Ending the cycle of fear-based pricing with Casey Brown

Speaker 1:

Welcome to the Agency Management Institute community, where you’ll learn how to grow and scale your business, attract and retain the best talent, make more money, and keep more of what you make. The Build a Better Agency podcast presented by White Label IQ is packed with insights on how small to mid-size agencies survive and thrive in today’s market, bringing his 25 plus years of experience as both an agency owner and agency consultant, please welcome your host, Drew McLellan.

Drew McLellan:

Hey everybody, Drew McLellan here from Agency Management Institute. No surprise, I am back with another episode of Build a Better Agency. Super excited about this guest and the topic. It’s going to sound boring and dry, but it is not, it’s not only not boring and dry, but it is really critical to your business. So I’m really excited to share her wisdom with you. I think you’re going to find her both brilliant and delightful. But before I do that, of course, I do want to remind you of a couple of things. So we have some amazing workshops coming up. We have two great workshops coming up in July. So we have the RE:Think Innovation Workshop so you’re going to learn a framework so that everybody inside your agency can be innovative and be an innovative thinker. And I don’t care if they’re an intern or the CFO or an account service director or a creative director, or anybody in between, there is no reason why everybody cannot be coming up with big juicy ideas on demand.

We did that as kids and we forgot how to do it. And so our guest instructor, Carla Johnson, who is brilliant, was a speaker at last year’s summit and wrote the book, RE:Think Innovation has a framework that she’s going to teach us. We taught this workshop a couple of years ago and that got rave reviews, and so we are doing it again. It’s July 11th and 12th here in Denver, so we’d love to have you join us. And then a couple of weeks after that, Mercer Island Group is back with Selling with Strategic Insights Workshop. This is a workshop they have taught many times before. If you have attended, you know how amazing it was. We have agencies, this is just what’s been reported, agencies that have attended that workshop and applied what they learned have made more than $100 million in new AGI just by using the strategic insight methodology that Robin and Steve and Lindsay and their team have developed.

After watching hundreds and hundreds of agencies present, they have cracked the code on A, how can we get out of the place where only the agency owner can be strategic? And B, how do we explain to clients and prospects our strategy and our thinking behind that strategy so they really can come along with us on that journey and see our thinking and why we came to the conclusions that we did? So that workshop is July 24th and 25th, also here in Denver. You can register for both workshops or read more about them by going to the website, going to the How We Help tab, scrolling down till you see workshops, and then it’s RE:Think Innovation is the first workshop July 11th and 12th, and the Selling with Strategic Insights is July 24th and 25th. So we’d love to see you there for one or both of those great workshops. July’s a great time to come to Denver, so please join us.

Let me tell you a little bit about our guest. Casey Brown is a pricing expert. What’s all she’s done for most of her career is help corporations and now privately held companies think differently about their pricing and adjust their pricing to make sure they’re not leaving money on the table. And she is brilliant. She’s going to talk about why we self-sabotage our pricing, how we can change how we think about pricing, the realities of the economy today and the impact that has on pricing. So we are going to talk about all of those things over the course of the next hour, and I think you’re going to find it really, really helpful. If you do not have a pen and a piece of paper or you don’t have some way to take notes, you’re going to want to grab something because she is about to drop some really great knowledge on us. So without any further ado, let’s get to that conversation. Casey, welcome to the podcast. Thanks for joining us.

Casey Brown:

Thanks so much for having me, Drew.

Drew McLellan:

So tell everybody a little bit about your background and how you came to have this depth of expertise in sales and pricing before we start chatting about those topics.

Casey Brown:

Sure thing. Well, the short answer is an accident. I actually have a background in engineering and I double majored in Spanish, and then I got a business degree. So I really didn’t know what I wanted to be when I grew up, but engineering was fascinating and fun and interesting from a data perspective, but I love people and I have a big personality. So ended up finding my way into a more commercial role as a Six Sigma Black Belt at GE, and that was a rotational program, and I did rotations in sales and marketing, and then I landed in pricing and just fell in love with it. I find it to be the most fascinating intersection between data and psychology, people and process, art and science. If you ever read a pricing textbook or an econ textbook or a business textbook, it sounds very dry and clinical like there’s this supply curve, demand curve with price drives everything. The real world is a lot less clinical than those books make it seem. It’s a lot more nuanced and interesting.

Drew McLellan:

Yeah. So you also today, now though, you don’t still work for GE?

Casey Brown:

No, no, no, no. That was 25 years ago, right? So I fell in love with it, spent a lot of time in corporate America doing it, and then about 15 years ago, decided to bring what I had learned in large corporate settings around good pricing strategy and execution, and bring it out to the market we now serve, which is the small and medium-sized privately held company, who didn’t generally have those resources available.

Drew McLellan:

Right. So when you started working with small to mid-sized companies, and I know you do a lot of work with agencies, and as you know with our audience, that’s the only people who have any interest in listening to this show, what surprised you? Because you went from the corporate pricing model into businesses that are privately held, closely held, that the owners have a very involved role day to day and a very sort of emotionally committed role day to day.

Casey Brown:

That’s right.

Drew McLellan:

What did you discover is true about us that wasn’t true about the GEs of the world?

