Edit Your Selection
Andrea Learned writes about how women appreciate an edited selection:
Not every laptop known-to-man needs to be available at your consumer electronics store. Rather, do some research and reflect that you know your customers: deliver the top 10 sellers or the ones about which your customers requested most information in the past few years. … If your camera store, clothing store, appliance store or computer store has done its work, you will have discovered the "top 10" of your women customers' favorites and those will be the ones you provide and the products for which you train your customer service staff to know EVERYTHING about.
For me, the takeaway quote for professional service providers:
Sometimes limits aren't bad. In a retailer's situation, narrowing product selection can just reflect an excellent understanding of the store's core customers.
Getting the Budget from a Client
Jason at 37 Signals shares this tip he received from his friend Carlos:
First you should just ask them for it. Be blunt: “What’s your budget or budget range for this project?” If you have a good client they’ll tell you (and trust me, you want good clients — finding the right clients is 90% of this business). If you have a reticent client they may say “we don’t have one yet” or “we’re just looking right now” or “we want you to tell us how much it will cost.” Truth is, everyone has a number in their head. They have a good idea of what they can spend or they wouldn’t be shopping in public. If they don’t then they shouldn’t be asking you to invest your time in writing a proposal — and you most certainly shouldn’t provide them with one.
So, how do you get the number when they won’t tell you? Try this: When they tell you they don’t have a number say, “Oh, ok. So a $100,000 solution would work for you?” They’ll quickly come back… “Oh no, probably something more around $30K.” BINGO: That’s the budget.
Some business-building lessons
Dan at Starting It shares some lessons he’s learned building his business into a great company.
First, the company must have a never-ending commitment to being the best. Every decision must be bounced up against the question - "What would a truly great company do on this issue?"
Second, you've got to say you are going to be the best right from the start - when it sounds funny to do so. Then, you've got to say you are the best before most people can even see that it has actually happened.Third, you've got to be committed to measuring how good you really are on a regular basis and then putting a plan in place to improve the weaknesses. We recommend an annual survey. It can certainly be painful to learn the truth about how you are doing - but that's the only way to get better.
Fourth, you've got to have a core set of principals that you follow on a day-to-day basis.
At Dan’s company, Digital Grit, those principals are:
1) A clear and compelling vision for the future and a demonstrated willingness to make the tough decisions required to turn that vision into a reality.
2) Action vs. inaction - make things happen.
3) A culture of excellence - success, growth, innovative "want to change the world" solutions, hard work, attention to detail, refuse to lose, planning, financial management, and fun.
4) An unwavering respect for each individual. Loyalty, commitment to diversity, accountability, empowerment, recognition.
5) A never-ending desire to learn and a true willingness to be humble.
6) Open, honest and frequent communications at all levels in multiple forms.
7) A commitment to hiring only the best.
What are your company’s core set of principals?
One Way to Raise Prices
John Jantsch has a great tip in this post titled You've Got to Sing Like You Don't Need the Money. Here are some excerpts:
Generate more leads, more opportunities, more clients than you can possibly serve, and then raise your prices.
Here’s the theory – If I have more demands on my time than I can meet. I can look someone squarely in the eye and name my price, because I don’t “have” to get the order. ... Too many business owners find themselves enslaved by maniac clients that rob them of their value. Just say no can apply to marketing too. Lastly ... nothing is more appealing than security. If a potential client sniffs even a whiff of desperation, your selling effort will move away from your terms and you won’t have the guts to name your price.
Now, I don't advocate raising prices all the time for all of your clients, but if you are serving those "maniac clients" or feel totally overwhelmed by your work load, why not take John's advice and see what happens?
If I had a Hammer ...
Andy Havens has this great post (a rant, really) titled "When Your Only Tool's a $115k Hammer" about how the management at large firms justify the huge associate starting salaries as a benefit to the client. Speaking of this law.com article, Andy pulls a quote from Howard Scher, managing partner of Buchanan Ingersoll's Philadelphiaoffice -- one of the firms that has just bumped starting salaries from$105 to $115K -- who says,
Wehave clients who want first-class legal representation, so we have tocompete for the best people. While I don't think that $5,000 or $10,000should be the basis for making a career decision, it is for people atthat stage of their careers. So we hope this shows law students thatBuchanan Ingersoll is a first-class firm.
Now, Andy's take:
Look at the quote above: "We have clients who wantfirst-class legal representation." No offense to Mr. Scher and hisfirm, which is a very nice joint (especially since I'd love to consultfor him; call me, Howard -- 614.395.4134), but I have a question; isthere a firm out there with clients who want second-class legalrepresentation? Is there a general counsel out there who wakes upthinking, "You know what? My outside representation is too damned good.I'm going to fire them and hire some hacks."
