is done, all of these things will be true. Now, you follow up by saying, "Okay, well, let's talk about the things that we can measure, so that when you say, 'These things are true,' what does that look like? How many of these things, that you want to be true, can we quantify?"
An example of something that might be difficult to quantify would be the client says, "I feel like you've got things under control. I've got a high degree of confidence in your ability to do whatever I put in front of you." Okay, well, how would you break that down?
You might try to quantify that by saying, "Well, how much time are you spending baby-sitting your agency right now? Okay, X hours a week or a month. All right, how many hours a week would feel to you like a success on that front? If you're currently spending 10 hours a week with your agency, where would you like to be?"
"I'd like to be at two hours."
"Okay, two hours a week actively working with the agency, and the rest of the time, they're doing what they need to do without you."
That's an example. Some of these things are tricky, right? They're mushy. We quantify the things where we can, and some things we accept that we just can't quantify them. Wherever possible, we agree on the metrics of success. The economic metrics of success, again, they're revenue gains or cost reductions. Those are the two main forms of economic success. We ask, "Well, what does success look like?"
"Well, sales goes to this level," or, "Our cost of client acquisition drops to this level."
Wherever possible, all of the specific elements of the client's desired future state, you essentially go down that list and say, "How will we know when we've got there? What's the thing that we'll measure to know that we've succeeded on this point?" That's the second step.
DAVID: Let me insert a question here. Let's say this is a very high-end design firm that's still doing world recognized identity work. How in the world do you agree on the metrics for success there?
One way to answer that question is, if they're too low on the totem pole, if you don't have the decision-maker, they're going to struggle to define success, but it seems like, in some cases, agencies care more about the metrics for success than the client does. I guess, in those cases, the agency might suggest how we might measure this, but there's so many ... such a significant percentage of work that agencies are doing that's very difficult to quantify. What do we do there? Do we just agree that we can't? Part B of this question is, do agencies discover, at this part in the process, that they don't want to work for this client, because of the metrics that they're suggesting?
BLAIR: Yeah, I'm not sure about that. I'm not sure if I've encountered the situation like that, but I found it really interesting the way you phrased the question. You really phrased it from the designers point of view, world class identity work. I think most clients have more specific goals for their identity work, than for it to be world class. If you ask the designer, "What would constitute success?" one of the answers might be, "Well, we win an award for that work." You're not likely to hear that from a client, although you might, right?
Your job, as the salesperson and the pricer here, is really just to facilitate the conversation and put aside your own ideas of what success is. Again, all value is personal and subjective, so your job is not to impose your assessment of value of what constitutes success on the client. It's to uncover what they see as the successful metrics. If you don't get anything from them, or you need to help them translate an intangible into a tangible metric, then you're free to do that.
Part of value-based pricing is when you go through the model of it all, you realize that, wow, you don't even think about solutions until after this third conversation. We're in the value conversation. You should not even be thinking about what it is you might do for the client yet. You're really in that full-blown facilitation mode. You're completely focused on the client, the value you might create for the client, how the client would translate that into the metrics of success, and you really just need to leave your own ideas out of it. That's not easy to do, especially if you've spent many years pricing based on inputs.
DAVID: Yeah, I could see a situation, many situations, or a high percentage of situations where, as you lead this value conversation, you're actually establishing yourself as an expert, because you're raising the level of the conversation. You're suggesting metrics that might not have even occurred to the client until you suggest them.
BLAIR: Yeah, and it's interesting. In the first conversation in our framework, the probative conversation ... That's when you prove your expertise. We teach to look for what we call the flip. The flip is the moment in time, where you go ... In the eyes of the client, you go from the vendor to the expert practitioner. Often, the probative conversation is a conversation that should happen without you present. It should happen through your agents of thought leadership and referrers. When you go into the next conversation, the first human-to-human conversation, the qualifying conversation, when that hasn't happened ... The flip really needs to happen before you get to the close.
As you point out, just by having the focus be on the client, the value you might create for the client, the metrics, and the other two things we're going to talk about here, and not be on your solutions, not be on your ideas of success, that really does help facilitate that power shift, where you move into the helpful facilitator role, and you're not seen as this self-serving, self-interested person. You're very clearly there to help the client. That really helps to facilitate the flip.
DAVID: Yep, absolutely, so step one is commit the client to their desired future state. Second, agree on the metrics of success, which is what we've been talking about. Now, we're taking a pretty big step to talk about the value of success, right?
BLAIR: Yeah, and this is really the answer to the question of, "Okay, if we hit these metrics of success, what's this worth to you? What's this worth to you individually and the client organization?" This is where it gets a little bit tricky, where I think you're free to lead the client a little bit. There's so many ways to do this. You could ask the open-ended question, "So what's this worth to you, if we do all of these things?" Again, you could go down your list of the components or elements of the desired future state and the corresponding metrics, and then what's the individual economic value of hitting each of these metrics? Or you could try to summarize them all loosely and, "Well, would you agree that if we accomplished all of these things, it looks like it's in excess of $2 million a year of recurring revenue, or maybe it's $2 million a year at 25% margin, so that's $500,000 a year in profit?"
You could do the math for the client and lead the client a little bit that way. That's effectively what you're trying to get to in this situation, is what's the value? Let's not forget, in this step, the noneconomic forms of value, some of the things that are a little bit hard to quantify. Just summarize them. "Okay, we're going to free you up to focus on other initiatives, and maybe that's going to lead to some economic gains in those other initiatives." I think you have to be a little bit wary of trying to price everything.
If you try to put a price on the really personal forms of value, somebody's emotions, that's like extortion, trying to price somebody's emotions. You do have to be careful about going too far, being too scripted or too rigid in trying to put a price on everything. Hit the key ones, where there's nice, big, obvious metrics. "Well, if we hit this, it's easy to translate this into revenue numbers, and, if you can, to profit numbers."
