Consultant Marketing Fee Anchors
You’re a consultant.
The question every prospect asks is, “What are your fees?”
When I was starting my practice as a marketing consultant back in 1990 I figured I should do a little research into fees for the kind of work I knew I would be doing. I talked to:
- Management Consultants
- Advertising Professionals
Method to my madness
Yes, that seems like a strange group to interview for setting fees but what I determined dictated a different view on how I’ve been compensated for all these years. What I discovered is that there is a wide range of fees in each of those specialties and that in the mind of the prospect, the value of the service is more important that a fixed fee.
Regardless of the profession, when someone wants to hire the assistance of an independent professional they assume that you will charge them for the time you work on their problem based on an hourly rate. That is the most common method of billing for accountants, consultants, and coaches.
The hourly fee
If you feel you must be compensated on an hourly basis then you need to give the prospect a way to understand the value of your assistance. The easiest way is to tell them the average fees of other professional advisors in the geographic market in which you practice. Back then I had easy access to a number of Management consultants and Advertising professionals as the former CEO of an Ad Agency. Psychologists were a little harder to have a sit down with but were quite forthright about their fees in a get acquainted conversation on the phone.
The numbers, back then, proved to be quite similar. They ranged from $75/hour to $150/hour. I decided to put my hourly fee at the same rate as the average of Psychologists ($125/hour) and to tell prospects how I came to that rate.
Because I had been keeping track of my time in quarter hour increments since 1965 it was easy for me to report my activities for a client, apply the rate and provide a detailed invoice.
The Fee Anchor
Somewhere in my research I ran into the idea of the Fee Anchor. This little piece of human psychology can be a superb way to convince a prospect to become a client. All of us use “rules of thumb” to make decisions faster. Anchoring is the human bias to rely on the first piece of information received (the anchor) when we make a decision.
The Day Rate
Once a prospect had heard the $125/hour fee It was easy to suggest that they might prefer a day rate if they could save a little money. They would quickly calculate the fee for a day would be $1000. Presented with a rate of $750/day they quickly signed the agreement. The anchor of 25/hour or $1000/day was how they now assessed the value of the service and $750/day was seen as a bargain.
The Value Anchor
What if the anchor is not based on your fees but on what the solution to the prospects problem will deliver in terms of time, revenues, profits or any other measure which can be stated in dollars that the prospect determines?
The higher the anchor, the higher you can set your fee.
Once you know the value a prospect places on your services you can propose multiple ways of being compensated. The retainer is usually the easiest to come to terms on. If the solution to the problem will, according to the prospect, generate a value of thousands of dollars you propose a fee of some percentage of that value. Often a prospect will note that your fee will actually be paid by the savings or increase as a result of your work.
A Commission on Top
If your work has the possibility of generating an even more significant difference for the prospect you can suggest a commission on that differential. Usually this is easier to do on a second engagement. You might accept stock in the company as the commission or as part of your retainer. That led to a multi-million dollar morning for me once, but that is another story.
And so it goes.
Jerry Fletcher is a sought-after International Speaker, a beBee ambassador, founder and Grand Poobah of www.BrandBrainTrust.com
His consulting practice, founded in 1990, is known for on and off-line Trust-based Consultant Marketing and Brand development advice that builds businesses, careers and lives of joy.
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