Second point. Do you care what any service provider inyour entire world of purchasing behavior has ever paid any of theirworkers? I want you to think very, very hard. Have you ever thought toyourself, "I should check and make sure that my surgeon (dentist,mechanic, kids' teacher, banker, insurance agent) is the HIGHEST PAIDPROFESSIONAL IN HIS INDUSTRY!!??
No. You never have. Ever. You care about the quality of service.Period. And in many cases, quality of service does NOT track on a1-to-1 basis with what employees are paid. It more often equates to thelevel of respect they are provided, the amount of feedback they have intheir organizational systems, how well they are managed, their level ofpersonal mentoring, etc.
But, just as the billable hour is the only measure bywhich law firms seem capable of judging productivity, associate pay isthe only measure by which they seem capable of esteeming quality,rewarding it and (this is the huge disconnect) communicating the sameto both clients and associates.
I'd love to just copy the rest of his post word-for-word, but you owe it to yourself to check out the rest of it here, and read the rest of Andy's terrific blog while you are at it. I can't resist this one more snippet, though:
You are sending them a bad, wrong, unhealthy and, ultimately,self-defeating message. If the only way you can get "the best" studentsto come to your firm is to pay them $10k more a year... Let them go toother firms. Take the "Tier-2" kids who want to work somewhere withheart, guts, moxie, brains and staying power. I guarantee that in a fewyears your clients will love those kids way, way more than they everwould any shiny, greedy "A-Team" gold-diggers.
Free Consultations Don't Work
Sean D'Souza, in his PsychoTactics blog, writes about the Myth of Free:
I'm not convinced FREE works. So I decided to put my money where my mouth was.
And I dedicated 16 weeks of educating customers free to find thatthe only ones that signed up were those that had already paid.
Free is fine. It works.
But paying customers buy more. And it's mainly because freecustomers don't understand value. I've tested free extensively atworkshops by giving away gifts free. I've tested it by giving awayteleclasses free. I've tested by giving away complimentary articles andreports. And free speeches at the corner coffee house. And we tested inthe US as well as New Zealand...And everytime we made customers pay,the results were better.
The more I've restricted the terms, the more people are eager tosign up. To give you an example: We closed our membership to 5000BC(our membership site). As a result we've had more people write to usdirectly, wanting to get in at any cost. These very people are hungryfor more and they post more on the forum, they ask more questions andthey're more keen to buy products. I'm not convinced about free.
The customer is right. But doesn't always understand the value whenit's free. Value between two parties is what makes a relationship arelationship.
I can't agree more. Once I stopped giving free consultations to prospective clients, I found that the potential clients were more likely to show up on time, be prepared for our meeting, and retain me as their lawyer far more often then before.
Why not ask the client?
As I said the other day, I’m in New York for LegalTech next week. I’m coming in Sunday the 30th and leaving on Wednesday. If you would like to get together, drop me a line.
I was looking at the list of presentations and found this gem:
Cost Recovery: How To Effectively Recover Client Costs:
As costs associated with Internet- and equipment-based client services continue to pile up for law firms, technology is keeping pace to help firms recoup these costs and prevent an adverse effect on profitability. Effective cost recovery systems must manage these billable charges - everything from Internet research to printer, fax, phone and copier activity - from the minute they're incurred all the way through billing and reimbursement. This session explores what law firms should look for when selecting a cost recovery system, with an emphasis on intuitive, easy-to-use hardware options, seamless integration with financial systems and elimination of administrative headaches.
In my firm, we don’t charge for copies, faxes, or phone calls. Maybe at this presentation, I’ll learn how to turn my normal overhead into thousands of dollars of profit. I’m sure my clients will love me for it — especially if I tell them I am using “intuitive” and “easy-to-use” hardware that “seamlessly integrates” with my financial systems and “eliminates my administrative headaches.”
More Billable Hour Hell
I’ve been wanting to write something insightful about this article and the lessons lawyers should take from it, but I am totally swamped right now, so just go read it:
I’ll be back on Monday with some great new LexThink! news.
What will you say "no" to?
Sam Decker has this absolutely amazing list of things he resolves to say “no” to:
1. What strategies, initiatives and activities will you say no to?
2. What measurements will you not pay attention to?
3. What customers will you not target?
4. What people will you not keep?
5. What competitors will you not follow?
6. What will you remove from your web site?
7. What money will you not spend?
8. What meetings will you decline?
9. What trips will you not make?
10. What slides will you not create?
11. What will you not say?
12. What thoughts will you not entertain?
Read Sam’s entire post — especially the comments under each “resolution” — and resolve to not do some things yourself this year.
When a client demands hourly work.
In his Entrepreneur’s Blog, Scott Allen discusses using a retainer instead of just billing clients on an hourly basis. He includes this question and answer from a PR discussion list he belongs to:
Q: I have a new prospective client that wants to buy hourly rates instead of a retainer. What reasons would you give a client why a retainer is better for them and why hourly services are not a good option for them?