Casey Brown:

Sure. Yeah, I think that’s a great question, and you really already hit on it a little bit in the question, which is the emotional commitment. Most of our clients are still founder led, so whoever started that company in their garage of their basement and scraped by the first couple of years, and even if it’s a thriving, successful business now, they were there for every bump and bruise and every cut and scrape. And I think that history, those battle wounds of a founder inform very much the pricing complexion of the business. And I find that goes one of two different ways. One is that because the founder and owner and leader remembers what it was like to barely be able to pay the bills, they sometimes operate with pricing fear, and they are what I would call the CDO, the chief discount officer.

They’re so afraid to let any dollar go by that they are the one that has the least amount of rigor when it comes to pricing decision making, and often their teams are the ones that sort of prop them up. The other end of the spectrum, which I see also quite a lot, is because that founder, owner, leader is the one that bled and sweated for this business from the beginning, they have a deeper understanding of the value and more pride in it that actually props up their rigor and props up their discipline, and they would never discount their value because they believe so strongly in what they do and what their team does, and sometimes they have to fight their team in the other direction. So I’ve seen both extremes that I really didn’t see any of that level of emotional connection in the corporate scene.

Drew McLellan:

So what I find in the work that we do, and we see full financials of 250, 300 agencies on top of all the other folks we just talked to is most of them are a blend of what you just described. They’re proud of their work.

Casey Brown:

Of course.

Drew McLellan:

But they cannot seem to get out of their own way when it comes to pricing. And even if they go into market with reasonable prices, we talk about best practices, we talk about how to take the billable hour and figure out how much time you think it’s going to take and then multiply it by 1.3. And we have all kinds of tricks and they know them all, and they sit down in front of that prospect and they put the piece of paper in front of them and the prospect goes, oh, yeah, I really want to do this, but I don’t have $50,000. I only have 30.

Casey Brown:

Right.

Drew McLellan:

And the very next sentence out of the owner’s mouth, and it’s almost always the owner is, okay, we’ll do it for 30.

Casey Brown:

Yeah. Yeah.

Drew McLellan:

What the heck?

Casey Brown:

That’s a question for the ages. There are so many… There’s so much there to unpack. The first thing is, I want to go back upstream a little bit because what I see in the agency world a lot is that when they put 50 in front of the client and they said they can only afford 30, the right number was actually 70 in the first place.

Drew McLellan:

Right. Right.

Casey Brown:

They pre-discounted themselves before they ever sat in front of the client. They talked themselves out of, they take what sort of magical thinking about, well, when they do the math on how much time it’s going to take, and they figure out 60 hours of this person’s time and 40 hours of this person and the blended rate, and they do, they get to 70, and oh, that’s too high. I don’t think that’s going to fit, and they start magic thinking, no, it’s not going to take 60 hours, they’ll do it in 40, and then whenever they sell it for 30, it still takes the 60 hours.

So now, their profitability is significantly underwater. So there’s a couple of things. One is don’t pre-discount because then you’re getting two rounds of discounting. You shoot arrows at yourself and then you let the customer shoot arrows at you. The other thing is very often when I can only afford 50, the automatic response is to take action on the price feedback, when we actually don’t have any idea what that price feedback even means. First of all, is that real or is that just somebody trying to get a better deal?

Drew McLellan:

Yeah. Right.

Casey Brown:

Is it a tactic?

Drew McLellan:

They’re connecting. Right.

Casey Brown:

Correct. Exactly. Because they have a job to do, they have employees to pay for and other things that they have to, they have stretch their budget and their costs are going up and everything else. And so it’s in human nature, absolutely. But absolutely also a part of business that everyone always wants a better deal and they will try to get it, and some of them will try very, very aggressively, and some of them will try more passively, but if you’ve ever heard so-and-so down the street can do it for less. I’ve got a competitive quote I want you to match. Is that your best number? Can you sharpen your budget or pencil the size of the budget?

Drew McLellan:

You’re more than twice as much as all the other proposals.

Casey Brown:

I can’t believe, all the things, right? So the very first step, the very first action to take in the face of price pressure is questions, not discount. The thing is with agencies, what your audience that is listening to this podcast sells is not something that’s done in three minutes on Amazon. It’s not like I put it in my cart, it’s a relationship sale based on deep understanding of the value. This means if you say, I understand you’re telling me you only have a $30,000 budget. Do you mind if I ask some questions? No one’s going to say, “No, you had your one shot. I’m out of here.” Right?

Drew McLellan:

Right.

Casey Brown:

You’re going to get to ask the questions and what we find in those questions, we can try to uncover if this is a tactic or if it’s real, and that could be a subject of one day long conversation between us. So we don’t have time to get into all those things, but I will say when you find out it’s real or you believe there’s a credible threat that they actually will go away if you don’t discount, then the next thing to consider is that to discount without changing the scope is the really, really… It’s not only terrible for profitability, but I want to inject another reason not to do it, which is it hurts trust.

Drew McLellan:

Right. I talk about pricing integrity all the time.

Casey Brown:

100%.

Drew McLellan:

That what you basically are saying is, I was trying to screw you before.

Casey Brown:

And you caught me.

Drew McLellan:

And you caught me.

