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Below is a transcript of this video, modified for your reading pleasure. Have a question that you'd like answered? Drop us a line!
Today, we are gonna talk about something that people are really afraid of, and that is talking about how much their services or products are going to cost. I want to give you one technique you can use that can make this conversation go much more easily.
We have a whole GrowBIG® Module we call “The Psychology of Pricing of Payments" which discusses seven behavioral economics principals that you can use. But this is one that we find very powerful that is easily explainable in a video like this. Hopefully, it can help you quite a bit.
A lot of times, when people give pricing to a client, they give them one option.
They tell their client, "Here is the scope of work. Here is the process. Here are the people who will be involved in it. And this is the way the pricing must be to match that scope. Here is how the financials can look."
The problem with giving one option to a client is, mentally, it gives them a "Do I like it, or do I not?" kind of experience. There are times when this makes sense. Many times, when we are gaining a small, potential project with a client, we provide one option and let it go. There is, however, a different way to accomplish the same idea that is more effective.
For bigger projects or projects you are still negotiating, it can be more beneficial to provide three options.
We have found that, when you provide three options of varying and increasing scope and value, you develop a mental framework of which one is right for me on the buyer's side. That is much more powerful than "Do I like it or not?", which is what you get with the one option scenario.
When we advise our clients, we help them come up with three options for their clients. The way to do that is create a landscape document, usually a one pager. You have a column for each of the options. The first, Option 1, typically is going to have the least amount of scope, but also the lowest price. Option 2 will have everything in Option 1, plus something else. Option 3 will have everything in Option 2, plus something else.
Doing this also makes it simple to write it up. If you can keep it to one page. A client can quickly look through it. You can guide them while being agnostic about what they choose. They're all great options. But it allows them figure out which ballpark they would like to be in. And they are able to pick that specific option.
Say the client has picked Option 2, the middle one. Then you can build out the scope of work, the process, the people, and the pricing with some input from them, using Option 2 as the baseline. It's a great way to Build Everything Together with a client and focus around both what they want and what you want, while providing expert guidance every step of the way.
The first is when the deals are big.
The bigger scope a project has, the more people involved, the more complicated the process, and the harder it is sometimes to move forward with a client because everybody is working to get what they want. Providing three options to a client on one simple page can get things unstuck and give you direction. Everyone can then help fine tune from there. So this first scenario is all about the scale being large and needing to move forward. This technique is a great solution, helping you point in a direction with the client.
The second is when the stakes are high, when you feel like you have to win this particular piece of work.
Sometimes this can even happen with smaller projects that you are doing for a client. Perhaps it is a 'first time' project for that particular client, who you really want to work with. Maybe it is a long standing client, but this is a 'first time' offering you've got and you've never been able to move forward with them on this type of service or project before. You really want to cement this offering, get it started, and start doing this kind of work.
Whatever the reason, when you feel like you've really got to win something, it can be really helpful to provide three options because you have a higher likelihood of getting a yes. With three options, people have the framework of "What is right for me?" as opposed to only one option providing a framework of either "Do I like it or not? Is it yes or no?"
The two scenarios outlined above are perfect times to use the three-option technique.
As always, with these videos, we hope you find them valuable, and we hope they help you help your clients succeed!
