I was going through the papers in my office the other day to see what could be filed in the recycle bin. In the course of doing so, I found a publication written by Ron Baker in 1997 on how to maximize fees. The publication — Ron called it a handbook — was written for the CPA profession but nevertheless, I think his words apply to the PR industry as well.
What do your customers — I use “customers” here in place of clients — buy from you?
Most would answer this question with “knowledge and expertise.” Others might offer specific deliverables. This type of answer focuses on the technical aspects of providing services to a customer, and isn’t incorrect but tends not to focus on the customer benefits that you, as a PR professional, are providing. The premise, then, is that you can’t begin to understand the selling process unless you understand the buying process.
What needs to be understood is the buying process from the customer’s perspective, and how you can arrive at a better understanding of this in order to implement a value pricing strategy.
Your customers are really buying two things: good feeling and solutions to their problems. As an example, the manufacture of Rogaine is selling hope! In summary, customers are really buying one thing when it comes right down to it: expectations.
Your goal — or challenge — is to discover that those expectations are remembering no two customers are alike, and no two of them engage your agency for exactly for the same reason.
Are your customers rational?
The quick answer is no! According to Allan Bores, your potential customers buy emotionally and justify intellectually. As an example, earthquake insurance sales rise dramatically after an earthquake. Intellectually, we know for the most part that the probability of another earthquake occurring hasn’t increased, but to the customer, it doesn’t matter nearly as much as the peace of mind that arrives after making such a decision.
What’s the cost of buying?
If a customer objects to your price, it’s usually due to one of two reasons: fear (usually emotional, not logical); or the fact that they want a better deal.
Concerning the first objection, you must play the role of a therapist and try to draw out the fear within the customer and prove to him or her that it’s not justified. If you are successful, the customer will most likely agree to your terms.
The second objection can be dealt with in many ways. One way is to offer a Fixed-Price Agreement. Sometimes it’s a good idea to let the customer decide their own payment terms if the price is paid in full within 12 months. This type of approach allows the customer to budget their PR services precisely.
When meeting with a customer to set a Fixed Price Agreement, try and sell more services that will give value to the customer. The more services they buy, the more willing you’ll be to adjust the pricing. The logic here is that selling additional services to an existing customer is more profitable than to a potential customer because there’s a lower learning curve, less write-off risk and more opportunity to utilize your professional staff.
Questions you must ask a potential customer (next month I’ll tell you what must be asked before you determine price).
The following are some open-ended questions you should ask your customers:
1. What do you expect of us?
2. What keeps you up at night?
3. If price isn’t an issue, what role would you want us to play in your business?
4. What do you like about working with your current PR agency? You learn more from success than failure. Emulate what they like and then ask …
5. What don’t you like about dealing with your current PR agency? You don’t have time to make all the mistakes yourself, so learn from the mistakes made by others. However, don’t insult the customer for two reasons: (1.) It insults the customer (nobody likes to feel like they made a bad decision); and (2.) it degrades the PR profession.
So, what are some of the requirements to institute value pricing?
You can reduce the chances of violating the customer’s expectations by spending more time planning the engagement and discussing the value your agency provides. This allows you to exceed the customer’s expectations and command higher prices for your services. Value pricing is easier to engage in when the following characteristics exist: quality customers, effective communication and total quality service.
In terms of total quality service, you must take care of your customers emotionally and psychologically, rather than just meet their PR needs. This is one area that your competition can’t match; in fact, most don’t even notice it, so doing so makes an enormous competitive difference.
One last thought: offer an unconditional money-back guarantee if the customer isn’t satisfied with your service. This has several advantages, one being it gives the customer an incentive to complain. Most of your customers will usually not share their reasons with you. Instead, they’ll simply move on to another PR agency. You may already be doing this if a customer complains loudly enough!
Become a total quality service agency! All things being equal, you should command a higher price as a TQS agency, offering perks such as a money back guarantee, than those without it.
Think about it. I know there’s risk and the concept is controversial.
Richard Goldstein is a partner at Buchbinder Tunick & Company LLP, New York, Certified Public Accountants.