Casey Brown:

And put my hands in the cookie jar, and now…

Drew McLellan:

Right.

Casey Brown:

Yes, absolutely. If the …

Drew McLellan:

Because the prospect can’t imagine you would do it for a loss. Therefore, you must have been trying to take advantage before, right?

Casey Brown:

That’s right. That’s right. It hurts trust. It tells the customer you’re trying to get away with something, and this is where some kind of give to get, whether it’s a de-scoping and de-scoping is the easiest and most obvious, but there’s other ways. I need a 100% of the payment upfront. I need you to write a testimonial for me that I can use on my website if I’m going to offer that discount. I’ve been trying to get into these other three divisions of your corporation and I can’t get a meeting. If you can help me get a meeting, then we can talk about a concession. It doesn’t always have to be the scope, but if there is no give to get, you are killing trust with customers and you’re killing your profitability.

Drew McLellan:

Yeah. Oh, gosh. I would underline and shout that all day long. It drives me insane.

Casey Brown:

Yeah. Yeah.

Drew McLellan:

So let’s talk about when the client says, sorry, I only have 30. What are some of the kinds of questions that we should ask to assess whether or not it’s real or it’s a tactic?

Casey Brown:

Well, this is the classic consultant answer. It depends.

Drew McLellan:

Right.

Casey Brown:

Turn it right on my business card, I’m allowed to say that. No, I mean, of course, it does.

Drew McLellan:

Sure.

Casey Brown:

Because I think there’s a lot of things it depends on, it’s very situational, but in a general sense, you can ask questions like, is this a question of budget? Or I would ask questions designed to get at if this is a budget thing or they’re considering an alternative at that price. So what is it that you see in my proposal that isn’t a fit for you at that price? Is there anything that we can live without? Another one, and especially if this is in comparison with competitors, like you mentioned the you’re more than 2X what the competitors would charge. I would say, let’s just imagine we could wave a magic wand over these two proposals and they were the exact same price, which one would you choose?

If they don’t say you, then you do not have a pricing problem, you have a different other problem. The other guy has sold them something or convinced them of something that you don’t offer. But if they say, I’d go with you, then the next question is why? What is it about what we’ve proposed about our firm or how we work or our services that have you answer that way? Because I want to make sure that when I come back to you with a response to this request that I don’t take away anything that’s really critical to you. And then this is the really important part, shut up and listen. Because one of the most common things that happens when people get nervous and uncomfortable, and most people are not comfortable having price conversations. When we get uncomfortable, we do too much talking. We fill in the space. So let the customer tell you why they’d choose you over the other guy if the prices were the same.

You’re not saying you’re going to match it, you’re just asking them to engage in a thought exercise. And then when you’ve heard them out, you might hear a nugget in there that gives you some confidence that you can hold the line. If the other guy can’t do it on time, then it doesn’t matter how cheap they are, for example, right? The acronym that I like a lot, I have it on a post-it note here in my monitor. It says W-A-I-T, wait, and it stands for why am I talking?

Drew McLellan:

That is awesome.

Casey Brown:

So one of the most powerful responses to an objection is silence. Tell me more or what were you thinking? Help me understand. Just some questions to get them talking more, and you will uncover a trove of information that will give you a sense of how much pricing power you really have.

Drew McLellan:

Yeah. Yeah, that’s so true. We get anxious and we’re so hungry for the sale that we just trip over our own words to talk on top of ourselves.

Casey Brown:

That’s right. And there’s another big problem I see in professional services firms like the agency world, which is we start to get compared against someone else. And then we want to, I call it the fruit salad approach. Let’s make sure we’re apples to apples and we get all very ticky-tacky about comparing proposals, and that may not be remotely the right approach because it depends on what they want and what they need. And so we match their price or we meet in the middle or we apples to apples, or we talk them to death with diary of the mouth about how much better we are. This is open, our mouth is open, our ears are closed, and we need to be actually engaging in dialogue, not monologue. So it’s not the time for us to start telling them how great we are, it’s time to start hearing from them what they value.

Drew McLellan:

Could I agree more. So let’s go back to the first discount, which is we do the math, we see that it’s going to cost $70,000 and we go in our own head, yeah, they’re never going to pay that. Where the heck does that come from? Because we don’t know. In most cases, the client hasn’t given us a budget, otherwise we would’ve built a proposal to the budget and then given them options higher or lower. So assuming we haven’t been given a budget or we’ve been given a big fuzzy budget, we understand the scope of the work that the client needs to really deliver the results that they’re asking us for. How do I get from A, there’s no way I’m going and asking that client for $70,000? Two, damn straight, we are worth $70,000. Let’s do it. Let’s go.

Casey Brown:

Well, the gap there is generally not value, its confidence. And I agree with you that even in the scenario that I described earlier, which is like CDO, chief discount officer, that it’s not because they don’t believe in their value and they’re not proud. They do believe in their value and they are proud and they’re afraid, and the fear is really driving their decision making. And so I believe this is about examining our own mindset in large part and where does it come from? And so let me just tell a quick story to illustrate this. A lot of times when we’re doing training programs, we’ll ask the sales folks or the business leaders, what kind of feedback do you get from customers? Do you hear that your prices are too high or do you hear that your prices are fair or too low? And universally, everybody says, that’s all we hear is our prices are too high, our prices are too high.

