Agency Forward

Chris DuBois 0:00
Hey everyone. Today I'm joined by Peter Giordano. Peter is a pricing expert who helps consultants, strategists and boutique firms charge higher fees by structuring pricing models that tie expertise to measurable wins. I wanted to bring Peter on because so many agency owners struggle with pricing their expertise, whether it's pricing your services, strategically, setting your rates, or just having the confidence to charge more right, agencies often leave money on the table. Peter breaks down how to fix that. In this episode, we discuss why agencies struggle to price strategy and how to fix it. When to put pricing on your website, pricing models that help agencies sell high value expertise and more. No one was asking for another community, but I've made one anyway. So what's different? The dynamic agency community is designed around access, rather than content, access to peers who've done it before, access to experts who design solutions, access to resources that have been battle tested. And right now, the price for founding members is only $97 a year. Join today, so your agency has immediate access to everything you need to grow. You can join at Dynamic agency, dot community, and now Peter Giordano,

Unknown Speaker 1:22
it's easier than ever to start an agency, but it's only getting harder to stand out and keep it alive. Join me as we explore the strategies agencies are using today to secure a better tomorrow. This is agency forward.

Unknown Speaker 1:39
What's the biggest pricing mistake Do you see agencies make? I would even remove the word agencies and just say a lot of consultants, boutique firms, individuals in this world actually mistake as it relates to pricing, and it's tangential. The reason I say that is it's this whole under promise and over deliver kind of concept. It's like a cliche, right? But I actually believe that this whole notion is under pricing your services, and here's why is it's kind of a flex to say I'm over delivering, but people buy on perceived value, and so price is that perceived value? So if at the beginning of a conversation you're already under promising, you're under pricing. I mean, logically, that works. So the first instance is your under pricing. And so even if you get past that and you over deliver at the end, I have this, this, this thought in my brain that keeps going back to like, how I feel if I over deliver, or how others kind of feel if they over deliver, or how I feel when people who have worked for me over deliver, and that's like this feeling of resent or almost taking advantage. So when I over deliver, I'm thrilled, right? I'm thrilled for the client that they got way more than they bargained for, way more than the deal was worth. And I'm really happy for like an instant, but then I like, I almost question. I'm like, Man, did I just under price myself, and I feel like this small feeling of resent, right? And if the client is also just a true gem, like they are somebody I want to work with forever, if I over deliver, they also kind of feel like they took advantage of me. And so it's like this weird, weird kind of feeling that happens at the end of it with this under promising and over delivering. So I think one of the biggest pricing mistakes that anybody is making, whether it's agencies or not, is listening to this flex of under promising and over delivering. I like that take. I'm gonna try to articulate my next question, because it just came to me while you're explaining that. So it's like,

Unknown Speaker 3:36
if you have if you can offer more value at a lower price, it makes for an easier decision, right? Because someone's able to see, like, okay, there's a bigger upside for me, easy, but at same time, when you get into this resentment side of things, it's like, yeah, but like, if we're talking client engagements, right, it's not just like, hey, you're buying this pencil or a toothbrush. It's like, No, we're actually, like, building a relationship that gets tied to this engagement. So how do you find that balance then of where, you know, pricing appropriately for the amount of value you're able to produce, will not over pricing because there is, like a market, kind of, you know, cap, I guess, for what they're willing to pay. Yeah, this also goes back to your philosophy or your methodology of pricing too. Like, are we talking about fixed fees? Are we talking about value based pricing? And that's that question relates to, again, we're going to buy the price at the beginning of this process. And going back to this notion of, is this a one time thing? Are you is your relationship with a client just one and done, or is it the intent to be long term value? And so I think that while I make the comments about under promising and over delivering at the point of accepting the price, which is the key to revenue, right, all revenue is generated at the acceptance of price, it's really hard to know at that point whether or not.

