In the last blog post I focused on the first two C's. Now, it is time to give the last two some discussion. Just as a reminder, here are the 4 C's of Value Pricing:
Comprehend
Create
Communicate
Close
These last 2 C's are really funny. . . . everyone thinks they "get it" and most people don't have a clue. for instance, most attorneys I know insist hey have great communication skills and yet most seem to be socially inept at the same exact time! Simply amazing! Wall Street Journal please take notice, self-awareness in Lawyers is at all-time lows! Communication as a part of Value Pricing is critical. See Below:
ATTORNEY --------------- CLIENT
Value starts here ----------- and ends up here
COMMUNICATE:
The first two Cs are focused on the creation process that all starts with the service professional. Value Pricing is based on PERCEIVED VALUE . . . . in other words. . . your value does not really exist unless the client can see it! So many lawyers miss this point in their practices today. . . they get mired in the details of a legal matter while sitting behind their desk all day and go home so proud thinking they added so much value to the client (even though the client had no idea how hard they laboured to find that needle in the haystack) and the next thing you know the client is calling you complaining about that huge bill you sent them!
When you use a fixed price model, it forces you to COMMUNICATE the value of the services provided. Remember, if you priced based on value and fail to communicate the value to the client, you will certainly not be able to CLOSE the deal. What does this mean? Well, If you did a good job of Comprehending Value then Communicating value should be easy. You are simply taking what you comprehend and stating how what you Create meets the needs that you Comprehended! If it is a perfect marriage you will have a winner. This is different in every scenario, so what is most important here is to watch your client, their body language, questions, etc, and make sure that you got the value proposition right from the beginning. If not, try to understand why and create a proposal that meets their desired needs. Remember: Value is SUBJECTIVE. . . . you need to Communicate the value to create a greater appreciation for your wisdom.
CLOSE:
Sounds easy, right? OK. . . . well try to add as much value as you possibly can, price accordingly, and try to sell on a fixed price against all of those other lawyers who "underestimate" how long it will take to quote a lower price and get the business! Well, it is easy really. The first thing you need to understand is that you are not a commodity. . . . . well. . . you are if you think you are, and then you don't deserve to have more than anyone else. But if you have a special skill or talent or quality and you realize it, than you have a "special sauce!" At Exemplar, we leverage the unique skills and talents of our entire team to create a "you can't get than anywhere else" effect. This has everything to do with closing the deal. . . because it is your job as a professional to communicate how unique and differentiated your services are . . . so that a price comparison between you and your competition is apples and oranges.
Here are some common problems that people deal with and how to address them in closing the deal:
Price Resistance:
Remember -- People are not really price sensitive, they are value sensitive. If someone questions the price, you need to be smarter and realize it is really a value objection: Reinforce the value proposition, differentiate, and reassure!
Offer Solutions: Be creative. If your attempt to communicate value is not successful, you should be creative and see if you can solve their problem or accomplish their goal with "less lawyering" With a little creativity and listening skills, you will often find that clients did not want the kitchen sink!!! So stop throwing it at them!
TIP: KNOW THY VALUE!!! Never lower your price without taking away corresponding value. I could write a blog on this topic alone. It is behaviour modifying. . . if clients think they can squeeze hundred-dollar bills out of you by trying to negotiate, they will do it every singe time. Know thy value, price accordingly, and stand behind the value you add. At Exemplar, clients know we are not cheap. We tell them up front we are not the cheapest shop in town. I personally tell some clients that if they want to shop at Wal-Mart for their lawyer I can refer them to a few down the street. People get what they pay for and they know it. . . . clients who do not want to pay you highly will not value you highly (assuming you follow the 4Cs and did your part!).
Don't be afraid to walk away: Remember: Inventory at the supermarket does not lose self-esteem if it is sitting on the shelf for an extra hour. . . neither should you.
Losing Business To Wal-Mart: former Wal-Mart shoppers end up being our best clients. . . . they first go to lawyers (some at big-firms too!) who underestimate the deal by so much in order to get the business. . . . they think they win. . . the client gets SCREWED. . . and they come to Exemplar never to return to a billable hour firm again. Integrity is more important to clients than saving a dollar. Thanks big-law for sending business our way. The breaches of integrity in our profession can become a wonderful referral source!