First of all, some of that is BS as we talked about. It’s a tactic, but that’s what they say. That’s all they hear. And then I say, have you ever put a proposal in front of a customer and told them about what you’ll do for them and the value you’ll create for them and told them the price and they’ve said, okay, that sounds good? And the answer is always yes, I’ve had that experience. Maybe I have it quite often. Maybe I have it every day, but I certainly have it sometimes. And I would say that is data. Those experiences are data from your customers, signals from your customers that your pricing is fair or competitive or realistic or possibly too low.

We get data that our prices are fair, too low, but we don’t pay attention to it. It’s rooted in human psychology. We’re wired for the negative, this thing called negativity bias where we give too much weight to negative events. And so customers complaining about price, even if it’s the exception, is what we think is of is all we hear. And the reality is we do get data from our customers that they value us and they’re willing to pay us. And you map that reality together with the reality that it is in the nature of the customer to ask for a better deal, even if they thought it was going to be 2X, and use those two realities to mine for some confidence to say, damn straight, it’s 70,000 and worth every penny and you’re getting a deal of a lifetime if you get to work with us. [inaudible 00:20:18] my exact words selling it, of course, but…

Drew McLellan:

Great.

Casey Brown:

… that would be my exact words, talking myself up before the pitch meeting.

Drew McLellan:

Yeah. So I think one of the challenges, I’m curious if you think this is the case. I think one of the challenges is that in agency world, most agency owners don’t love sales, not their thing. They grew up, they’re a copywriter, they’re an art director, they were on the account service side, whatever it is, but they don’t love sales. So their pipeline is sometimes a little thin, which creates that sort of scarcity mindset, which then feeds the, I got to get this sale and I got to get it at whatever price I can get it. Because a dollar’s better than no dollar.

Casey Brown:

Right. 95 cents is better than nothing. I’d rather have a dollar, but if I got it discounted, I’ll get it. Yeah, absolutely.

Drew McLellan:

Right. So as part of the problem even further up the chain, which is I don’t have enough at bats to be choosy and be more firm and comfortable in my pricing because when I get a shot, I got to get it. I got to win.

Casey Brown:

I absolutely see that being the case. And there are a number of different industries we work in where it’s essentially a business built around a very specific skill, very specific knowledge. It’s a technician of us… It’s a craftsman or craftswoman of a craft, and in this case, that marketing and that agency world who is now the owner of it. But what drew them to it is that they’re a creative at heart or there’s something else that they love doing, and it’s not necessarily selling the thing. The challenge that creates is as you shared, thin pipeline and some scarcity mentality and some desperation around pricing. The other thing is, and I’ve done a lot of work to try to understand and help creatives, especially because I believe that this is an audience that tends to undervalue their own work even more than, I don’t know, widget manufacturers, everybody has pricing challenges.

But if you are in a creative space, my experience is that you experience more pricing challenge than others. And I think some of that is the subjectivity of the value of creative work. And another reason I think this happens is that when you feel very personally connected to the craft, there are some people that have almost head trash around like it’s greedy or gouging to charge for this thing that I… It’s almost like they feel like they’re selling out on the purity of their craft if it becomes about the money, and it’s like, no, I don’t care, I mean, Picasso sold his stuff for gajillion dollars, not because he needed the money, because he believed that it was worth it. So I spend a lot of time when we’re working with creatives to help them understand what do they… Because sometimes they think honestly, they get down to it, they don’t think they deserve it.

Drew McLellan:

Yeah, that’s interesting.

Casey Brown:

And they don’t love doing it. They don’t love selling. They’d rather hurry up and get the sale closed so they can get back to the doing. There’s a challenge with this sort of the technical seller-doer or the analytical seller-doer, the creative seller-doer. The fun part of the job is not the selling, it’s the doing. So they want to minimize that time. And what’s also fascinating is there’s a sort of psychographic reality that sometimes the very thing that makes them so exceptional at the doing side of the agency is exactly the thing that works against their confidence and comfort with selling, which is having maybe some “confrontational pricing conversations” with customers. So they just hurry up and get it over with so we can get back to doing. And if we just do enough of it, we’ll be fine.

Drew McLellan:

Right. It’s almost a volume game. And in reality, an agency life as you know we’re not a volume sport. If an agency is selling to the right size client, two or three or four good size sales a year, that’s a great year. I’m going to grow by 20%.

Casey Brown:

Especially when you consider that in the agency world, what you’re selling in to some degree is time, right? And whether you do that on an hourly basis or fixed fee regardless, you’re trading the time of a talented group of people in your firm for money. And so it isn’t this infinitely scalable thing. You’re not a SaaS company where we just send out another copy of the software. The more you sell, the more you work, the more you sell, the more you work. And I would tell them if you see this differently, Drew, but what I see a lot is the most price sensitive customers are the neediest ones. They’re the biggest pains. They’re the ones that suck up disproportionate organizational resources, abuse your staff, don’t pay you on time. You see their number come up on your caller ID and you hit the red button like, no, I don’t have time for this guy today. He drains me. Right?

Drew McLellan:

Right.