A: What's the problem? Give him your hourly rate along with the minimum number or hours he has to purchase -- in advance -- every month. (Answer comes from list member Rob Frankel)
It really isn't about price.
David Young, on his Branding Blog has this interesting post pointing to an MIT Sloan School of Management Study that shows slightly more than half of consumers are willing to pay more for a product (while shopping online) if it comes from a well-known vendor.
The study, which ran from early 2003 to early 2004, monitored 10,000 searches by shoppers looking for books that were among the 100 most popular titles. The searches took place on DealTime.com, an Internet comparison-shopping service that lists several dozen retailer offers at a time. The listings include pricing and shipping information, product ratings and more.
Researchers chose to monitor book shoppers because the products they buy are exactly the same.
"We went in thinking a book is a book," Erik Brynjolfsson, director of the center for e-business at Sloan, said Wednesday. "But we found out that people care a lot about who they buy from, even if what they're buying is a commodity."
Fifty-one percent of the shoppers scrolled down from the lowest priced books at the top of the list to the better-known retailers, paying several dollars more to buy their tomes from a vendor they knew. The hardcover books monitored in the study cost an average of $42.
Of course price made a difference to many, given that 49 percent of the shoppers bought the lowest-priced book. But Brynjolfsson and his fellow researchers expected closer to 100 percent of the shoppers to choose to pay the least possible for the same product.
"The vicious price competition predicted (on the Internet) by retailers and economists is not what we found," Brynjolfsson said.
The lesson from the study, according to Brynjolfsson, “Don't think that price is all the consumer will care about.”
What should we take away from this study? Remember, it is not always about price. It is about trust, competence, and convenience.
Keep Sick Workers Home
Have employees who are feeling a little under the weather? Are they still at their desks hacking and wheezing away trying to get through the work day? Next time, make them stay home -- or so says this article from HBS Working Knowledge:
Employers worry a lot about absenteeism, but new research suggests a bigger threat to productivity is “presenteeism”: sick workers who show up at work but are not fully functioning. U.S. companies may lose $150 billion (yes, that’s billion) annually because of presenteeism, according to some estimates.
Now, tell them to go get that bowl of chicken noodle soup.
Getting More Money from Clients
I just ran across Andy Havens' Legal Marketing weblog and this post about announcing price increases to clients. Andy has a great blog, and I've added it to my list of daily reads. Here are my favorite passages from his post:
One thing I will caution against, and that is the "spread the pain" message. I've heard of several firms that basically say, "We're gonna jack rates by 10%, but as a favor to you, we're going to do it slowly; 5% this year, and 5% next year." That's the most dumb-ass customer communications gaffe I've ever heard of. If you're going to screw somebody, do it and get it over with. Or do half now, and half again next year... but don't telegraph it ahead of time. It's like telling somebody, "I'm going to punch you in the mouth now... and then, in a second or two, I'm gonna punch you in the gut." No, no, no, no, no, no, no, no, no. Just don't do it.
PS: Better yet, switch to project-based billing. You'll make more money, you'll keep 10-15% more because of the time-value of money that ain't in the WIP for 6 months and your clients won't be worried that every time they call to ask a 10 second question that they'll be getting a bill for 1/10 of an hour.
To work at home -- or not?
From Arnie Herz’s Legal Sanity comes this link to an ABA Journal article titled, “Home Alone. Using Available Resources, Working at Home Can Pay Off,” that suggests that working at home is a viable alternative for some small firm practitioners. However, this BBC News Article seems to point to an opposite conclusion. According to a study quoted in the article:
Less than 50% of people who work from home are satisfied with their home office space, with a quarter of them forced to work in the kitchen, 37% in the spare room and 10% "hotdesking" it to anywhere they can find. [In fact over] three-quarters of home workers have found themselves working in a cramped and cluttered space, and over 50% of those surveyed said they did not have enough room to work effectively.
What does this all mean? Make sure the productivity gains you experience by losing your commute or gaining convenience are not offset by a bad work environment. Just because something feels like it is more productive, does not make it so.
More on Pricing Legal Services
I recently signed up for the free MarketingExperiements.com newsletter. According to the site:
MarketingExperiments.Com is a member of the MEC Labs Group and a division of Digital Trust Inc. MEC is an online laboratory with a simple (but not easy) five-word mission statement: To discover what really works. The Lab tests every conceivable marketing method on the Internet.Our experiments range from three to eighteen months, and they involve budgets ranging from $4500 to $50,000+. We are often surprised, and sometimes embarrassed to discover just how much we DON'T know about marketing.