Put this on your wall over your desk: It is the formula to success. . .
I feel much better having a free hour to develop better business than to work for a client who does not Value my expertise highly!
When I feel good about what I do, I produce better results for my client.
When I am Valued highly, I feel good about what I do.
When I get paid well, I feel Valued highly.
When I Comprehend, Create, and Communicate Value I get paid well by the RIGHT clients!
Are you getting my drift? If not than you deserve to be blown away by you competition. If so,
you are on your way to success in a Value Priced Model.
Tuesday, August 28, 2007
Thursday, August 16, 2007
The 4 C's of Value Pricing: Get it or forget it!
There are many things about Value Pricing that professionals continue to get wrong. In this blog, I wanted to share the methodology we use internally at Exemplar to train our professionals to execute on a Value Price model: The 4 C's of Value Pricing:
Comprehend
Create
Communicate
Close
For the purposes of this blog, I will focus on the first 2, since these could be the subject of a book and the last C is particular to closing the sale on Value Priced work, which will only happen if you do the first 3 properly. Let me start out by explaining that the Price of work in a Value Price model has NOTHING to do with your time. Say it with me now " The Price of work has NOTHING to do with time." Write it on the board 50 times and say it out loud at least 3 times a day. Value Pricing is about Adding Value to the client and Charging for the value you add. . . . It is ENTIRELY based on Value to the client. Yes, I'm going to have to ask you to repeat that to: It is ENTIRELY based on Value to the client. Now for a lesson:
(Short Story: I recently learned that if you get stuck in a cave for several days in perfect darkness, you would actually go blind. . . .YES. . . blind for good! Did you know that the fish that swim in cave waters are completely blind? Who knew! Why is this relevant? What the heck do you think will happen to your skills if you fail to use them, particularly the ones that are relevant to the 4 C's. So, for your own good, make sure you use your skills lest you lose them!
Comprehend Value:
Have you lost your ability to comprehend value as a result of decades of billing by the hour?
Perhaps the biggest challenge for professionals training in the billable hour model is to Comprehend Value to the client. Most professionals who try a fixed price model cannot help themselves but to try to estimate time in order to arrive at a price. This is almost a sure way to fail at pricing. The most profitable companies do no price products based on their costs, so why should you? They price their products based on the perceived value to the client! How do they determine value? First, they have to Comprehend Value to the client. In each field, there are certain things that clients value. In law, for instance, here are some of them:
-- Getting the job done quickly or at least on schedule
-- Great Service
-- High-Quality Work
-- A Relationship with their attorney
-- An attorney who understands their business
-- A professional who respects them
-- An attorney who returns phone calls
They go on and on. Many value drivers are specific to each engagement. For instance, some clients value being educated on each clause of their contracts, while others are so busy that they value a professional who can do a great job while requiring a little time as possible of the client's time. The key to comprehending value is to ask questions. You might say "I already ask many questions, so I must already get it". Listen up: If it were that simple smarty pants I would not have to be writing this to you. Clearly, it is about asking the RIGHT questions. Right now, you ask questions so that you can understand the substantive work that needs to be done. . . you are trying to understand your mandate. . . . not your VALUE to the client. You need to ask them what they are looking for in a professional relationship. What would the engagement look like to them in an "ideal" world and what would their customer experience be like. What "outcome" are they looking for and how much had-holding or education do they want. In order to value price you need to Comprehend Value by asking smart questions designed to uncover their desires, goals, deadlines, and business strategy. Without this information, you cannot effectively serve your clients no matter what billing model you use!
Create Value:
Have you lost your ability to be creative by being a drone in the billable hour system for years?
This one is simply my favorite one, because this is where Exemplar is so different from most professionals. Remember, we price based on Value and we charge for the Value we add. So, check this out. . . . where are the incentives for your firm and where are the incentives for Exemplar? What do you think is right?
PRICING MODEL
Billable Hours
INCENTIVE (You make more money when you. . . )
Bill More Hours, Drag it out, take your time, pad your bill, be inefficient)
PRICING MODEL
Value Pricing
INCENTIVE (You make more money when you. . . )
Are more effective, efficient, add more value, get the JOB DONE!
