Who sets the price, sales or ops?

This is not how basketball works

This is not how basketball works

When it comes to pricing, there are two schools of thought. What you’re thinking, and what everyone else is thinking. Out there it’s a wild spectrum of pricing methodologies and practices among digital client services organizations.

I remember an Owner Camp conversation where Brian Williams (from Viget) and Jon Lax (leading Teehan & Lax at the time) debated the value of tracking hours. At the heart of the time tracking debate was the impact tracking had on scoping, budgeting, and selling projects. When the dust settled, it turns out they were both right. Their respective methodologies were each powerful and successful for them, despite their differences.

Fixed-fee pricing, value based pricing, time and materials invoicing, and agile scoping all work. They’re all different flavors in the same ice cream case. There is no right answer, only the answer that’s right for you and your clients. The utility of each approach is derived from how you view pricing philosophically.

Is pricing a function of operations, or a function of sales?

Where pricing is a function of operations, there is often clarity. An arithmetic model determines a project price based on a scoped effort multiplied by a billable rate. If you scope in hours, the total hours multiplied by an hourly rate = budget. If you scope by feature/value the sum of all features’ value = budget. This method often withstands client scrutiny the most frictionlessly. “It costs what it costs” she told herself as she lay her head down for a night of sound sleep, untroubled by thoughts of “should I have charged more?!?”

Where pricing is a function of sales, there is often opportunity. When you decouple pricing from rigid operational math you can price a client with more money at a higher budget (price the client, not the project). You can cut price to make a proposal more attractive. You can price different clients, different projects, and different days of the week, in different ways. This approach often opens the door to many questions from clients, and especially from procurement departments.

In both cases though, you can successfully price the same project, from a certain point of view.

In a recent conversation with an agency, we discussed the limited profitability of a recent project.

On the one hand, one of the partners was lamenting that this project only netted $5,000 in profit. It was nearly break-even work. He felt this was not a sustainable business model, and he was right.

On the other hand the other partner was thrilled that the real win was that the work resulted in securing a Master Service Agreement (MSA) with their client’s large consumer brand parent company. She felt that if given the opportunity, they would have gladly paid $5,000 to purchase an MSA with this global brand, opening the doors to more opportunities, and she was right.

Truth be told, when I work with clients who adhere to operational pricing strategies or sales pricing strategies, they’re almost always secretly flexible within their own paradigms. An hourly pricing team isn’t opposed to raising their rates when they feel a client can afford it. Another team who prices to sell/close projects will similarly break open a spreadsheet and account for every proposed hour when the right client comes calling.

The morale of the story is that in my experience pricing is typically more alchemy than science, but it helps to determine if you think pricing is a function of operations or sales.

Are you likely to be more comforted by a reliable/transparent pricing strategy, knowing there is a ceiling to how much you can charge?

Or are you more concerned that you’re leaving money on the table by underpricing an opportunity, knowing that there is a potentially higher reward, but also increased risk?

Once you’ve made a determination about where you live philosophically, settle in, but don’t get too comfortable. Continually challenge your stance, and question whether you should introduce more formula into your thinking, or more flexibility. The only wrong answer in the long run, is getting lazy, and rigidly adhering to one camp or the other without occasionally weighing your alternatives.

Vulnerably Honest

Wes Anderson levels of transparency

Wes Anderson levels of transparency

There are so many books on negotiating tactics. So very many. Often these tactics are framed around “winning” negotiations, and it feels that way when the stakes are high. 

I’ve had to negotiate like my (work) life depended on it. I was a recruiter for 5 years. I worked in a commission-driven business model where competition from other recruiters was endless, opportunities to build relationships with clients were hard-won, and sometimes when you successfully “sold” a placement, the person you fought to place at a client changed their mind at the last moment. It was selling in a really commoditized way like selling copiers, but if the copiers could decide they didn’t want to work at Astra Zeneca thanks anyway tho. Unrelated, I have lots of grey hair.

The stakes only get higher in client services, especially if you’re selling consulting services. When you’re selling a “how” not a “what.” Winning negotiations becomes even more critical when more and more people on a team are depending on your successful sales outcomes. You negotiate with procurement, you generate consensus among large groups of stakeholders, and then if you’re really lucky you get to negotiate with legal. These are professional negotiation winners. Talk about bringing a knife to a gun fight.