In a recent experiment, they worked with a leading psychiatrist and author to determine how to maximize online sales of a new book. They tested three price points ($7.95, $14.00, and $24.95) and measured the effectiveness and total revenue produced by each. Their results are a bit surprising. The lowest price point generated the second-lowest number of orders and the lowest amount of total revenue. The middle price point generated the highest number of orders. The interesting nugget (for me at least) was that when the book was priced at $24.95, the smallest number or orders still generated the highest amount of revenue. In fact, both the $14.00 and $24.95 prices generated more than twice the revenue of the lowest price.
While the lesson for lawyers might not be to change your billable rate to $1,000.00 per hour (and only work one hour per day), it is interesting to note that lower prices (rates) don’t necessarily translate into more sales (clients). We’ve been playing with some pricing strategies here at my firm for our value-based billing mode and I’ll share some year-end results with you soon. Until then, the MarketingExperiments.com newsletter is a worthy read. I highly recommend checking it out yourself.
The Psychology of Pricing
I ran across this interesting article in the November 2003 edition of Design:Business newsletter. Though written for design professionals, there were some really good insights into the pricing of all professional services. Just some snippets:
Although there is no question about the overall importance of pricing to the success of a design business, overemphasizing it is a common mistake. Many designers assume that pricing is a very important factor in success, which it is not. Surveys of buyers of professional services consistently show that cost is never even among the top reasons clients give for choosing a supplier. Typically, the surveys show that cost ranks around tenth in importance. It is always lower than quality, service, dependability, flexibility, convenience, etc. Creative Business knows of no similar surveys specific to the buyers of design services, but our experience among better clients with good projects is that cost ranks fifth in order of importance. Ahead of it are “chemistry,” or how much the client likes the individual(s) he or she will be working with; degree of relevant experience; portfolio quality and creativity; and service. Also relevant is that the more creatively challenging the job and more sophisticated the client, the less importance cost takes on. And vice versa. Additionally, our experience is that skill in pricing ranks fourth in importance among the reasons some studios and freelances are more successful than others. Again, not number one. Higher in importance are the desire and motivation to succeed, the everyday working procedures that have been established, and marketing programs and efforts.
Understanding the psychology of design pricing is important because most clients accept that quality, results, and price go hand in hand. The higher the quality, the better the results, the more something is thought to cost. This belief is especially relevant to the design market because clients place orders without seeing what they’ll be getting. They make purchasing decisions on the anticipation of quality and results based on little more than samples of similar projects and their confidence in a firm or individual. Similarly, once the work is produced it will usually be subjectively evaluated before any market feedback is received. Here, too, client satisfaction depends mostly on perceptions of how well they believe their needs have been met. Aggressive (low) pricing in such situations sends the wrong signal. It can lead clients to expect a reduction in quality and results. It can also lead to a destructive pricing cycle: the more price-competitive a design firm is seen to be, the less their work will be valued; and the less their work is valued, the more competitive they will need to be in the future.
Clutter is Never Free
Knowledge@Wharton has this great article with a conversation with one of the authors of Conquering Complexity in Your Business. Some excerpts:
Complexity is a systemic effect that accumulates over time. So while you may have a perfect portfolio today, your customers' tastes are changing—what's good today is probably not good tomorrow. Many businesses respond by expanding their portfolio and placing more goods or services on the market. Each innovation may represent a source of customer value and profits at the time that it is introduced, but unless you have some mechanism for rebalancing that portfolio, complexity will creep into your processes, tax internal systems, and drive up costs. Even worse, you might strangle growth in the name of pursuing customer value.
Also, it consumes resources and can impede growth. If you have a portfolio of 4,000 products, you're spreading your marketing resources across all those products, when you should be concentrating on core brands. We also find in our work that companies with a complex product or service line have a significant gap in their understanding of what truly drives their profitability. What's important is that companies understand the relationships between complexity, cost, efficiency and growth, which we captured in a concept called the Complexity Equation. Management can then make rational decisions with these relationships being explicit, instead of implicit or unknown.
As a general practitioner, this article hits a bit close to home.
Dumping the Billable Hour (Again)
Jay Conrad Levinson and Michael W. McLaughlin, authors of Guerilla Marketing for Consultants write about one of my favorite topics: abandoning the billable hour. Some excerpts:
It’s time to dump the hourly rate once and for all.
To begin with, the hourly rate is a totally bogus number. It’s computed using very broad (and sometimes flawed) assumptions about a firm’s costs, volume and profit. And, many consultants toss those assumptions out the window and discount their hourly rates when they believe doing so will improve their chances of winning a project.
By charging a client for time alone, you completely undermine the expertise you’ve spent years building, and you limit the profit you can justifiably earn. Dozens of pricing alternatives exist that don’t rely on the hourly rate. Look for alternatives that lead to discussions with clients about the outcomes they want to achieve.
When pricing your next project, think results, not effort.
Thanks to Dana VanDen Huevel for the link.