Are you getting my drift? In a billable hour model you do no spend any non-billable time thinking with the client about what the best strategy is to approach the case. In a Value Pricing model, we have every incentive to partner with our clients, put our business thinking caps on with them, and think up the most creative ways to approach the problem in order to solve it. It is a strategic process, and often a creative process, which is what is so rewarding about it. At Exemplar, we have an incentive to find new ways to solve old problems. Put incentives in the right place. . . no more hourly bull! No more bill padding and hamster wheeling. . . . put your timepiece down and do the Value Pricing dance! Look at the Incentive chart above again. . . what would you rather do the rest of your professional life?
This is only a short sample of what needs to happen on each of the first 2 C's. The other 2 are critical as well and are worthy of another discussion or blog post. The point here is that Value Pricing is not just a different pricing model. . . It is a different State of Mind and requires different Skills! So, you need to ask yourself if you are a fish in a cave or if you have the skills to pull it off. Be patient with yourself while you learn and develop. You will not become an expert in any of these in a day, but you will notice a significant difference in your lifestyle and in the happiness of your clients as you embark on the journey!
Comprehend
Create
Communicate
Close
For the purposes of this blog, I will focus on the first 2, since these could be the subject of a book and the last C is particular to closing the sale on Value Priced work, which will only happen if you do the first 3 properly. Let me start out by explaining that the Price of work in a Value Price model has NOTHING to do with your time. Say it with me now " The Price of work has NOTHING to do with time." Write it on the board 50 times and say it out loud at least 3 times a day. Value Pricing is about Adding Value to the client and Charging for the value you add. . . . It is ENTIRELY based on Value to the client. Yes, I'm going to have to ask you to repeat that to: It is ENTIRELY based on Value to the client. Now for a lesson:
(Short Story: I recently learned that if you get stuck in a cave for several days in perfect darkness, you would actually go blind. . . .YES. . . blind for good! Did you know that the fish that swim in cave waters are completely blind? Who knew! Why is this relevant? What the heck do you think will happen to your skills if you fail to use them, particularly the ones that are relevant to the 4 C's. So, for your own good, make sure you use your skills lest you lose them!
Comprehend Value:
Have you lost your ability to comprehend value as a result of decades of billing by the hour?
Perhaps the biggest challenge for professionals training in the billable hour model is to Comprehend Value to the client. Most professionals who try a fixed price model cannot help themselves but to try to estimate time in order to arrive at a price. This is almost a sure way to fail at pricing. The most profitable companies do no price products based on their costs, so why should you? They price their products based on the perceived value to the client! How do they determine value? First, they have to Comprehend Value to the client. In each field, there are certain things that clients value. In law, for instance, here are some of them:
-- Getting the job done quickly or at least on schedule
-- Great Service
-- High-Quality Work
-- A Relationship with their attorney
-- An attorney who understands their business
-- A professional who respects them
-- An attorney who returns phone calls
They go on and on. Many value drivers are specific to each engagement. For instance, some clients value being educated on each clause of their contracts, while others are so busy that they value a professional who can do a great job while requiring a little time as possible of the client's time. The key to comprehending value is to ask questions. You might say "I already ask many questions, so I must already get it". Listen up: If it were that simple smarty pants I would not have to be writing this to you. Clearly, it is about asking the RIGHT questions. Right now, you ask questions so that you can understand the substantive work that needs to be done. . . you are trying to understand your mandate. . . . not your VALUE to the client. You need to ask them what they are looking for in a professional relationship. What would the engagement look like to them in an "ideal" world and what would their customer experience be like. What "outcome" are they looking for and how much had-holding or education do they want. In order to value price you need to Comprehend Value by asking smart questions designed to uncover their desires, goals, deadlines, and business strategy. Without this information, you cannot effectively serve your clients no matter what billing model you use!
Create Value:
Have you lost your ability to be creative by being a drone in the billable hour system for years?