Unknown Speaker 5:00
You actually are under promising or over delivering, unless it's you, like, if you are truly saying, I'm walking into this mindset, saying I'm gonna, I'm gonna, I'm under selling this thing that's that's not like, you're gonna know walking in your client may not, but you're gonna walk into it knowing such. I'm

Unknown Speaker 5:16
not sure that actually answered your question. Hold on, let's, let's, let's, let's retry that in terms of reframe the question for me, sure. So we there's only so much I can charge for a certain service, right? Because the market has said this is about average for what everybody else is doing. I can pack as much value into this as I want, but people are still going to say, like, Yeah, but the market kind of says this is the price. And so how do you find that balance of being able to, like, add the value of making an easy decision for them, by showing there's so much more value, but still being kind of within that ballpark that they're looking to pay for price, so that, you know, you can make it still an easy decision for them. Yeah. Okay, so this goes, this is a little bit along the lines of that value based pricing and where it meets your market. And again,

Unknown Speaker 6:07
I don't think that there is one perfect model for pricing. You have to adapt it a little bit to your model. I'm much more of an advocate of adaptive pricing modeling, and that is being able to price your services a few different ways, in all honesty, because if you serve, let's say, SAS clients, right, they actually deliver their pricing in a way to their clients through this tiered based modeling. And so you almost want to speak their language. And so you can't just enter every single conversation assuming that your pricing modeling is the only one that actually works. And so if it doesn't call for this value based pricing, and it does call for more of a fixed base, or a tier base, or even a performance based you do have to adapt to the ICP or even the ACP, the ancillary customer profile that you do fit. So while it's a maybe a blanket statement that I offered, it is fitting to your market.

Unknown Speaker 7:01
So I guess let's talk adaptive pricing. Then how?

Unknown Speaker 7:07
How do you apply this in, say, like a agency, a boutique firm, right like, how you have services rather than just like software that you're putting out there? How do you actually go about setting up adaptive pricing so that you can get exactly the right structure for the right client. Well, the adaptive pricing models that takes preparation. So like, one of the secrets, I think, to pricing honestly, is preparation, like preparing yourself and already having the frameworks in place. If you can't say I am comfortably or confidently dialed in in my pricing model, it probably needs some work. And so as you work with clients of a certain niche or agencies of a certain ICP, if that is a really narrow ICP, like, let's just for example, manufacturing companies, if manufacturing between 10 to 15 million they've been about 40 years old, you're pretty dialed in as to what type of pricing structure you're going to use for that, but if there's varying degrees of any ICP, any varying degrees of your scope, any varying degrees of their revenue model, like you're starting to enter a category where you have to have a little bit more of conversations, a little bit more value based pricing, a little bit more nuance in your pricing models. And that's where adaptive pricing actually comes into play unless you haven't fully prepared, and you kind of force it down their throat a little bit, square model, right, round hole. So that's why I'm saying preparation when it comes to pricing, is super, super important, because you can adapt, right? So let's take a service like, like, marketing, yep, right. You're

Unknown Speaker 8:43
to buy marketing. It's like, you're not getting an immediate result, right there. You're talking six, nine months down the road before you start seeing, like, the actual traction from everything. So how can you within your pricing, I guess, kind of set it up so that this is perceived as an investment rather than just a cost. Yeah.

Unknown Speaker 9:01
Pricing grounds all of us, right? We deal with pricing every single day. It's a cost to us going to the groceries, right? It doesn't matter what we do. We talk about price every single day, whether you call it premiums, whether you call it fees, it doesn't matter. We deal with price all the time, and it's grounding. It's tangible. You talk about marketing now,

Unknown Speaker 9:21
I deal more with clients who sell strategy and expertise, right? These are intangible things. They're long term things, right? They are hard to pinpoint within an organization or within a company as to this is the reason for the outcome. But we all know that strategy is super important. We all know that it's the foundation for long term success, so it becomes really important to be able to speak to those kind of objections, in a sense, and particularly with with marketing, is that means we need to be able to have those value based conversations.

Unknown Speaker 10:00
Things and tie them to outcomes. So one of the things that I might suggest doing is, early in our conversations, right, figure out what are the actual outcomes and tie them to financial objectives, right? What are some of the things that you can ground people in tangibility? Right? The intangibility problem is really hard with pricing. I like to say the problem that I'm solving is strategy is hard to sell and even harder to price, and the one way, and you can go about doing that starting to defeat some of those objections, and the easiest one to start to defeat is a tangibility problem. So find ways to either break off your service into smaller, bite sized versions of it, to create more tangibility, or begin to have the value conversation that ties the outcomes to financial aspects. Now, what does that have to do with investment and costs?