Casey Brown:

The best customers that you love working with tend to be the least price sensitive ones anyway, because they really value the unique offering that you bring.

Drew McLellan:

Yeah. Yeah. That is so true.

Casey Brown:

So it’s a quality over quantity thing all day long in the agency world when it comes to customers.

Drew McLellan:

Yeah. We talk a lot about their target should be, and I’m curious how you with pricing, if size matters, and we’ll talk about that in a second, but we talk about the ideal client is somewhere between five and 15% of their adjusted gross income, like less than 5%, too small won’t value it, sucks up a ton of time. More than 15%, puts you at risk. They’re a gorilla. They lead you around by the nose. And so again, if you sell two or three of those, that’s about all the growth that an agency can successfully manage year over year without crushing the organization.

Casey Brown:

I a 100% agree. And I will add onto that something you didn’t say, but you may also counsel, which is to take a look at that tail, take a look at that bottom 5% of your revenue. It’s often a ton of bottom feeders. And I mean, I don’t mean that in an insulting way to them as human beings, but when it comes to what they do and the impact they have on your agency and the amount of time that they take up, that there is a need to continue to always upgrade your customer list. And if they’re tiny and great customers, great, but if they’re tiny and bad customers, let them go bother the competition for a while. It’s time to become an alumni of your agency.

Drew McLellan:

Right. Yeah. And that’s so hard for agency folks to do. They have legacy clients, they’ve been with them 20 years, the agency owner or the team values the loyalty and the longevity and isn’t paying attention to profitability.

Casey Brown:

Right. Well, and what’s so common is that we’re doing in the agency world, some kind of multiplier, you mentioned the hours and then the 1.3 and there’s some math around the hours. And their truth of the matter is there are costs to serve customers beyond just the hours that someone’s spending.

Drew McLellan:

[Inaudible 00:27:12].

Casey Brown:

And it can be a sort of psychic cost, it can be a headache cost, it can be a… And the other thing is we tend to underestimate the amount of time that those tiny little customers take up. And so they, oh, it’s just five minutes, five minutes is never five minutes.

Drew McLellan:

Right. I want to take a quick break, but when we come back, I want to talk about, you talk a lot about, okay, it’s great to have pricing, a great pricing strategy, but it’s also about execution. And given the economy that we’re in today and that we’re facing, how critical that I want to talk about that, but I also want to talk about the legacy clients that we were just talking about. And when somebody is used to paying a dollar an hour and we’re now at a $1.50 an hour, what does that conversation look like given our emotional connection to these people, et cetera, et cetera? So let’s take a quick break and then I want to jump into those topics.

Hey there, just a quick interruption. I want to make sure that you are aware that you are cordially invited, not just invited, but cordially invited to join our Facebook group, our private Facebook group. All you have to do is go to Facebook and search for Build a Better Agency, and you’ll find the Facebook group. You have to answer three quick questions. You have to put in the agency URL. You have to talk about what you want to learn from the group, and you have to promise to behave yourself, and that’s it. And then we’ll let you in and you can jump into the conversation with over a thousand other agency owners and leaders. And there’s a robust conversation happening every day. People are sharing resources and best practices and discussing everything from work from home policies to maternity and paternity policies, to biz dev strategies. So come join us and jump into the conversation. All right? Speaking of conversations, let’s head back.

All right, we are back with Casey Brown and we’re talking about pricing. So let’s wrap up the loyalty long-term client. They’ve been with us forever. They help me start the agency. I mean, there’s so much emotion around those relationships. And again, I mean, I have a lot of those relation, I mean, I get it. And you tend to grandfather them into pricing and doing other things. How should we be thinking about pricing in relation to those clients?

Casey Brown:

Well, this is a little bit of a thorny question because every business is run by a human or set of humans, and like all humans, we have relationship and that’s valuable. So I would say there’s a purely pricing strategy answer, which says, if that does not make sense for them to be your customer, then you should cut them loose. That isn’t the real world that we live in because of the scenario you just laid out. And even in our business and we’re pricing consultancy, I do some pro bono work for some entrepreneurs that I really want to help get out of the gate. So I will never tell someone that they cannot choose, especially, I mean, heck, you’re the owner. You get to do whatever you want. You can choose to continue to engage with low profitability customers. I just think that we need to do it with our eyes wide open.

I think that it is, there’s probably too much work going for them, too much time going to them. And I think that there’s usually not enough boundaries around that. And so for example, I said I do some pro bono work. I used to do… It used to suck out a lot of my time and now I have a boundary around it which says I can take on one client in this fashion once per quarter. We have an application process, would love to work with you, apply, go. And so if somebody approaches me that wants to work with me, I say, “Hey, I’d love to work with you. We’re full this year.” The idea being that you can do heart work and if your heart work is continuing to work with agencies or clients that have been with you 20 years because they’re loyal, then by all means do that. But recognize that you’re doing essentially a pro bono favor for someone or a deeply discounted favor for someone. Make sure that’s worth it and keep it in a tight box.

Drew McLellan:

Yeah, and do the math, know what that’s costing.

Casey Brown:

Yes. Yes.

Drew McLellan:

What you’re paying to do that. Yeah.