DAVID: All right, if you've done these first three steps well, then you can do the fourth one, and this goes back to the first question I asked you. It's like, "Why does value pricing go to die here?" It's because we don't lead up to value pricing in the right way. We don't build the foundation, layer after layer, so that it's a natural step to get to the point, the fourth step, where you're offering pricing guidance, right?
BLAIR: Yeah, so that is the fourth step, and it's before you wrap up the value conversation, because what you're going to do next, typically, is you're going to take this information. You're going to go away, and you're going to craft a proposal with multiple options, different ways that you can help the client, but to this point, you haven't even thought about solutions, and you shouldn't be. Again, this takes some practice, just moving off of the solutions and thinking solely about the value that you might create for the client.
You've got a sense of the fact that, maybe, if you hit all of these things, you're going to generate half a million dollars of profit, recurring every year. From there, now you're going to go in. You're going to put together some options, some different ways that you can help, with different price points. You want to make sure that the client hears a price from you, before they see it. If there's a price objection, you want to know in advance. You should never be in a situation where you're putting your proposal forward to the client, and you get this shocked, "Oh, we can't do that! We don't have that kind of money."
As a proper salesperson, a facilitator of this framework, you really need to uncover whatever pricing objection there is. Before you come back with a proposal, you essentially say, "I'm going to come back with some options, and they're going to be in the X to Y range," or really in the Y to X. You want to start with the high number, because there's a principle known as anchoring, where the first piece of information on pricing, that you deliver, is going to have a follow on effect. There's all kinds of science that has proven this to be true.
You start with the high number, and then you might offer a low number on the range. You might say, "Okay, so we're going to strive to put together solutions that can deliver half a million dollars a year in profit for you. I'm going to come back with some options for you that range in the $250,000 on the high side to in the $100,000 on the low side," and then you hear what I do next, right? I say nothing.
DAVID: Pause, yeah, right.
BLAIR: Yeah, yeah, because whatever the client says to fill that void, that silence, is going to be really helpful information. You might hear, "Ooh, there's no way I'm going to be able to get $250,000 funded." You could dive into that, and say, "Well, why not? It's a two to one return on investment in the first year, and then it's all free after that," or you could follow up and say, "Well, what do you think you could get funded?"
The answer might be, "Well, maybe we could do 150."
"Okay, I'll make sure there's at least one option in the $150,000 range." You might say, "If we're really convinced of some other solutions that are above that, I might bring you an option above that, and you're free to just reject it," or you don't have to get the client's permission to come back with a higher price, but if the client is adamant that, "Listen, I think 150 is the ceiling," then you do have an obligation to come back with an option that's at or below that 150 mark.
Now, you're in a situation where the clients not going to fall out of their chair. They're not going to be in a position to say, "No, we can't hire you, because we can't meet this price." You've had the conversation in advance.
DAVID: Right, and you're not writing this long proposal, wondering how they're going to react to the price. You already have some sense of that, and you're just formalizing it with something a lot simpler, and without any surprises in and around price. It's like doing your work. If you do your work in the sales process, then there are fewer and fewer surprises, and you're learning the critical things earlier and earlier in the process.
BLAIR: Yeah, that's a great way to look at it. If you do your work up until this point, the first three conversations, then your proposal should be one page. You've taken all of the stress off the closing meeting. We end up writing these big, long proposals, we're over-invested in the sale, because we haven't had the right conversations previous to that. Then, when we think of the four conversations, most people listening to this would think, "Well, that closing conversation's the big one. It's where all the effort goes. It's where all the stress is." It shouldn't be. That's the case when you haven't handled the previous conversations well, and the hardest one to master is the value conversation.
The framework's pretty simple, right? I've just laid it out. It's pretty simple. If you follow it — again, it takes practice; you get good at it — then closing becomes really easy. Your cost of sale goes way down, and your profit margins go way up, because you're pricing your services not based on the cost to you, not based even on the deliverable, but on the value you might create.
Now we've got a price range. Let's say it's $100,000 to $250,000. Now, right here at the end of the value conversation, before the closing conversation, now you go away, and now you start thinking about, "Well, what could we do for these prices?" You've flipped the value chain, really. Most firms think of, "Here's the solution. Here's how many hours it's going to take to do, and here's our cost. Therefore, here's what the price is to the client."
You've completely flipped that. You've focused on the value you might create for the client, first, and then the price, second, and now you start thinking about, "Well, what would we do for that price?" Out of that will come your cost. It's value, price, cost, not cost, price, value.
DAVID: So simple, but difficult to learn. Those of you listening to this, I'm guessing that this is one of those podcast episodes that you'll want to listen to several times, so get out a pen, piece of paper, and write down these four steps, so that, as you listen to it again, you'll be able to place the individual conversation in the framework.
Step one: Commit the client to their desired future state. Second: Agree on the metrics of success. Third: Agree on the value of success. Fourth and finally: Offer pricing guidance. If you can get good at discovering what part of that framework your conversation is in and how to move it to the next, and how to not move to the next until you have the right answers, and so on, you'll get better at it. You might want to guy a book, I suppose. Is there any book that would be valuable?
BLAIR: David, I'm so glad you asked. There is, indeed, a book. It's called Pricing Creativity: A Guide to Profit Beyond the Billable Hour. It's available only at pricingcreativity.com. The book is expensive, as far as books go, but it's also fully guaranteed. If, for any reason, you can't follow the advice, or it doesn't generate more money for you, send it back for a full refund.
DAVID: Great. Thank you, Blair.
BLAIR: Thanks, David.