Unknown Speaker 10:49
That was a long winded answer of saying that everybody's gonna think of your price as cost right off the bat. It's because that's what we're used to. So your job isn't to make them think of you as an investment. Off the bat. Actually, your job is more in line with helping them see the aha moment, or the transformation from them originally thinking it being a cost to becoming an investment. And I think the way in which you do that is through tangibility and value based conversations. It's a transformation. It's not an immediate thought. We're all too grounded in cost. So I guess if you're able to really show the value and what you're able to produce, then let's, let's get into the talk between or value based pricing versus flat based pricing or other models. I guess if you're good at showing the value right, you package this in a way that people can see it. Value based pricing might be the obvious direction to take the business right? If you here's a framework, maybe right, here's a framework. I, again, I'm an advocate more for the value based that being said, it doesn't I am also a value for the adaptive pricing model. So I think that you should have a few arrows in your quiver, in a sense. And so let's go value based. First fixed fee, or flat fees, whatever you want to call them. Let's

Unknown Speaker 12:03
talk about rules of thumb,

Unknown Speaker 12:06
if you have varying degrees of scope,

Unknown Speaker 12:09
if you operate with a larger variation of an ICP, whether that's age, size scale doesn't matter,

Unknown Speaker 12:18
or even varying degrees of your scope. Value based pricing is probably a more effective model, because you'll be able to capture the not only the delta between your value and the price itself, but you can also adapt what it is that to their saying. If you have a process that is super dialed in, what you offer the package is the package, or if you are more along the implementation route, where it is a little bit more tangible, in a sense, going with the flat fee or fixed price, might actually capture some of those efficiencies of the value based price. And when I say this, I really mean when you're dialed in, I don't think that there is a perfect model, but there is probably a perfect one for your situation and who you serve.

Unknown Speaker 13:00
Right?

Unknown Speaker 13:02
Is it more? Do you see a lot of variability, I guess, within a certain client type, and so like within one ICP, the it's more individualized, I guess, for how they like pricing. Obviously, you can't change it for every single person

Unknown Speaker 13:17
without protecting it. I guess, which I think I would actually, let's do a quick pause. Are you for pricing on your website? Oh,

Unknown Speaker 13:27
this is a really good question. I am, if it's value based pricing, I am against including it on your website, right? Okay, I would put it on your website if you are a productized offering, right? And you actually want to filter out clients from your sales conversation, because they're already walking in to the conversation with some affordability, subconscious thought, right? If they've seen your pricing, 5000 10,000 $15,000 $1,000

Unknown Speaker 13:57
walking into the conversation, they've already mentally partially agreed to that price, or at least that affordability. Now, there's a couple of nuances to this, like we can go into the decoy effect, right? How do you drive psychological behavior to purchasing a specific package? Right? If you're, if you're in a process based or a flat fee based structure, and you are a productized offer, there could be real value to having it on your website, right? One, you reduce the friction of having unnecessary sales calls. Two is, you can actually visually using the decoy effect, and sometimes it's called the popcorn effect or the anchoring effect. Right is where you're using three tiers to actually drive behavior to one of the pricing models. Having it on your website, in that sense, actually becomes a

Unknown Speaker 14:43
benefit. Gotcha for value based pricing, though, would you still put like a starting at this rate? Here are some of the variables that might influence this based off, you know, our work together. I guess, are you giving them anything pricing wise, or just saying, contact sales?

Unknown Speaker 15:01
Uh, more along the lines, it's going to be contact sales. Now, if you have to, if you're forcing me to say yes, then there's probably two ways of going about it. Is

Unknown Speaker 15:12
packages do start at X number of dollars, perfectly fine, right? Again, it's a some version of a filtering price or filtering process, but you're at least anchoring them to something. The other is

Unknown Speaker 15:25
being able to say that identify your actual ICP or identify past not past clients by name, but it's basically saying

Unknown Speaker 15:36
previous engagements have been priced at this range, and clients have received this type of outcome. So it is like the minimally, negatively anchored approach, in that sense. And again, it's fine, like, if you want to put it on there, that also could be your style, and it could also be your filtering process, because pricing is always a filter. But in a sense, when it comes to value based pricing, I would err on the side of having the sales conversations, because value based pricing requires you to have conversation and build trust and establish value.

