Last week as I was working at one of my favorite watering holes (coffee shops), I overheard a couple of entrepreneurs discussing value based services. It was a very interesting conversation. One of the debaters, who I will call Nick, felt value based clients were a horrible business model. Your prices eliminate clients, who do not have the money. Or do not value the service per the cost, so a business partnership is unlikely. The other young man, who I will call Chris, felt his services, should not be determined by his customers. It should be determine by the need or demand for his services, which will drive his cost for services. The debate got really heated!!!
While both made some very interesting point, the conversation really touch a nerve for me. I do a lot of value pricing. I can offer you hosting, improved speed (page load time) of site, security (report of any vulnerabilities…and the ability to fix them), back up (on a cloud), up time monitoring, monthly reports, search engine optimization, KLT (know, like, and trust) marketing, and an assortment of other features. All of these services cost me, with regards to time, knowledge, and sometimes money…so I do pass along these fees to my client.
As I listened to NIck detailed all the bad features of a value based services. He outlined that in some cases, your customer felt like you was only after a monthly fee. Nothing happens unless an emergency crop up… kind of like insurance policy. Nick was a strong supporter of charging maximum amounts to clients, when an issue crop up. No preventive services!!! If you have a problem, then this is my cost to fix it. If you can not pay it, then the problem is yours to fixed. You want to go somewhere else, and he was fine with that … position. Good luck…Nick is not (in my opinion) offering great customer service. He has a extensive list of satisfied customer, but his services cost premium dollars. His client list is very short, but dependable.
Chris detailed why, having peace of mind (the essence of ) value based services, works better. Chris’ s clients pay a small fee monthly. This fee will insure that if something goes wrong, or if they need a service performed, then it will be done. Chris’ cash flow and work is steady. He can continue to improve his experience level, but many of the requests are outside the scope of the contract. Chris does not mind, as he is gaining experience…which he can pass along later.
As I listened to the two young men, it was obvious that they did not identify the types of customer. This is a issue with most new or novice entrepreneurs. Value based customers (really all customers) come in three forms. You have the customer, who looks at your service as a high value and they have a high budget (or money). We love these as customers…money and respect for your services. Next you have the customer, who values your services, but they do not have a lot of money. They know your services are needed…but when it comes to paying you, well that is another story. Lastly, you have the customer, who does not see the value in your services and wants to pay the very minimum. If your customers are more like examples #2, and #3, then you really need to market your services to others.
In upcoming blog post, I will outline my KLT (know, like, and trust) marketing methods to get more example #1 clients…who value you services and has the money to pay for your services.
If you are looking for a web designer or brand developer, then I am available. I can be reached at email@example.com or 678-718-5489.
Image courtesy of Ryoji Iwata.