This one is simply my favorite one, because this is where Exemplar is so different from most professionals. Remember, we price based on Value and we charge for the Value we add. So, check this out. . . . where are the incentives for your firm and where are the incentives for Exemplar? What do you think is right?
PRICING MODEL
Billable Hours
INCENTIVE (You make more money when you. . . )
Bill More Hours, Drag it out, take your time, pad your bill, be inefficient)
PRICING MODEL
Value Pricing
INCENTIVE (You make more money when you. . . )
Are more effective, efficient, add more value, get the JOB DONE!
Are you getting my drift? In a billable hour model you do no spend any non-billable time thinking with the client about what the best strategy is to approach the case. In a Value Pricing model, we have every incentive to partner with our clients, put our business thinking caps on with them, and think up the most creative ways to approach the problem in order to solve it. It is a strategic process, and often a creative process, which is what is so rewarding about it. At Exemplar, we have an incentive to find new ways to solve old problems. Put incentives in the right place. . . no more hourly bull! No more bill padding and hamster wheeling. . . . put your timepiece down and do the Value Pricing dance! Look at the Incentive chart above again. . . what would you rather do the rest of your professional life?
This is only a short sample of what needs to happen on each of the first 2 C's. The other 2 are critical as well and are worthy of another discussion or blog post. The point here is that Value Pricing is not just a different pricing model. . . It is a different State of Mind and requires different Skills! So, you need to ask yourself if you are a fish in a cave or if you have the skills to pull it off. Be patient with yourself while you learn and develop. You will not become an expert in any of these in a day, but you will notice a significant difference in your lifestyle and in the happiness of your clients as you embark on the journey!
Monday, August 06, 2007
How Powerful The Mirror!
Don't you meet people all the time that make you think: "If only they knew what they looked like!" Don't you just wish you could just get them a mirror and put them out of their misery? I certainly do! I was reading David Maister's great book, True Professionalism, for the 3rd time and got neck pains from consistently nodding at how logical and, well, obvious it is that the measure of an organization is whether it has the courage to define and the defend its values! When I looked up from the book and peered out the window and the competing firm in the ivory tower across the way I had the opportunity to exercise the other neck muscles as I shook my head in disgust at what exists today in the legal industry: A crisis of values!
When I say values I do not mean some politically conservative statement or one of moral judgment. Rather, I mean a conspicuous absence of stated core values that are enforced and alive inside the firm! At Exemplar, we have eight core values: Excellence, Leadership, Integrity, Team, Trust, Respect, Communication, and Equanimity. What does that mean to us? It means that we talk about these values openly in the firm . . . not just once in awhile but all the time. We talk about them in staff meetings and come to a mutual understanding of what these values mean to us and to our organization. Perhaps most importantly, they are NOT for SALE! It is simply unacceptable to compromise any single one of them in our organization. This brings me to the point of this blog: Taking a look in the mirror. If you are a partner in BigLaw I suspect that the idea of all of the Partners looking in the mirror and seeing how people really see them (or what they think of them) makes you worry that they will all jump out the window of the 45th floor as if to re-enact 9/11. I'll bet you are right.
Most associates I know think the Partners in Power treat them like CRAP!
So, wake up and smell the flowers folks. . . it might be time to look in that mirror and see what the "people" around you really think about you. After all, the only person you are really fooling by sticking your head in the sand is you!
At Exemplar we've got mirrors in place from the start. We are instituting a system that allows everyone around you, both managers and subordinates, to rate you anonymously on the eight core values, the results of which are combined into a report that only you and an executive can see. At periodic quarterly reviews you will be able to see what you really look like to people. After all, consider the following on why perception really is reality!
Our VALUES are not an Objective Standard, They are subjective. The ONLY thing that matters is the mirror: Whether people really think you have them.
Take Leadership: You are not a leader if others do not follow. If people do no perceive you as a leader they are sure not to follow. Therefore, what people think about you in this regard is more important than anything.
Take Integrity: Have you ever heard a story about someone with the highest integrity. . . and nobody thought so? Neither have I!! Perhaps people's perception of your integrity is as critical as integrity itself!
How about Respect? There really is no such thing as a respectful person that causes everyone around them to feel like they are treated like crap!
