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Could Your Consulting Firm’s Price Increase Tomorrow Help Sales Today?

You may have considered announcing an increase in your consulting firm’s fees—or announcing a potential increase in fees—as a method for inducing prospects to engage your consulting firm now, while your fees are at their current rates. Let’s discuss whether that technique works or not.

Your consulting firm is better at what it does than it used to be. You create more value for clients now than you did in the past and, therefore, your fees can justifiably be higher going forward than they were in the past.

Plus, inflation is real these days, like billionaires in space, virtual reality chairs, and visiting space in a virtual reality chair (which costs less and is lower risk).

In the U.S., annual inflation exceeded 5% for each of the past eight months. Meaning, if your consulting firm charged $100k for a project last year, for the same project you should charge at least $115k this year. (That math might be slightly off, but I prefer noticeable changes.)

And since the labor costs in consulting are skyrocketing, you may be thinking of raising your consulting firm’s fees just to keep your margins intact.

Net, there are plenty of reasons for your consulting firm to increase your fees. The question, though, is this:

Will announcing a pending price increase to prospects encourage them to engage your consulting firm now?

No.

In our experience, consulting clients rarely make a purchase decision based on a pending fee increase.

A consulting firm’s bump in fees is typically in the 10-20% range, and here’s what we know about how clients act in relation to fees:

Clients will choose a consulting firm with up to a 30% fee premium in a competitive situation (or one controlled by the federal government or a procurement department).

In a non-competitive situation or one not controlled by procurement, clients will choose a consulting firm with up to a 300% premium based on relationships, trust and demonstrated value.

Either way, a small fee difference of 10-20% doesn’t influence their thinking.

Also, if a prospective client is on the fence about whether or not to work with your consulting firm, and they’re weighing the fee relative to value, a pending fee increase won’t help your cause.

Finally, the rare client who is spurred to action because of a 10-20% fee difference is typically a bargain hunter. That’s not the type of client your consulting firm is looking for.

It still makes sense to let clients and prospects know in advance that your consulting firm’s fees are increasing.

If a client has already decided to work with your consulting firm, advising them of an impending fee increase may prompt them to sign the deal sooner.

Just don’t use your pending fee increase as a marketing message in hopes that it will drive a surge in client engagements.

Do you agree, or have you seen that announcing a price increase helps your consulting firm win projects? I’m curious to hear your experience.


6 Comments
  1. Steve Wunker
    January 19, 2022 at 7:13 am Reply

    David, what about situations where the client is a cost center with a fixed budget, like a market research or HR department, and they’re weighing among several priorities / internal clients about how to allocate that money? Does this still hold?

    • David A. Fields
      January 19, 2022 at 8:00 am Reply

      Excellent question, Steve. Let’s take the example of a market research department. Often (thought not always), those departments act as pass-throughs on large projects, meaning their budget comes from a commercial group. In those cases, the market research department gets to choose the vendor, however the budget and go/no-go decision is made by the commercial team.

      Will the commercial team make a decision they wouldn’t have otherwise because of an announced fee increase by one vendor? Probably not. You may be able to win business earlier that you would have won anyway; however, you’re unlikely to win incremental business.

      If the group doesn’t act as a pass-through and, instead, has an unallocated budget that they’re trying to maximize, you’re more likely to advance business you would have won otherwise; however, you’re pointing their reasoning for choosing you toward the budget and, in the long run, that won’t serve you well. Your firm wins when you’re chosen because you’re trusted and perceived as worth virtually any premium rather than worth buying only when “on sale.”

  2. Tomaž
    January 19, 2022 at 11:48 am Reply

    Hi David,
    touching again pricing, an “evergreen” and endless well of topics for discussion in the consulting business. 😀 Excellent and useful.

    I admit I can’t tell you exactly the level of pricing for our projects this year compared to the projects we did a year or two years ago.
    Except for two particular type of services, we have been able to standardize, we can’t really compare and tell if they are more expensive or not today.
    We don’t set prices based on hourly rate (mostly use value based model), which would allow us to make direct comparison of prices between not equal/same type of the projects.
    On the other hand we could recalculate each single project to the hourly based pricing, which would then help us compare different types of projects.
    Refering back to the topic … I think since even for us (our team) it’s not easy to compare the prices of different customer projects, even at the same customers, it’s way tougher for customers to do it.
    In addition we see with our projects many reasons why the price is not the same for a very similar projects, even at the same customer. For example, they are in hurry, need some particular topic / requirement added, would like to take higher / lower risk etc.
    As you’ve been explaining and learning it’s (almost) all about trust when dealing with customers, and transparency, also pricing transparency, is the key element of trust.
    I don’t have a specific question eventually, but I’m curious what you and readers think about my “short” monologue and what are your experiences and thoughts.

    • David A. Fields
      January 19, 2022 at 1:41 pm Reply

      Good monologue, Tomaž! First, good on you for thinking beyond simple scope and fees when developing your proposals for clients. You’re absolutely right, there are (at least) 14 “contract tuning keys” that you can play with when you’re developing an offering for a potential prospect.

      When you constantly mix those contract tuning keys it becomes much more difficult to compare pricing across projects, just as you said.

      On the other hand, to make your consulting practice more scalable, it helps to have somewhat standardized offerings or, at least menus of offerings that you understand internally. Then your pricing becomes more consistent, even as you’re adding other pieces in that change the fee the client sees.

      Thanks for bringing up the topic, Tomaž!

  3. Margaret Ricci
    January 19, 2022 at 4:11 pm Reply

    Many executives and companies may feel that it’s a marketing ploy also, which erodes trust. The trust quotient is the most important component in the formula and must be protected and not be compromised for the sake of a few (tens of) thousands of dollars. Once you have lost that war, you’ve lost a potential “loyalty customer” which has a much lower ratio of spend to retain.

    • David A. Fields
      January 20, 2022 at 8:37 am Reply

      Well said, Margaret. Trust is the #1 driver of choice when a client is deciding between firms–and even when deciding whether to engage you for a project or not engage any firm. Salesmanship can give the impression that you’re acting in your own best interests (upside down) rather than in the client’s best interest (Right-Side Up), which is counterproductive.

      I appreciate your input, Margaret!

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