Typically, when most of us think of price, we immediately envision money. Yet this is only one possibility. Realistically, price is whatever we place a value on in exchange for something else that another person or business values in likeness.
This post isn’t meant to be exhaustive. There are virtually unlimited possibilities here; after all, value is subjective and in the eye of the beholder. Instead, I’ll focus on ones that have resonated with me as I’ve negotiated with clients throughout my career.
Gaining exposure and experience
Occasionally, I’ve encountered opportunities that required expertise that my teams or I did not yet possess or had only limited exposure to previously. When presented with such an opportunity, I would consider whether the request was something that contributed to our mission or was completely outside our wheelhouse.
If I found alignment, this is where it would potentially impact my pricing. In some scenarios, I would price our solution more aggressively to help win the business, knowing there was a high likelihood that we would forego profit. I want to stress here that it was a strategic decision based on the need to improve or round-out the skillset of my team. With the outcome being an even more valuable team in the future. Always worth the investment, if the cost is reasonable.
Singing our praises for all to hear
By far, I’ve discovered word of mouth to be the most effective form of marketing in relationship businesses like professional services. Deeply satisfied people will gladly sing your praises when given the opportunity; especially, when they feel they have found the golden ticket to success.
However, larger corporations can be a bit more hesitant to publicly do the same thing. The risk of outright association (at least with young or small consulting firms) can appear too risky.
This is where explicit recommendations, either published online or in marketing collateral or via the occasional reference call, can act as a form of compensation for your consultancy. The more prestigious your client’s brand, the more valuable it potentially can be to you.
Finding strategic alignment
Alliances that benefit all parties can produce outcomes that transcend a bit of cash today. For example, partnerships with clients or complementary businesses with massive brand recognition or deep knowledge and expertise can add visibility to your firm that would take years to organically grow on your own.
The possibilities are endless here; it depends on how creative the parties can be. In my experience, gaining the first right of refusal from a vendor on opportunities of a certain area of expertise can be extremely value. The vendor also wins given they sell their product and hand off the implementation to another party… effectively allowing them to focus on growing sales.
A stake in the business venture
In some scenarios, a client may not have the budget to pay for your solution yet you believe in their mission. If they are open to discussing an equity stake in their business, this could be a viable compensation strategy. This is an example where alignment is achieved by motivating your business to ensure they continue to achieve success over the long-term.
While this is probably a rare opportunity, it can be extremely attractive if both companies share similar beliefs and are well poised to help one another grow profitably.
One of the keys to success here will be your ability to influence and lead the way your company is benefitting the client firm. If you have little influence, you have limited recourse of ensuring your investment will materialize favorably. In that scenario, walk away.
Licensing your know-how
My background is in technology. With that said, my past teams have created revolutionary software solutions for many Fortune 500 corporations over my 20 year career. One frequent sticking point has been who owns the resulting intellectual property.
It’s almost always the desire of the largest organizations to own it, however, that should come at an explicit price. Before work starts, and often during the initial negotiation of the master service agreement between parties, the default arrangement should be spelled out.
When your work has mass appeal, it may be best to hold on to your rights so you can resell the solution. Clients don’t necessarily care about the effort involved, they are laser focused on what your firm can achieve for them.
I’m an advocate for making that consideration part of the pricing strategy so that clients can weigh whether it’s important enough to pay for true ownership or if something like a “royalty-free, transferrable, global license” would meet their needs instead.
Community input on other popular options
I’ve touched on a few alternative compensation scenarios. Each can be highly variable when executed yet can be rewarding in the right circumstances.
What are your favorite alternatives? Please share in the comments for all to benefit.