Casey Brown:

Right. And then if you’ve got Sandra in your office, who’s one of your most valuable employees, who’s taking 15 hours of her week to serve those kind of clients, what’s the opportunity cost of 15 hours of Sandra’s time? So really, really have your eyes open about it and then do it if you want to.

Drew McLellan:

If I decide that I don’t want to, that I really do have to have this conversation with them and they’re at some sort of legacy pricing, what does that conversation look like?

Casey Brown:

Yeah, well, so this is the same answer I give when people say, how do I fire customers? Which is the best way to fire people is to raise their price. And in this case, you’re not trying to fire them, but it’s the same outcome, right? And some of them may go and some of them may stay. And so I think it’s like all price increased conversations or all price increased notifications. It’s honest, it’s fact-based, and it’s human driven. And for goodness sakes, it’s brief. Don’t go on and on. Back to the why am I talking thing, right?

Drew McLellan:

Right.

Casey Brown:

So I think Sam loved working with you over the past 20 years. You’ve been a huge part of this agency’s growth and it has been fun to collaborate with you on growing your business through X, Y, and Z. And as you know in the time we’ve been working together, this is what’s happened in our firm to provide more and more and more value to you. And because of our relationship and because of the value that we place on the partnership with your company, we’ve protected you from a lot of the price changes that we’ve had to pass along to other customers over time. Unfortunately, at this point, to deliver the level of quality and service and excellence you’ve come to count on from A, B, C agency, a modest price increase is necessary at this time, and we’d love to keep working with you. We’d love, love, love to keep working with you, but instead of a dollar, it’s a $1.50.

And if you have any questions, we can hold that dollar till July 1st, that’s another action we want to take to protect this partnership. If you have any questions, I’d be happy to answer, we’d love to keep working with you. I mean, that’s off the top of my head. But something like that, which is essentially rooted in fact, rooted in… Our costs have continued to go up. We’ve invested in upgrades in technology equipment, service, and your valued partner. And if you can play inside our rules essentially, I wouldn’t put it that way, but if you can make it work on your side, we can make it work on our side, but we can’t continue to make it work at the old pricing. We cannot deliver the level of service and quality you count on. The other option, I suppose as always, I mean, this depends on your ability to do this is what can you de-scope them to. It says if $1 is all you got, here’s what we can do for you. We can no longer do X and Y. We can only do X.

Drew McLellan:

Yeah. So let’s shift a little bit to pricing strategy versus pricing execution, especially in a moment. The economy shifts and it’s a constant pendulum. So in my mind, while we are certainly mindful of the tightening of the purse strings in the economy, at least here in the US, some of our listeners are in other parts of the globe and they may not be experiencing it, but I know that a lot of times what we’re experiencing is also being experienced globally. 2023 is a year where a lot of clients are tightening their belt or we’re seeing a lot of the elongation of sales cycles. And we are even seeing, we were just with a group of agencies and we were talking about how several of them have been awarded work, but they’re waiting for three months to get the first project going, right?

Casey Brown:

Pausing the project. Yeah.

Drew McLellan:

Everything is just taking forever.

Casey Brown:

Right.

Drew McLellan:

So pricing execution becomes even more critical because we’re waiting longer for every dollar. So let’s talk a little bit about that and how do I protect margins in an economy like what we’re doing right now?

Casey Brown:

Right. Well, yes, and I’ll just add one more mention in the situation we’re in, we’re still also coming out of the highest inflation any of us have seen in our adult lifetime. And it’s still, we are now in what the economists agree is entrenched inflation, not transitory. So it’s not what it was maybe a year ago in the height of it. But we are still, the days of one or 2% inflation for year on year on year are over at least for the foreseeable future. And that is certainly affecting the agencies and their profitability, but it’s also affecting all of their customers and their profitability, which is part of why some of these sales cycles are slowing down. Part of why some of these projects are getting paused and budgets are getting cut a little bit is everybody’s got more to spend on healthcare and employee hiring and fuel and infrastructure and raw materials and everything else.

So what do we do or why do I believe that the war is won and lost in execution? Well, I think, and I just have informed… This has been an opinion, I’ve becoming more and more strongly convinced of the longer I’m in business because people always call us. Clients call us up all the time and say, “I need a better pricing strategy. We’re not making enough money. Help us with strategy.” And I have seen over 25 years of focusing in this arena of pricing specifically, strategy isn’t the biggest gap. In other words, the pricing game is not won by the generals sitting in the war room drawing up the maps, it’s won in this sort of hand-to-hand combat by the salesperson directly communicating the value, directly communicating the price, and then defending it when the customer pushes back. And so it’s that sort of last mile, if you will, of the pricing journey where the biggest amount of leaks happen.

And when we shore up that last mile and make those folks in that sort of hand-to-hand combat with the customers around pricing, make them better equipped with the messaging methods, tools, and most importantly the confidence to succeed, then that has a much bigger profit impact than some perfect strategy. What I’ve found over the years is that companies spend a lot of time putting together or maybe a lot of dollars putting together a great strategy, but if the people whose job it is to sell that to customers, if you don’t have their hearts and minds, they’ll march right around it and go discount anyway. I say it’s like putting the hands of the keys of a Ferrari in the hands of a toddler.

Drew McLellan:

Right.

