Improve Your Process to Raise Your Prices with Value-Based Pricing for Services or Offers

Awesome. Sounds good. I mean, I'm excited to work with you. How much does that cost? Awesome. Yeah, probably about 20. Really? That's all? I mean, 20, you know, per thingamabob. Because. Yeah, so that's really 2700. Really? I mean, yeah. I mean, that's what I would normally charge, but because, you know, you and I have been talking for 30 seconds, I'm actually gonna just cut that price in half or so. And it would be 1500. That's what it would be. 1500. Are you sure about that? Duh. If that scenario felt a little bit too real for you, I'm hoping this video will help you feel a little bit more confident about navigating, validating, and bringing some confidence to conversations about pricing. Full disclaimer. I'm not some kind of sales coach here. I'm coming at this topic from a process perspective. And if you haven't met me before, hello, my name is Layla. I'm a process consultant here on the ProcessDriven YouTube channel. You might have gotten some themes there. And today what I want to share is how we can use formulas and, yes, our processes to help us feel more confident and convey more value in conversations around pricing. To get us started, I want to look at a basic formula, formula for determining price and credit where credit is due. I'm pretty sure I first heard this over on the Future YouTube channel. I'm honestly not sure. I tried to find the video, couldn't find it. But check out the future if you're looking to find more topics like this, because they cover a whole lot about sales and design, psychology, way more than I can cover here. But they shared this concept, price being the result of value and risk. Kind of putting these two things together. I love this concept, so I want to just repeat this here and build onto it. The basic assumption is that however much value someone's going to get out of the thing that you're selling, say that new website is going to make them $10,000. We're going to consider how likely it is that that website is actually going to give them $10,000 in sales or value, and that is going to determine our price. Think of it almost like a lottery ticket. If the lottery could win a hundred dollars and we are 100% certain we will make a hundred dollars off of that lottery ticket, we'd be willing to pay up to $99.99 for that lottery ticket to make an extra penny. But if the odds of us winning that value getting that result is lower, we're probably not going to want to pay as much money upfront because of risk. This is kind of how most financial instruments are priced as well. Now, I think this is great as a starting point, but as a former econ major, I'd be remiss not to mention the value of human expectations and how heavily that weighs on this entire formula. And it's why pricing becomes so subjective. In my view, a more accurate way to modify this equation would be to add perception, add people's expectations into each of these. Because honestly, the value of something and the likeliness of something, what you think it is, honestly, doesn't matter. It matters what your potential buyer believes it to be. And that's why perception is something I'm adding into both sides of this equation. So now it's the perceived value, someone, what they think they're going to get and how likely they think think it's going to be for them to get that that will determine the price they're willing to pay. So it's no longer just a simple math equation. We've got this layer of perception added on. So let me break this down with some things. What impacts each half of this equation? On the value side, I really think it comes down to three pieces. We could probably expand this and go into greater detail. But the three things I've identified here are who you are selling to. So that perception, that perspective that they're bringing to it, that greatly influences the perception of value, the actual results you are providing. Meaning, what are you giving them, what are you getting? Is it $100 lottery ticket or the grand sweepstakes? And then ultimately the perception again. So what is their opinion of these two things? Now let's flip over to the likeliness side of the equation or the risk side. How likely is this to happen? Well, I think that's influenced by three other things. First, who you are, what are you bringing to the table as the transformation provider, what risks are inherent in getting those results, and of course, the perception of all of the above. I'm a bit of a broken record here. Now, later on in this video, I'm going to go through examples of each of these bullet points to drill into them. But first let's go over a little example of this whole equation just to make sure we're on the same page. Now, in prepping for this presentation, the example that came to mind is paying for a campsite. Because myself here I am located in a beautiful area with tons of wilderness, but little known fact. You might have guessed by my appearance and profession, I'm not much of a wilderness person. I am an air conditioned house cat kind of human being. And so when it comes to paying for a campsite, my spouse and I are in very different positions. So if I use him and myself as examples here, you'll see how this perspective that we bring can really change the overall formula and our perception of price and value for each of these pieces. So to get us started here, let's take the perspective of my spouse. To Alex, going out and spending a night