Need I go on? Probably not! So, you ask, what do you do after someone sees what they look like? Just because they see "Ugly" does not mean they will change, right? RIGHT! That is the point. . . . Check this out.
The result of continuously giving people the "mirror" is that how (or if) they respond says a lot about their character. You see, the people who belong at Exemplar simply cannot stand to see the blemishes on their face. They came to Exemplar because they believe in the values and believe that they have every one of them. So, when they see something they can improve they are motivated to take action to make it better. The great thing about the mirror test for us is that it takes a hell of a lot less policing to identify the DUDS! It is this simple: The Duds will no change in spite of what they see! It makes our job easier. People who do not embrace the values are not disappointed when they look in the mirror and see "jerk" or "client hoarder" or "untrusting bastard!" . . . I can go on. . . you know many people who could be described this way!
So. all you really have to do is put people to the perception test and see if they give a damn! Do you have the courage to implement this in your organization? You have nothing to lose (well, unless your window is open. . . and even then the ones who jump probably did need a complete personality transplant!) Can you think of one good reason people should not be accountable to the values of the organization? I can't!
When I say values I do not mean some politically conservative statement or one of moral judgment. Rather, I mean a conspicuous absence of stated core values that are enforced and alive inside the firm! At Exemplar, we have eight core values: Excellence, Leadership, Integrity, Team, Trust, Respect, Communication, and Equanimity. What does that mean to us? It means that we talk about these values openly in the firm . . . not just once in awhile but all the time. We talk about them in staff meetings and come to a mutual understanding of what these values mean to us and to our organization. Perhaps most importantly, they are NOT for SALE! It is simply unacceptable to compromise any single one of them in our organization. This brings me to the point of this blog: Taking a look in the mirror. If you are a partner in BigLaw I suspect that the idea of all of the Partners looking in the mirror and seeing how people really see them (or what they think of them) makes you worry that they will all jump out the window of the 45th floor as if to re-enact 9/11. I'll bet you are right.
Most associates I know think the Partners in Power treat them like CRAP!
So, wake up and smell the flowers folks. . . it might be time to look in that mirror and see what the "people" around you really think about you. After all, the only person you are really fooling by sticking your head in the sand is you!
At Exemplar we've got mirrors in place from the start. We are instituting a system that allows everyone around you, both managers and subordinates, to rate you anonymously on the eight core values, the results of which are combined into a report that only you and an executive can see. At periodic quarterly reviews you will be able to see what you really look like to people. After all, consider the following on why perception really is reality!
Our VALUES are not an Objective Standard, They are subjective. The ONLY thing that matters is the mirror: Whether people really think you have them.
Take Leadership: You are not a leader if others do not follow. If people do no perceive you as a leader they are sure not to follow. Therefore, what people think about you in this regard is more important than anything.
Take Integrity: Have you ever heard a story about someone with the highest integrity. . . and nobody thought so? Neither have I!! Perhaps people's perception of your integrity is as critical as integrity itself!
How about Respect? There really is no such thing as a respectful person that causes everyone around them to feel like they are treated like crap!
Need I go on? Probably not! So, you ask, what do you do after someone sees what they look like? Just because they see "Ugly" does not mean they will change, right? RIGHT! That is the point. . . . Check this out.
The result of continuously giving people the "mirror" is that how (or if) they respond says a lot about their character. You see, the people who belong at Exemplar simply cannot stand to see the blemishes on their face. They came to Exemplar because they believe in the values and believe that they have every one of them. So, when they see something they can improve they are motivated to take action to make it better. The great thing about the mirror test for us is that it takes a hell of a lot less policing to identify the DUDS! It is this simple: The Duds will no change in spite of what they see! It makes our job easier. People who do not embrace the values are not disappointed when they look in the mirror and see "jerk" or "client hoarder" or "untrusting bastard!" . . . I can go on. . . you know many people who could be described this way!
So. all you really have to do is put people to the perception test and see if they give a damn! Do you have the courage to implement this in your organization? You have nothing to lose (well, unless your window is open. . . and even then the ones who jump probably did need a complete personality transplant!) Can you think of one good reason people should not be accountable to the values of the organization? I can't!
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