Project pricing is like a balloon in a room made of nails. I’m not sure why such a room would exist or how you would get the balloon in there, but go with me on this one.
On the pricing floor are the rusty nails that cheapen you and let the air out of your credibility or win you projects you can’t afford to deliver. But you’re probably more worried about the needle-sharp nails on the ceiling.
As your pricing balloon drifts higher, it imputes higher value and gives you space to deliver client delight while maintaining a high margin. But a millimeter too high and the balloon pops, making you scream in fright. Or maybe that scream was frustration over losing the project.
How do you position your balloon just a hair below the upper nails? With one, simple question.
I’m assuming that during your discovery process (a.k.a. the Context Discussion) you’re already asking your prospect about her budget for the project. Occasionally your prospect will tell you, but more often she won’t. Either way, there’s a follow-up question that will help you position your balloon.
I suppose you could just ask, “What’s the budget ceiling?” but I don’t. I employ a slightly less direct question.
My follow up question is: “At what price do you have a heart attack?”
Yes, I literally use those words. I’ve settled on the “heart attack” language for two obvious reasons and one hidden, but more powerful, benefit.
The obvious reasons are: 1) it often garners information I need to win the project; and, 2) it’s funny, in a grim way. Prospects always laugh when I ask, which builds rapport.
The more subtle benefit of the heart attack language is it changes the reference price. Let’s say the prospect wouldn’t give you a budget when you asked, but silently she’s hoping your project comes in below $75,000. You ask what price would give her a heart attack and she laughs, thinks for a moment and chortles, “A heart attack? If this came back at six figures, probably my boss and I would both have heart attacks!”
In that brief moment of thinking, your client just told herself in a very real, visceral way, “I would survive as long as the project fees are under $100,000.” And just like that, you have another 30% of room for your project. While other consultants would have punctured their chances at $80,000, you can float a higher-value project with a $98,000 price tag and still win it.
The heart attack question has worked extremely well for me.
Is there a technique you’ve used successfully to avoid overpricing? If so, please share it below in the comments section.
If not, what are your thoughts on adopting the heart attack question for yourself.
Text and images are © 2023 David A. Fields, all rights reserved.
David, I have used this with varying degrees of success. I find it helpful to say “I’m not looking for a hard dollar figure. If I went above 6 figures, would that cause you to clutch your chest?”. Sometimes it works, other times the client just doesn’t want to reveal the budget. In those cases I give them a range of options but make it clear that as the cost of my service decreases, the amount of work they’ll need to do to bring the project to a successful conclusion increases.Either way, they will pay for the work.
Excellent variation, David, and you make a couple of good points: in some cases a client may not be able to give you a fixed number; also, there are times when you want to set the reference price, not leave it up to the client. I’ve often used a combination of setting an “insanely” high reference price, then following up with the heart attack question. For instance, I might say, “I’m pretty sure we can get this done for under a million dollars.” Then I’ll pose the heart attack question.
Thank you for your contribution to the discussion.
David – you consistently give real, usable guidance on a variety of issues which I greatly appreciate. Something like this might not always work, but if I get a number 1 or 2 more times out of 10 than I had in the past, I consider it a great benefit… and I think that’s the idea here. Good stuff – thanks.
Thank you for the kind feedback, Kevin. You are so right that nothing works every time and if we can improve our hit rate 40% or 20% or even 10% it can have a huge impact on our business. In this particular case, as with all tactics, I let my sense of the prospect be my guide. If the discussion is tense and my prospect’s disposition is unwelcoming, I won’t use the heart attack question until I’ve improved the tenor of the conversation.
I appreciate you adding your thoughts and feedback.
This is a brilliant word picture and I can see a lot of applications for it. But what do you do when the prospect honestly doesn’t have a clue about the budget? For example, I propose a new marketing tactic for them, one they hadn’t thought of, so they couldn’t possibly think of a number. How can I set the stage and manage their expectations?
Great question, Dan! It warrants a longer answer than I can give in a comment, but I’ll offer a couple of overall thoughts: First, when you establish the value of your work during the Context Discussion it puts a rough order of magnitude in the client’s mind. If the client estimates your tactic will deliver $10 million incremental profit, they’re going to be more open to a high fee than if they estimate it will only deliver $100k.
Also, during the Parameters portion of the Context Discussion if you’re sensing there might be a budget concern, you can float a trial balloon and see whether that hits the sharp nails on the ceiling. David Discenza gave good language for that in his earlier comment.
Finally, be aware of your likely competitive set. What alternatives to working with you are the prospect considering and what do they cost? If they mentioned that they’re interested in your Facebook ad service, but they also were thinking of running a small, direct mail campaign, you could ask what they were thinking they would invest in the mail campaign. That becomes the anchor that you need to either sail around or find a way to move. (Balloons and anchors in one comment. The metaphor police may be pulling up the driveway as I type this.)
I appreciate the general advice, as it looks good for many situations.
My question is–when bidding a government project where they tell you the budget is X, is there a “sweet spot” as a percentage of X that generally promises the best chance of getting the job ? It would seem that 0.5X should be effective if you can do it for that price, but most government people seem to expect that if you don’t propose at least 0.8X, you must have no idea what you’re doing.
Yes, perhaps I just answered my own question, but does anyone else have experience on this ?
Another great question. I’ll be interested to see input from other readers.
In my experience, government projects are pretty different and it depends on whether you’re dealing with Federal, state or municipal governments. Some recent research I did for a consulting firm that works with municipalities suggested that you can be about 10-15% above your competition if you’re perceived as the best provider. You’re absolutely right that a low price conveys low quality and as long as you’re not dealing with the feds, shooting low rarely does you any favors.
My business has to do with determining the market value of a given business, and we have been
doing so since 1985. We offer a sliding scale of fees which are charged, reflecting the amount
of effort and features which are included in a given project. Your approach looks interesting and
may prove helpful, since we are an independent operation are are generally more competitive than
most of our higher priced competition. Thanks for the insight!!
Paul A Halas, Jr., VA, CMC
Halas & Associates
Sounds like an interesting business, Paul. Have you considered charging based on the value you’re providing rather than the amount of effort? For example, determining the market value of a $1 billion-ish organization to set shadow stock prices for its employees is worth much more than determining the market value of a $1 million-ish acquisition target and, effort aside, opens the door for a more valuable project for you and your client. Thank you for sharing your particular situation.