camping for some reason is something that is a fun thing. And for him, if we had to put a dollar value on it, spending a night under the stars would be worth about $100. Now granted, in reality we don't have to put these prices on things, but let's just pretend. Okay? Now for my ever optimistic spouse, the likeliness of something going wrong when you're out there camping is about 1%, 99% chance that things are going to go great. You're going to get that full value. It's going to be amazing. But there's a 1% chance of failure. The other 99% of the chance he could be lost in the wilderness, but that's still a positive outcome in his mind. And so there we go. Therefore, for my spouse, the value, the money he would want to pay in order to get that night camping under the stars, if for some reason we had to pay money for that would be up to or equal to $100. At $100, it would be exactly equal the price to the value. So the deal would be done. That's how much he would pay for that result. Now let's flip over to my perspective, a different client avatar. For me, camping has almost no value, but because it makes my spouse happy, I still give it some credit here. So if I had to put a price on it, I would put about $50 in value for spending that night being in the wilderness. That questionable night of camping would be worth that much. For me, the likeliness of that camping experience, of being a Success is about 5%. Yes, that is right. I believe there's about a 95% chance I will be killed by an axe murderer, bit by a spider or eaten by a bear if I go out camping. We'll unpack that later. So doing the math between these pieces, the price I would pay for a paid camping experience would be about $2.50. Anything up to that would feel like a fair deal. Anything over that wouldn't be worth it, considering the risk. So, so in this way, we've Got the same exact experience, two different avatars, two different risk profiles, and two different perceptions of what a fair price is. This is exactly why if someone emails you and say, hey, your pricing is too high, you should really take it with a grain of salt. Because one person's perspective is going to be very different than another person's perspective, even if all other things are equal. But now that we know this, let's look at how we can adjust different factors that contribute to this formula to actually change the price that is considered fair or market rate for our product and service. And yes, that means each of these six bullet points here is a lever that we can push or pull to impact our pricing result. First off, let's go with who you're selling to. If we want to change this input, we could look at narrowing or shifting our ideal client avatar. For the example of camping, you might want to sell your camping services to my spouse and not to me. If you want to make a little bit more money off of it. Moving on to the results, we can also change what exactly it is that we're selling. We can use the same exact expertise, the same or similar infrastructure. But rather than saying, hey, we'll set up your software for you, we could shift our what to hey, we'll teach you how to set up your software or hey, we'll teach you how to set up your software for this specific outcome. All of a sudden, by repositioning the end transformation or the end result you're giving, you can provide more or less value and raise your prices or lower your prices depending on your delivery format. This bullet point really feeds into your product strategy. So it's probably not something you'll be changing very often, but it is an option to consider. And finally, of course, we can influence the perception of all of the above. This could come into your copywriting, your positioning, focusing on benefits instead of features. I mean, there's so many ways you can go about this, but one example I have here is focusing on how you explain your deliverables. So maybe you are a branding coach that spends two hours helping somebody develop their brand voice. You could talk about it as we'll define your brand voice during this call, or we could say you get a two hour call, same thing, same deliverable, same result. But way you're communicating, it can change the perception of what the value is. This clarity of explanation can go a long way and is really where those branding, copywriting, sales experts can really come in and help you add a little polish to otherwise good bones. That may not be perceived as as good as they are. Alright, so that is perceived value. Moving over to perceived likeliness, who you are is the other factor to consider. This is one that is generally earned versus purchased. But think about the comparison of hey, here are my 200 testimonials where I've helped your exact industry do this versus hey, my niece knows how to do that stuff. I think, yeah, in this case, the niece might be a little bit less trusted than the other resource. Your reputation, track record, confidence, those things can help convey how likely it is that you can get somebody the results that you are capable of giving them. If you haven't done something before, such as giving someone a haircut, the chance of that haircut turning out to be really good might be lower than if a professional hairdresser was giving that same haircut. Next up, risks that may be preventing results. This is kind of inherent in the promises you make on the other half. But let's just say your promise is to deliver a brand logo. That's what you're going to deliver. Well, you