Information Technology Professionals: How to Charge Higher Fees
I feel sorry for IT professionals who compete on price. I hope
you are not one of them, because this is what you will face:
- A reputation as a cut-rate consultant or, if you own a firm, a
reputation as a "body shop." Clients assume they get what they
pay for, and will therefore assume that you must not be very
good.
- Projects that are of marginal importance to your clients. If
they were important, they would pay more for the right
consulting professional.
- Clients that care about price, and not relationships. Every
time I have cut my fees for a new client, I have regretted it.
Clients that focus on price end up being more demanding, less
grateful, and much less loyal than clients that understand the
value of the services I offer.
- Difficulty attracting enough clients to generate the revenue
you want to make. Attracting a few clients at higher fees saves
you time and hassle compared to chasing many price-sensitive
clients at lower fees.
- Employees (if you have or want any) that are dissatisfied and
look for opportunities at firms where clients value the quality
of their work. The psychology of pricing consulting services is
not so different from the psychology of pricing Vodka: The
higher the price, the better quality people think they are
getting. In the case of consulting services, the price-quality
relationship is often true.
Here is a strategy to raise your fees while attracting better
clients:
1. Become the authority in your target market in order to
establish your credibility and value. Do this through a variety
of strategies:
- Develop valuable educational and informational messages that
help your prospects associate you with solutions.
- Compile a mailing list of prospects in your target market, and
follow up in ways that are valuable and important to them.
- Be visible to your target market through a variety of media:
speaking, articles, audio CD's, videos, fact kits, your web
site, etc.
- Collect and post testimonials, case studies, and articles
about you and collect references.
2. Talk less about what you do and what you know, and more about
the specific business and personal results you get for your
clients. How much money or time do you save them? How much do
you increase profit? How do you help improve quality, reduce
employee turnover, and provide peace of mind? Where have you
done this before? The more results you can show, the more you
can demonstrate that your high fees are still very inexpensive
compared to what their problem is costing. You should still
provide excellent information about your service offerings, but
focus first on solving your prospect's pressing problems.
3. Demonstrate that you have a consistent, proprietary, unique
approach to get results, and that this approach goes far beyond
what the competition does. Describe your methodology. Tell them
about the services you offer that competitors do not.
4. Explain why your experience and qualifications set you above
others. Talk about your education, years in the field,
certifications, and past clients and employers.
5. Let them know that you do not accept all assignments or
clients, only those that fit your specific target market and
capabilities. Let prospects know that you choose a relatively
small, select roster of clients. That way, you are accessible to
them, and can provide services that your busier competitors
cannot. Promise them (and mean it) that you will return phone
calls and emails instantly. Give examples of assignments you
have turned down.
6. Be willing to say "no." If an engagement appears to be
outside your capabilities, a high risk, with a client that will
not want a long-term relationship, or that is undesirable to
you, say no. Even if you need the revenue, it is better to spend
your time establishing trust and credibility with a more
desirable set of prospects.
7. Stop selling and hawking your services. Instead, become
skilled at educating prospects and letting them make the
decision to hire you on their own. If you use salesmanship, you
will put prospects on the defensive and they will be more likely
to negotiate price with you.
8. Prepare a set of responses to objections about your fees.
These include:
- You get what you pay for, or less. For instance, inexperienced
professionals looking to get a foot in the door often charge low
fees. So do consultants who don't have many clients and need the
work; they don't have many clients for a reason. Why would a
consultant with true expertise and credentials charge fees that
low?
- Tell stories about clients who have hired low-priced
consultants, and ended up paying much more in the long run to
correct their mistakes. If you can, talk about clients that
called you in to fix this sort of situation after hiring another
consultant first.
- Talk about the rules of "scope." Scope include cost, time, and
quality. If a consultant is reducing cost, something else in the
scope has to go, too.
- Remind them that, with your limited roster of clients, you can
be much more accessible than consultants who need to fill their
pipeline with many lower-paying clients.
- Remind the client about the stakes involved in his or her
project, and what it might cost if it goes awry.
- Show that you are completely committed to the prospect's
personal success and satisfaction.
- Offer other terms besides price: payment terms, additional
services, a guarantee, reduced scope, or free support or
training.
- If the client promises future work in exchange for low fees up
front, explain that you appreciate the offer, but have been
burned by this approach before and promised not to accept it
again. Agree only if the client agrees to a contract for that
work up front.
- Be willing to turn down assignments in which the prospect will
not budge on fees, or in which you see little chance of forming
a profitable long-term relationship with the prospect.
Charging higher fees, and attracting better clients, is all
about trust and credibility. As your trust and credibility
rises, so will your fees and the quality of your clients.