Why do partners make poor pricing decisions?
Poor pricing decisions are often a result of inaccurate beliefs. The day-to-day messages partners receive from their clients tells them they are over-priced. And these messages lead to pricing being driven by fear. Fear of losing an opportunity, or worse still, a client. So, in a misguided attempt to do what they believe will appease clients, prices are regularly discounted well below what’s justified or appropriate.
A partners’ retreat
At a recent retreat, we were asked to run a program to develop partners’ confidence and competence at pricing. The first session focused on pricing success, how clients assess if a price is fair and what we can do to influence this assessment. We discussed how it’s the client’s role to fight for the best price, and that push-back on a firm’s pricing doesn’t mean that you got it wrong. We discussed the key indicators that highlight if you are over-charging, or possibly under-charging.
At this point one partner spoke up to say she had just realized she had been undercharging for years. She had been doing this because of client feedback (“you’re too expensive”) and doubt about the worth of her team’s work. But now she realized that her team had more than enough work, clients were buying despite the price, and she was often awarded new jobs without competition.
Having thanked her for sharing and for her honesty, we asked the room if any others felt the same way. Around 30 percent of hands went up! Could 30 percent of partners at your firm be undercharging? And if so, what difference would it make to your firm’s profit if you could help your partners by training them how to confidently manage pricing conversations?
Mindset then skills
Having reached this realization, we were then able to move on to teach key pricing skills such as:
- How to compete on superior value to reduce the need to compete on price.
- How to create more accurate estimates and deal with variations in a manner clients appreciate.
- How to use pricing conversations to strengthen client relationships and build trust.
- How to deal with client push-back on our prices with confidence and conviction.
Unlike corporates, within professional services firms, the internal pricing battle (convincing partners) can often be harder that the external pricing battle (convincing clients). And this is the battle that needs to be won first.
Is your firm undercharging? Learn more about Positive Pricing’s confidential in-house education programs, designed to empower your firm to have proactive pricing conversations that strengthen client relationships and boost profits.