and I both know that the risk of getting a logo designed is that you're going to hate what it looks like. And you have two ways that you can navigate this. If you wanted to not help your perceived likeliness, you could just say, oh, don't worry, it'll be perfect. You're basically dismissing someone's risk concern, you're dismissing it as invalid, and they're left thinking, hmm, do they actually know what's going on? Cause I've definitely taken logos before where I don't like them. Or the alternative path, if you want to de risk that transaction, is to actually copy a concept I saw up in this video over on Alt Agency's channel where Joey Coleman talked about how you can get ahead of those risks and bake them in to your sales process. To just paraphrase what he says in that video. It's something along the lines of, hey, I'm going to give you a logo. You're going to probably hate most of these logos and that's okay. We're going to then move on to the next step where you'll probably hate some more, but eventually you're going to like the end result. What that's doing is framing things up to understand that there will be roadblocks and you are already prepared to circumvent them versus if you go the everything's going to be perfect approach. You sound like you don't know what you're doing because you're living in this land of diluted optimism. So that's an example of the risk factor. Finally, of course, perception. So how you communicate your de risking factors is what this leans into. How you are perceived by outsiders, whether in your control or outside of your control, will impact this as well. Just want to jump in with a quick productivity tip from our sponsor of today's video, textexpander. If you find yourself typing or retyping or looking for information and then typing it regularly, you are probably going to find that textexpander could save you a ton of time. Textexpander allows you to define templates, basic calculations, and a whole bunch more, and allow you to store it all within one brief typed word. 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But just in case none of those made sense to you, none of those really struck home, let me give you six specific examples of how you can implement process changes to increase or decrease pull these levers in whichever way you prefer. Idea number one Reduce risk. You can reduce risk by anticipating challenges and building roadblock prevention into your normal flow. So so this is basically implementing that Joey Coleman idea I talked about earlier. So if you are someone that, say, anticipates your landscape clients to hate what the initial mulch color looks like, you could change your landscaping prep process, your design process, and have a step where you actually bring a sample of mulch to the house, put it in the yard and have the client look at it, compare it with a few other samples and sign off. That is a way to prepare for something that you know is typically a sticking point. Anytime you experience something that prevents a client from getting the value you want to deliver, whether that's the home renovation or the lawn care or the legal services, build something into your process for next time that prevents that from ever becoming an issue. Make it part of the normal road, and even if you don't need it, it's there in case it does come up. It helps you seem more prepared and it ensures your client never has to deal with awkward back and forth. The second idea for reducing risk is to communicate your preparedness for risks. So this goes into that perspective piece. If you do the stuff I said in the first bullet point here, you need to tell people about it. If you are working in, say, a consulting engagement, this might include having a visual roadmap telling clients, here's what you're going to experience as a customer of our consulting agency. Phase one, phase two, phase three, hey, here's where we're going to bring the mulch samples. You know, whatever it is, here's what it's going to look like. If we do all this anticipation stuff, that's great, but if people don't know about it, we're not really hitting the perception half of that equation. So we need to communicate it both before the sale, during the sale, and after the sale so that it is very clear that we know what we're doing and that we're ready for anything and we are committed to making sure our customers get value. The third example ties into the second, and this is about proactively sharing what is going to happen next. I have recently hired a lot of service providers this year, and it's been incredibly sad to realize how few of them actually do this step. Well, you know, we'll hire a contractor, we'll hire a lawyer, we'll hire an accountant, pay the money, whatever that is. And then we hear nothing from them for 24 hours, 48 hours, 72 hours, just waiting. That is what we want to avoid, because what that waiting does is give us space for buyer's remorse. And so what we want to do is make sure that every touch point with a customer, we're telling them what's happening, we what they need to do and what happens next. I've been drilling that into my own team, but I want to share it here as well, because as a customer, I absolutely hate the radio silence. So if you're looking to avoid that buyer's remorse and help reduce that perceived risk, once again of failure, always be sure you are sharing what happens next. This could be done by saying it in each email, by having a client portal, by transparently showing what