There’s a traditional, somewhat logical, pattern to how business has always been done. The seller describes a product or service, promise benefits, maybe even paints a rosy picture of the prospective buyer’s life with said product or service, and asks the buyer to pay a set price in order to acquire it.
While this how it has always been done, there are a couple of inherent problems with this model, particularly when it comes to acquiring a fairly new product or service with little history or buyer success to point to as proof of promised results.
The biggest problem is that the buyer is left to shoulder the entire burden of risk. What if they don’t get the promised results? What if it isn’t what they need? What if, heaven forbid, it’s not as good as the commercial suggested?
Now, some of this doubt can be dismissed with guarantees, but still, the buyer must wade through the process.
Because we’ve all experienced problem #1 at some point, we’re reluctant to believe the claims and value propositions of something that really may be the answer to our challenges. In some cases, we forgo products and services that we need because we just aren’t sure the price risk outweighs the value or results promised.
I believe that one of the most effective ways to address this is to look at using a fee for value or results based pricing model, particularly in the case of new services.
Imagine for a moment the competitive selling advantage of a message like this: You’re in total control – you decide how much to pay at the end of the session – based on how much value you think you’ve received.
Or this: These are the results you’ll receive, but you don’t owe us a dime until you realize them fully.
I know that kind of pricing model is open for abuse. Some people just don’t value anything the way they should, so it would require careful consideration, but I really like a couple of things that it offers.
It changes the relationship between buyer and seller. This kind of offer is quite likely very attractive to the buyer because the seller is now effectively shouldering a great deal of the risk. This means the seller can and should be very picky about whom they allow to enter into such an agreement and what they require from that buyer in terms of working together. This can’t be a come on to attract people that want a deal or it will never work. This has to be a serious offer meant to remove the barrier of doubt and that comes with its own price – accountability. If done correctly, this method could allow you to attract more ideal clients rather than price shoppers.
This is the one that might be the real reason a seller would resist this model. If you make this kind of offer and your pay day really does depend on delivering the goods as opposed to writing a great sales letter, you better bring your A game.
Imagine if your created a service in a laboratory where you started to build how it would work, how you would engage the client, what support materials you needed and what price you needed to charge in order to make a profit. Now, fill this lab with ideal clients for this service and ask them to give you continuous, real-time feedback as to the results and value they are receiving as you continue to improve the offering until they are willing to pay what you needed.
In many ways, this could be the ultimate method for developing the perfect engagement for a new service.
Once you established the ultimate value through people’s realization of results, you could benchmark and prove this value in ways that would allow you to move the model to a fee based one, but my guess is the service would be far better than the one you dreamed up in the quarterly strategy meeting.
While shouldering the risk you would get better at what you do and create services that would surpass anything your competitors would dare to offer. In fact, you would have to do this, or you would go out of business.
There are pitfalls in this model, no doubt, but if you can profitably overcome and manage them, you’ll have a tool without competition.
This kind of bold confidence in what you have to offer, if positioned correctly, sends a very strong message to the potential market about your belief in your ability to deliver results.
Taking my own advice
Like a great deal of the advice I dispense on this blog, I’m taking it myself.
I am conducting a full day live and in person workshop in Kansas City in June called – How to Build the Marketing System That Is Perfect for Your Business and I am going to employ this the model of exchanging fee for value.
Attendees won’t be asked to pay anything until after the workshop is over and they get to determine how much. This won’t be a light, stripped down version – this is me, testing what my best stuff is worth, so you can bet I’ll be prepared and you can bet I’ll ask a lot of the attendees.
If you’re interested in finding out more or applying to attend (there are two dates available, but the groups will be very small) – have a look here