Casey Brown:

Let’s teach the kid to drive, we get a [inaudible 00:37:48] get them there. A well executed mediocre strategy is much better than a mediocre executed great strategy.

Drew McLellan:

So how, if I’m the agency owner and I’m the toddler, how do I learn how to be better at execution?

Casey Brown:

Yes. Well, I think, whether you are the toddler or you’re managing the toddlers in this analogy, I believe that preparation is essential, especially if you have a mindset of fear. And I mean this can be things like I’m preparing what my opening sentence is going to be. I’m preparing… A big fan of the idea of a price objection FAQ doc for internal purposes. What are all the things that we’re going to hear from customers? What are all the kinds of objections we get? You don’t get 10 million different objections, you get 10, they blow down a handful of things over and over again.

This is outside my budget, so-and-so’s cheaper. This is more than you charged me last time. My business is down 30%. What can you do to help me out? Whatever it is, they’re not a bazillion of those things. There is a right… If you take the time and thoughtfulness and pull together your troops, to continue the war analogy, I suppose, there is a right best organizational answer to each of those. And if you have 10 people on your team selling, including you, the agency owner, you do not have 10 people equally gifted in the art of value message creation. You just don’t.

Drew McLellan:

Right.

Casey Brown:

You have some people who are awesome at it and some people who really freak out and struggle and panic and discount. And that might be you the owner, it might be your people. In any case, make sure number 10 is just as arm with number one. So this is about creating that language and then practicing it so it sounds natural and fluent because you know and I know human nature well enough to know if we haven’t done the work to make it feel comfortable for us, we won’t do it. We will resort to what is ritual and routine, which for some people is reaching into their quiver of sales tools and pulling out an arrow of a discount. So if we want different results from ourselves and from our people, we’ve got to arm them, arm us with better messaging and better preparation to stand in front of the customer and hold the line on price and not discount out of fear.

Drew McLellan:

So one thing we haven’t talked about is how do I know if my pricing is right? How do I have… So I know our work is good, I know we deliver results. Is that worth $10,000 or a $100,000?

Casey Brown:

It’s the most beautiful question and you’re not going to like the answer. You might like it fine, some of your listeners won’t like it. It’s not right. And here’s what I mean.

Drew McLellan:

Okay, well, it was great talking to you. Thanks for being on the show.

Casey Brown:

Great talking to you, [inaudible 00:40:34]. It’s not right. It’s never right. And by that I mean, there’s no such thing as one right price. It doesn’t exist. First of all, market price doesn’t exist. It’s a living, breathing, moving thing. It changes every transaction out there in the world. And if you’ve ever seen a competitive quote, you’ve seen a competitive quote and for you to conclude from that that you’re too expensive or not expensive enough, most people do not charge the same price for everything they sell to everybody they sell to. Most of your competitors don’t either, which means you have one tiny data point in a sea of reality. And top of that, with the inflation we’re experiencing, people are upping their rates and things like that. So we’ve got to be really careful concluding what we think we might know about the market price, that includes where we sit inside that market. And it’s not right for everyone, right?

Drew McLellan:

Right.

Casey Brown:

In other words, whether you say, okay, I did all my homework and I really put my confidence hat on and I’m going to go out and charge 70. For some people, that’s twice as much as they would ever pay you. And they think you’re a crook for trying it. And for other people, they pay you 140 and they think you’re a fool for having your price. So you’re always too expensive for some people, you’re always cheaper than you could be for others. There’s no such thing as the perfect price. I will tell you unequivocally, in 25 years of being a pricing geek and in 15 years of advising companies to do it better, I’ve never one time ever come across a company that isn’t underpriced, at least in some areas of their business. The mistake of being overpriced or underpriced, if you’re overpriced, you’re out.

Drew McLellan:

Right.

Casey Brown:

None, I would argue, I would assert, I would even bet a substantial amount of money that a 100% of your listeners are underpriced, not overpriced. Now, they might be just right in a bunch of places, but they’re underpriced some of their business and maybe they’re underpriced everywhere. One of the problems, and this goes back to that mindset of fear, is that we think the cliff, the place where we’re going to suddenly fall off and lose all our businesses right at an inch from the front of our toes, and it’s actually across the room. So I’m an advocate of safe, low risk testing. Where could you test that out?

Which, you don’t want to do that with your customer that’s 50% of your business. You don’t want to do that. Jim Collins says bullets before cannons. So what are the easiest low risk places to test out if maybe you’re underpriced and start pushing it from there? And when you start having more and more success at that price, then you can expand and eventually you can take it to your biggest customer. If you start to see that the win rate starts to go down in that little test kitchen, then you know that’s a signal to you that the pricing’s where it needs to be and not higher.

Drew McLellan:

That sounds like a…

Casey Brown:

What is your petri dish?

Drew McLellan:

… whole different conversation. We could just do another hour on that. Yeah.

Casey Brown:

It’s one of the reasons that pricing is so fun and so fascinating is I’ve been a deep student of one thing for 25 years and I learn every single day. And I say that not to stress anybody out that thinks, how will I ever get great at this if this is, I’m also trying to run a business and do a million things and be great at creative and great at agency work is to maybe relieve the stress of getting perfect at it. Because there’s no such thing. You don’t need to be perfect. Could you improve your pricing execution by 1% or 2%? Because for a lot of agencies, knowing what I know about the industry standards and you know what you know having seen a lot of PNLs, 1, 2, 3, 5% can make an enormous difference on the bottom line of a firm.