With this much on the line, and this much effort invested in negotiating, you may start to employ pricing strategies, or be tempted to construct elaborate negotiating tactics, or otherwise overcomplicate an already complicated decision. You’re working to protect your interests. You’re defending against vulnerability. I know, I’ve done all of this, to positive and negative results.

I remember an agency owner telling me that when their firm suffered through layoffs, they were 100% honest with clients about what was going on, why it needed to happen, and how it would impact their relationship and work. The agency negotiated a brief pause in all client work as they reorganized, and they and their clients weathered the storm. I thought this was crazy. I’d never entertained being that transparent, but there was real power in the trust earned in that investment in honesty.

What I’ve started to experiment with (because life is too damn short) is employing a level of honesty and transparency that I found scary at first, but that I realize has become a powerful way to build trust and rapport with my own clients. 

I’m completely leveling with my clients. Not just about what I want and what I need, but about what I perceive to be their priorities, their concerns, their needs. I’ve had to disclaimer this approach at times, warning we are about to engage in some “next-level transparency” up in here. I’ve explained to them what I think they were being too polite to plainly say. I’ve been transparent with them about my business requirements and plans. 

There is real risk here. I may not be 100% accurate in my assessment of what my clients are struggling with in making their decisions. I open myself up to the risk of being wrong. There is a vulnerability in being honest with someone, and not protecting yourself by positioning or jockeying. I know I’ve rocked a client or two back on their heels a time or two as a result. But in every case, we’ve settled into a more honest and transparent conversation.

The team I’m supporting is smaller now that I’m running my own business (there are four of them and they’re all named Rinaldi and they all live in my house), but they depend on me a helluva lot more than my former coworkers ever did (boy’s size M compression pants don’t pay for themselves you know). So there are some real stakes, and a lot to lose if I can’t successfully negotiate with my clients. 

Granted, in my current line of work I began by working with people I already knew, and in many cases already trusted. Honesty is easier in those cases. But I’m well outside of that roped-off, protected little swim lane now. I’m encouraging a level of honesty with clients I barely know, and the feedback has been that they don’t feel like they’re being “sold.” In consulting services that level of trust is a valuable currency. It’ll come in handy when I need to lead my clients. So while I’m dialing up risk by employing vulnerable levels of honesty, I’m dialing up trust and positive outcomes even more. You may feel like you’re exposing yourself to vulnerability by being honest, especially when it’s an unglamorous flavor of honesty, but I’m pretty certain it’s a good policy to adhere to. Some say the best.

The Tactical Deployment of Fun

One of the challenges I face working for/by myself is "getting started." I’m a talker, and I’m at least 20% smarter when talking an idea through with someone else. 25% smarter if I can high five and walk around while talking. 

When I’m working actively, talking with a client, we cover a tremendous amount of ground really quickly. It helps that we speak a common client services language and can share ideas in a more primordial state back and forth faster. After a 45 minute call I’m often stunned by how much ground was covered, and how easy it was to plow through a bunch of topics or challenges.

Then, I sit down to do some heads down work, and time slows to a crawl. It feels like the Millenium Falcon coming out of hyperspace. It’s not that I’m procrastinating. I can watch those Joel Embiid videos later. I struggle with the frustration that my rate of progress slows so dramatically.

What I started to do to overcome this frustration, was find ways to make work fun. Well, fun may be an overstatement, but I definitely find creative ways to get rolling.

For example, I needed to rewrite a client’s proposal from soup to nuts (soup to mints? Who eats exit nuts?) and holy crap I was I getting good at staring at this document not getting anywhere. 

So I thought about Dan Mall. If I endorsed Dan Mall on LinkedIn I would obviously start by endorsing him for scarves. The brother’s scarf game is on point. But next, I’d endorse him for making work fun.

I’ve worked with Dan on a few projects now, and where he’s irreplaceably valuable is when he reconstructs a client task to be fun. Whether it’s as simple as using Mad Libs as a metaphor to get clients talking, or exploring an idea visually vs verbally, Dan is great at looking at a challenge from a slightly different angle, and making the work more enjoyable and memorable. Clients come out of his meetings humming. That spoonful of sugar is just enough.

So rather than plow through my client’s proposal, I put on some sweet sweet coffee house jazz and read other firms’ proposals. I have a wee proposal library I’ve built up over the years. I love reading them. It’s a thing. 