Unknown Speaker 16:09
Okay, so now going back to my initial question, I'll see if I can kind of frame it better. In a perfect world, right? We could give every customer coming to us the exact pricing model that they need in order to, like, quickly say yes, as long as it doesn't break us because of, you know, whatever the math and everything else, right? It's going to come out the same way to the same value on the back end, I guess. But we can't actually do that because, like, your website, when are we going to tailor change the website, like the five different versions based off whatever selection they chose. You know, earlier in their the buyer's journey is there? Do you notice a lot of variability within an ICP to where it is individualized, where people will actually have their own preferences and they really want that so, like, they might actually decide faster if they see pricing a certain way, or is it more industry based, where they just accept like when we're trying to do business with these types of of companies? So this is generally how it's packaged. So that's what we're going to go with. Yeah, again, let's, let's go back to that whole strategy is hard to sell, if we're talking about the strategy and expertise right there is there's a different nuance to that. If you're buying a specific package, if you're buying a specific outcome, you already know exactly what it is that you want. I want this. I want this done. I want this implemented. It's definitely more clear cut, but I go back to this notion all the time is a lot of the agencies and a lot of the boutique firms, right? We're selling strategy, we're selling expertise, and so it's really hard, right? There is degrees. There are varying degrees of ICPs or even needs, right, different times in their maturity cycle of a company. But I guess if you were to say it's perfect, it's perfect, right? Like you get the same client who has the same exact needs, who fits the same exact problem, who calls you, right? You've been word of mouth, then, yeah, you're probably just going to be pricing your website. This is what it costs, because I already know what the value is that I'm going to provide, right? Yeah, and this is good. So a lot of the agencies I'm working with, actually, for the most part, most of them actually started with just like services, right? Like they're just offering those. And as part of my work with them, it's like, no, we're actually going to front load strategy on this to make sure that we're really anchoring the actual value you can provide and setting you up as a partner. And then we'll implement on the back end. And so now they get two different pricing tiers to be able to deliver here or or we set it up as one where it's like, you have your the strategy pricing like this is what it's going to cost to do a strategy. We can do this one off and just give you a strategy, or we can couple it with, you know, actually working with us, and, you know, for an ongoing period of time

Unknown Speaker 18:55
with that. Do you is

Unknown Speaker 18:57
there, like, some sort of, I don't know, I don't want to say like discounting strategy, but like, some, some way of structuring this where it shows that, hey, someone's actually going to get a price benefit by working with us for six months, you know, nine months or a year, versus just getting the strategy. Like, is there some way that would make the decision easier for them to move from that, like, from just getting the strategy to getting the strategy to getting the full implementation with the strategy, just purely from a pricing perspective. Like, I know we can make the argument right, like, show them all the things we're going to give them within the delivery of this. But is there something just from a pricing standpoint that would actually get them to, like, attract their their attention somewhere else? Yeah,

Unknown Speaker 19:38
selling strategy is hard. Like, we've, we've talked about this,

Unknown Speaker 19:43
one way in which we can go about doing this is actually through the relationship between pricing and offers. Like some people will actually say, call it the gateway offer, the wedge offer, right is, is there a way in which, in order for you to sell strategy or sell expertise, that you first must sell?

Unknown Speaker 20:00
Something else, you almost have to sell proof in the way in which you operate, in the way in which you work, and then you parlay that initial proof into the larger packages.

Unknown Speaker 20:10
You could also operate with the concept of, if you buy all of this today, there is a discount associated with that, because pricing is more than just the tag. It's also the bundling mechanisms. It's also the optionality that you provide. And in these conversations, particularly like strategy and expertise, is they're buying some version of a feeling, but in reality, they are trying to buy an outcome with a price that is feels very much today, because that's price out of your pocket today for a long term result. And so you can either go down what we've talked about, which is trying to make it connected to tangible outcomes, or nip that entirely and just say, why don't we start with some lower version gateway offer that then we can parlay and say, if this works like I mean, you don't, you don't need to frame it like this. But in a sense, is, let me prove it to you here, and I will then maybe roll in the price into the larger package, right? It's a part of the larger package. And so you're actually using offer and strategic pricing to be able to upsell to a larger package of a strategy work. So show the something tangible, show something a little bit more shorter term, show something a little bit more with direct impact, so that by doing that, you can actually roll into some of the strategy work and prove your value in something smaller. It also reduces your risk as well, because if you are signing up for a six month retainer or six month value based project, right, you also have no relationship with the actual client. And so this actually gives you an out as well and a risk reduction strategy as well, by just offering some of that early, lower gateway style offer and with strategic pricing,

Unknown Speaker 21:52
right? Yeah. So I call it the bridge offer. Bridge offer, perfect name for it, the just because we're trying to bridge a gap of them not having anything to getting into our core service.