is in your backlog or something in between. Number two, let's switch to the value side of the equation. We could increase the value by making the customer experience more or less interactive. Notice these are kind of two competing ideas. But with all of this pricing stuff, your avatar matters more than anything who you are serving. And let's just assume who you're serving and how you're serving them is fixed. For most people it is in the short term given that we want to focus in on who we're serving and figure out what they want and and do more or less of it. So these first two examples are both around that if you are serving students in the Gen Z category, you probably want to make things more and more self service. You don't have to talk to a human, here's the button you need to press. And that automation will actually be perceived as more valuable to that avatar in general. I mean these are all generalities. Know your avatar. On the flip side, let's say your customer avatar really, really loves that human touch point. They love the chit chat, they love to have a receptionist really talk to them and see how their day is going as they're booking their dentist appointment. In that case, make it more interactive and that will increase the perceived value by just adding that soft touch to the value you're already delivering. This could be manifested with the example I just gave as just changing how you book your dentist appointments. Related to that number two, which tie right in here, is to do more of the ER in either direction. So, so I used the example so far of interactive, but we could also look at faster, slower, quicker, cheaper, more expensive. You know, what are those things that your avatar values? Let's add more or less of that. So if you are students want things to be on a budget, find a way to chip off expenses to make that a more low cost service. If your client avatar perceives things as valuable, if they take more time, then maybe you purposely want to get that meal out slower to show how carefully crafted it was. On the flip side, if your ideal avatar in your restaurant is in a hurry, maybe you want to have your meals be even faster because that will be perceived as more valuable. Know your person and tailor your more or less of whatever to that person. As another example of increasing value, you could create reusable assets. And this is one that I actually did in my own business when we were moving from a service to a productized service to ultimately a membership. But I would start introducing reusable assets. So whether that is a video tutorial, a guidebook, a workbook, create something once included in all of your offers to come, and all of a sudden that offer itself provides more value, presuming that that asset is something your team or yourself could actually use. One example of this could be what I have up here in this video, where you actually simply have a price chart, a reference chart on your purchase desk. Not even an asset someone takes with them, just a visual guide, and that could help increase the perceived value or comfort in the sales process. Another example would be have an onboarding packet for all of your new copywriting clients where you explain expectations, give them guidelines around their brand voice, and maybe even give them a workbook as to how to set clear expectations with you about what they want to see. Sound like all that good stuff? As my final example, and the one that I've used most recently is the course example. Literally build a mini online course or mini book ebook, something for your customers that guide them through what to expect when working with you. This is something I did for my own business with my process course and now my process membership. It's also something I've worked recently with a musician on and I've said, hey, you're working with weddings. You're trying to get these weddings to book you as their wedding singer. Why don't you build some kind of ebook as to what to expect when you're working with me? Here's what happens. Day one, Day two, Day three to clarify expectations, help them get ahead and help those busy brides or grooms or anything in between feel prepared and equipped on what they need to expect. This helps you stay prepared as the wedding singer. It helps them feel like you know what you're doing and increases the value on both halves while also de risking. If you haven't gathered by just these three examples, there is a lot of overlap between them and arguably these are just four examples in different phrasings, but you can pull these together and be really creative to both de risk and increase value at the same time, which ultimately will increase the price in the eyes of your ideal client. If this was helpful to you, if you want to learn more about how you can actually develop these processes. If you don't know what your onboarding process is, let alone how to add value or de risk it, check out these videos up here on this playlist where we have a lot more content around process mapping, process documentation and even automation. All the stuff you might need and of course like and subscribe so you see these videos in your feeds. Thanks so much for watching. Thanks to our sponsor for today and until next time. Enjoy the process. Thanks watching for oh and a quick reminder, the sponsor of today's video is textexpander. So if you'd like to support this channel and also boost your own keystroke productivity, check out the link in the description below.