Episode 396

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We all want to get paid what we’re worth. But it’s more than likely that we’re downplaying our agency’s value because we’re too worried about pricing ourselves out or overcharging. This week, our guest, Casey Brown, will explain why that’s wrong and how to get out of a fear-based pricing mindset for good.

Casey has been serving small to mid-sized agencies for the past 15 years to bring her corporate pricing expertise to private companies. She’ll teach us why it’s probable that we’re talking ourselves out of charging what we’re worth and giving discounts where they’re not needed.

Our time is valuable in a typically creative industry, and we deserve to be paid what we’re worth. Get ready to take action after listening to this episode so you can start having better pricing conversations with customers and stand up for your true worth as an agency.

A big thank you to our podcast’s presenting sponsor, White Label IQ. They’re an amazing resource for agencies who want to outsource their design, dev, or PPC work at wholesale prices. Check out their special offer (10 free hours!) for podcast listeners here.

fear-based pricing

What You Will Learn in This Episode:

  • Why you should never pre-discount in pricing conversations
  • The questions you should be asking when a client pushes back on price
  • How to establish pricing integrity that establishes trust between you and the customer
  • How to gauge if a client’s low budget is real
  • Building confidence in your pricing
  • How to get out of a fear-based mindset
  • The best approach to raising prices on legacy clients
  • Protecting your margins in this current economy
  • How to know if your pricing is right

“The most price-sensitive customers are the neediest ones. They're the biggest pains that suck up disproportionate organizational resources, abuse your staff, or don't pay you on time.” @pricingcasey Click To Tweet
“Very often 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.” @pricingcasey Click To Tweet
“To discount without changing the scope is not only terrible for profitability, but it also hurts trust.” @pricingcasey Click To Tweet
“In the agency world, what you're selling to some degree is time.” @pricingcasey Click To Tweet
“If you're excellent at what you do, you have to be paid like you're excellent.” @pricingcasey Click To Tweet

Ways to contact Casey:

Resources:

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