Unknown Speaker 22:03
But I do. I like that idea of rolling over into into the pricing. So rather than saying, buy this one off or get the full package, it's like, Well, why don't we buy a one off? And if you like it, we'll roll you over into that other pricing. And that is a pretty good risk reduction for them, and particularly if you are selling again, advisory strategy or expertise, you can actually break off a piece of the work that you do in your larger packages and make that the bridge offer itself, right. And then, and you tell them like you can tell them up front is basically like, this is a little bit more tangible. It's a little bit more bitable. And then the sense is, this may cost $1,000 1500 2500 and I will roll this in like you can give them the heads up in advance that it is a pricing stretch, and you price it accordingly. And like, I have my own gateway offers that I actually have used as well, in a sense, which is designed as such, but it is also intentionally lower price, because it's almost a marketing expense, a proof expense, in my sense, which is because I sell strategy as well. I sell expertise. I know it's hard to sell, I also know it's hard to price. And so this is one way, one bridge, to allow them to see the value tangibly, so that we can not, I don't just have to talk about it, but I can also just show it, demonstrate, right?

Unknown Speaker 23:19
Yeah, we use it a lot for it's like, we can either take the strategy and break that off and deliver that. We've also used it for, like, website projects where it's like, hey, maybe our core offer is actually, you know, conversion rate optimization, and we're going to be working on your site over over a year. We can actually build certain pages in, maybe the entire site project as a one off. And if you really like what we delivered, then we can go into that, yeah, that workload, and so, yeah, this is good. We're aligned on this part of part of pricing too. Is, I'm gonna say this is, we all know this, and you're gonna shake your head when you listen this, right? Is, like, pricing is also experimental. It is right we It grounds us, but it's also experimental. And there are pricing touches everything. I said this multiple times, which is pricing is more than just a tag right. Pricing is connected to your marketing with positioning right. Marketing is connected to your sales with objections and revenue generation. It's connected to your offer by gateways and bridge offers and knowing what to charge and how to charge it. It's connected to finance, because it will ensure that every sale is profitable. It connects to operations right, because it will allow you to price accordingly, so that you can scale or grow or optimize without overbearing your workload. And so I just want to remind individuals that like pricing while we know it grounds us and it's about the dollar sign or it's about how much you actually charge. In reality, pricing touches everything, across all functions of your business, and is deeply connected to business strategy.

Unknown Speaker 24:50
I like that you brought up that it's an experiment, because it's something I try to express with with the marketing side, where it's like we're taking our best guess here, right?

Unknown Speaker 25:00
Stuff, what we know and what we believe, but the market decides if that's something of value and it's what they want. And so like that mentality, not getting too anchored to a price, but being able to say, Okay, well, the market's actually telling me this is the best fit, right? And I will also say this, which is, while you set the price, you don't choose the price. The market really does choose the price, but again, you have influence over this price. If it's a value based conversation, you have influence over that conversation. You also have influence over who you choose as your market, right? You also have choice as to how and when you adjust pricing. Pricing aspects doesn't just have to be the tag, but it could also be the bundling process, or even the payment terms, or even the methodology of payment and so forth, or even, what are the other aspects around pricing that you can you can maneuver. And so I really like to harp on this idea that pricing is particularly a pricing model or a pricing strategy is way more than just a tag. And yes, you influence it. You try to set it, but your customer sets it, that being said, you still influence it, right? So let's talk

Unknown Speaker 26:13
raising rates for current clients.

Unknown Speaker 26:18
Are there strategies you have around around around that I'm glad that you said that raising rates for current clients, because I see all the time, just double your rates, just raise your rates. And I've thought about this a lot, which is, there's only two people who are ever actually affected by raising rates.