Drew McLellan:

Right.

Casey Brown:

And if I can just say why that matters to me so much. I believe if you’re excellent at what you do, you got to be paid like you’re excellent. I said that before. But why this matters is if you’re underpricing, then you’re accepting mediocre pay for excellent work. And it’s unjust because it lets the customer keep the money that should be in your agency’s pocket that you could use to hire more people, upgrade technology, grow, innovate, pay yourselves and your people better. Now, we’re talking about paychecks, we’re talking about families and communities. There’s a huge ripple effect. There’s a very important reason to have the confidence to ask for what you’re worth.

Drew McLellan:

Oh, that is a perfect ending sentence for what I hope will be an ongoing conversation because I still have a lot of questions, but we need to wrap up. And that is the perfect way to remind us why we do this. It’s not about being greedy, it’s not about trying to gouge anybody. It’s about being paid fairly so we can use that money to do good things for our people, for ourselves, for our community. And because we’ve earned it. We have a right to it.

Casey Brown:

That’s right. Do you mind if I tell a 60-second story?

Drew McLellan:

No.

Casey Brown:

And many of your listeners might know this story, but I think it’s really apropo to the conversation we’re having. Picasso was sitting in a plaza sketching once upon a time, and a woman recognized him and asked him to sketch her. He says he will. And he dashes off this quick sketch and she sees it. She’s fascinated at how well he captured her spirit or essence, her je ne sais quoi, and she asked him if he’ll sell it to her. And he says yes. And he quotes her price of 5,000 Francs, which was a huge sum of money for that time in history. And she said, sir, she’s shocked. She’s outraged, “Sir, it only took you five minutes.” And he says, “No, madam, it took me a lifetime.”

Drew McLellan:

Right.

Casey Brown:

And that story when I speak to folks in your industry, always resonates because these are people masterful in their craft. They deserve to be paid like masters. Your Picasso baby get paid.

Drew McLellan:

Yeah. Love that. Love that. Casey, if folks want to have more conversation with you, if they want to follow your work, if they want to have you look at their pricing, what is the best way for them to track you down, to find you, to learn more from you?

Casey Brown:

Sure. So there’s a contact form available on our website, which is boostpricing.com, boost like the energy drink, pricing like the best way to make money, boostpricing.com. Email us at [email protected], or you can find me, and I do a lot of stuff on LinkedIn. I write a lot of articles and post a lot of videos on LinkedIn. And you can find me at Casey Brown Boost altogether, caseybrownboost.

Drew McLellan:

Beautiful. This has been fascinating and super helpful, so pragmatic, and I’m hoping that people are actually kind of feeling inspired to try and be better about their pricing and to know that they are worth more than typically what they’re asking for. And they sure as heck should hold their ground when they’re sitting in a meeting and they’ve decided on the price for something. So thank you. These people are going to put this to good use. Thank you for your time and your expertise.

Casey Brown:

Thanks so much, Drew.

Drew McLellan:

You bet. All right guys, so this is not a listen to and forget about episode. This is a, what are you going to do with this information? I want to hear from you. I want to hear how you took what Casey taught us today and changed your mindset, changed your practice, changed your patterns, changed your pricing. What are you doing to extract the proper value? And maybe that’s the thing we have to keep reminding ourselves. This is about proper value. This is not about you trying to take advantage, but what are you doing to stop discounting what you do, to stop diminishing what you do, and to really get paid full boat for the expertise that you and your team bring to clients and the impact that you have on their business? So go back and listen to this again if you have to, to get fired up and to make a plan.

But I want to hear about your plan because this is an action packed episode. So make sure that you take some action and that you do some things to change the way you think about and feel about pricing. And I will be honest with you, I think we all suffer a little bit from this. I am not removed from this either. So I think it just is a good reminder to all of us that we deliver something that’s meaningful and valuable and we should get paid for it. So with that, quick shout out to our friends at White Label IQ, who also deliver amazing value for their clients. So as you know, they are the presenting sponsor of the podcast, but they help agencies provide incredible white label design dev and PPC services. And they are a great agency partner because they are an agency.

They were born from an agency. So they understand how you make money, how you price things, and how they can be a great partner in that so that they’re a profit center for you as opposed to a cost. So check them out at whitelabeliq.com/ami and make sure you tell them that I sent you and I will be back next week with another guest, helping you think a little differently about your business, helping you build a business that you’re proud of, that is profitable, sustainable, and something that takes good care of you and your family.

So I’ll be back with a guest. I am super grateful that you come back every week. I love these conversations. I love having them on your behalf. I love kind of putting on my agency on our hat and thinking of all the things you’d be asking if you were here with Casey. So keep coming back and I will keep bringing you great guests. All right, I’ll see you next week. That’s a wrap for this week’s episode of Build a Better Agency. Visit agencymanagementinstitute.com to check out our workshops, coaching packages, and all the other ways we serve agencies just like yours. Thanks for listening.