 
 

I started reading through other examples, and started cataloging their contents by sections, by focus, by structure. Armed with this mighty spreadsheet, I was able to run a gap analysis of where my client’s proposal has holes. Where they comparatively over-invest in content or focus. Where they stand out. Rewriting was a breeze.

I try to think like this when working directly with clients too. 

For example, when discussing business development goals with a client, I often employ a time traveler metaphor, bear with me. When you’re in biz dev, you’re a time traveler. You’re living at least part-time in your firm’s future. The projects you’re closing, the clients you’re calling, they all represent the work your team will be living with for the next six months, or the next year. You’re imagining the case studies this work will yield. The other projects it can lead to in time. You’re thinking 6–18 months ahead.

When developing these goals, I’d love to crack open the client’s Work section on their site, view source, and start to messing around swapping in new client logos and case study titles that represent their wishlist clients. It would be awesome to visually see Starbucks or the NBA or Habitat For Humanity or whatever among their client case studies, on their actual site. The reality of that would be awesome. Frankly it’s just outside my reach to pull that off live (but I know Mark Huot can do it, I’ve seen him do it in a pitch and it’s glorious, damn him).

I can’t stick the landing with my grander unconstrained goals, so I punt. Instead, I have the same kind of time travel conversation without the visual aids, and occasionally I’ll do a bit of that visual work in Photoshop offline and bring that back to the client. That’s what I’m capable of, and it still gets the job done. 

Setting the big, ambitious, fun goal at least gets me thinking in the right direction. Then I figure out how much of that vision I can execute. Ultimately though, I remain aimed at making the process more enjoyable.

It may not always be Disney World-level fun, but Action Park is still a good time. You just need to sign more waivers.

give a little bit

So I’m a small business. Kind of an accidental enterprise when I started out tbh. I was getting into consulting and I needed a shingle to tell my story. A logo sketch, some vector help from Ben Jordan, and a dusted off domain I’d owned for 8 years later, I’m suddenly Clutch. Not so suddenly if you ever creeped on my LinkedIn bio.

Lots of little decisions followed. Not the least of which was client holiday gifts. I had 8 clients at the end of 2016, and a handful of colleagues and friends I owed a drink for either sage advice, timely support, or remote high fives. I looked at DiBruno Bothers gift baskets (an old standby) and thought about sending a bottle of wine (but I live in Pennsylvania where booze is too hard).

After much introspection I settled on sending clients and friends prints from Scott Campbell. I’m an illustrator, and an illustration enthusiast, and I imagined a fellow illustrator like Scott might appreciate a little holiday business more than the larger enterprises I was considering supporting with my patronage. 

Scott has some really amazing pieces and does these great illustration series

For this year’s client gifts I settled on a tribute to America’s greatest living actor, Jeff Goldblum:

GoldblumsPrint_grande.jpg

And for the folks I wanted to buy a drink for (but couldn’t because they’re all over the country) I bought his Star Wars cantina prints. Honestly, these guys look like more to raise a glass with than I am anyway:

 
 

Yeah, it’s me kind of imposing my taste on my clients, but it’s authentically something I’m passionate about, and something I sincerely think will put a smile on someone's face. 

Sorry Greg Storey, I got you a book.

 

 

Zep

I love nicknames. One time a guy I worked with in Savannah called me “Dr. J” because I’m from Philadelphia. The name did not stick, but it may have been the greatest moment in my life. Greg Storey has the cutest nickname for me. He calls me “When are you going to blog about it?” I know this is my nickname because he calls me it every time I talk to him. It’s catchy too. Dan Mall calls me “That’s a blog post.” 

With all this blog talk I began to wonder, should I be blogging?

Dan and Greg are excellent writers, and bloggers from way back. I’ve spent a long time talking about blogging with the two of them over the past few months and they’ve both taught me something valuable, again.

Yes, I should be blogging, and so should you. 

It’s a way to catalog what I'm thinking about, what I'm working on, half-baked ideas, etc. It doesn’t need to adhere to a cunningly clever editorial plan or content strategy. It doesn’t have to break the internet in half with its novelty.

It’s valuable to me to put my thoughts out there, whether it’s valuable to anyone else is almost unimportant.

My goals are:

  • To blog about my work, but remain personal
  • To blog frequently, but not kill myself if I miss a weekly schedule
  • To be honest, a little vulnerable, and a lot transparent

This is my first blog post, so I owe a little personal transparency. I do have a nickname. My family calls me Zep. It’s short for Giuseppe, and so am I.