Unknown Speaker 26:39
It's your current clients and it's you. It's not new buyers, it's not lurkers, it's not past clients. But I feel like when we at the collective we talks about raising rates, it's like just raising rates for everyone. And I think that that's actually not true. It's really just your current your current clients. What I would say to people when it comes to raising rates is, if you hesitate, or you're you're afraid to lose clients. You're not alone, right? You are, you are not alone. This is a this is a normal, this is a normal thing that everybody deals with. Raising rates on your current clients requires you to do one thing, and that requires you to add additional value before you raise rates.

Unknown Speaker 27:19
One thing I would say, Please do not do when you talk about raising rates is, do not, by any means, blame it on costs. Do not blame it on the market. Do not blame it on your inefficiencies, right? That puts you in a negative position, right? If you talk about raising rates, you almost want to make this like a celebration thing. You want them to celebrate it while obviously it's more money out of their pocket, they want to happily do it. And in order for that to actually happen, is you need to demonstrate more value that is provided than the raising of those rates. And I'm going to be really clear on that, is

Unknown Speaker 27:54
if you raise your rates by 10% you must show more than 10% of value, otherwise you're just basically raising everything, and they're getting the same amount of value that they did before, just at a higher rate. They're not losing money. They're still getting the equivalent value, but there's no actual efficiency gained. So a few rules when it comes to raising rates, know that it is just your current clients that really affected. Two is, please don't base it on cost. Three is, if you are going to do it, make sure that you are increasing the amount of value more than the actual amount that you're raising rates. And talk about it like show them why be able to point into and to do that and to prove it right. So as we start to wind down here, yeah, what's, what's the, what's that? One big Domino, if they just knock this over. Everything else with pricing becomes easy.

Unknown Speaker 28:43
Pricing is never purely easy,

Unknown Speaker 28:46
or else I'd certainly be out of a job.

Unknown Speaker 28:49
I think here's the thing is, if you're only looking at your pricing strategy as how much you charge, or if you're only looking at your pricing strategy one time a year, you're underselling yourself. Let's go back to the first thing that we even said, Right? Is under promising and over delivering. I also don't want you to under promise to yourself, right? You have a business to run, and pricing touches everything. Pricing is the acceptance of is the acceptance point to revenue. And if you're not really looking at your pricing, you're not tweaking it. You're not thinking about it, you're not looking at the metrics, and you're not even considering your confidence. Right is you actually have to look in the mirror as well. I think the domino that needs to that you need to really focus in on, is that you can't just look at it one time a year. Said it, forget it. You really need to do this an adaptive mentality, and it's time to take a look at it today. It's probably time to take a look at it next month from now, and it's time to talk to others to really help understand what it is that you're missing,

Unknown Speaker 29:47
right?

Unknown Speaker 29:49
Awesome, Peter, this has been great. I got two more for you. First question being, what book do you recommend? Every agency owner should read the book that I always recommend.

Unknown Speaker 30:00
Meant is called Super thinking. And the reason why I call it's called Super thinking, it's a book of mental models. And it's not just for any agency. It's for anybody who really needs to think, make decisions and be more strategic about their work. And the reason why I say this is because mental models, just those mental heuristics, really allows you to draw the breadcrumbs to even things that you don't know, that you don't have tangible expertise in. So super thinking is an amazing book that I always suggest anybody read if you want to think sharper. Who's that one by it's actually, look at this. I have it right here, super thinking. It's Gabriel Weinberg and Lauren McCann. And this is the, I believe the founder of DuckDuckGo,

Unknown Speaker 30:44
you'd find I asked that question just so that I can add to my reading list. So hopefully listeners at this point have started their own reading list. But last question, Where can people find you? People can find me on LinkedIn. I'm most active there, and the other location is Peter jordanal The third, all spelled out.com

Unknown Speaker 31:05
Peter Donald the third.com and it has my work, my writing, and all of my business models and business strategies and business access.

Unknown Speaker 31:14
Awesome. All right, Peter, thanks for joining. Thank you, Chris. I appreciate it.

Unknown Speaker 31:22
You. That's the show everyone. You can leave a rating and review, or you can do something that benefits. You click the link in the show notes to subscribe to agency forward on sub stack, you'll get weekly content resources and links from around the internet to help you drive your agency forward.

Unknown Speaker 31:42
You

Transcribed by https://otter.ai