In pricing guru Reed Holden’s latest newsletter and blog post, he drives home the point that while IT buyers tend to look like are buying on price they really are not. They just use low price providers to drive down the prices of others.
The way to call them on this is to offer options, including a bare bones option. Once the prospect reject the idea of the lowest price, they are no longer a price buyer. We need to call them on this.
Also, IT providers need to lead with a strategy of distinguishing themselves as knowledge firms, not service firms. This means positioning themselves more like insurance companies do. With insurance (healthcare excepted, but do not get me started), we pay for things we do not want. With IT, we do not want problems.
I am sesquipedalian. So when a new word that I had not ever heard comes my way, I am very excited. This one comes courtesy an exchange between Ron Baker and Jim Caruso, Partner in charge of Financial Management Outsourcing for Fesnak and Associates LLP.
Jim send the following email to Ron a few days ago and Ron passed in along to me.
First, I received word that an online comment I made on a Harvard Business Review blog post would be printed in the magazine.
For those of you that can’t make it out, my 15 seconds of fame reads, “Business ain’t science.” I told the copy editor that I had more to offer than that and that I usually am grammatically correct, but they did not seem interested. “No, your thought really says quite a lot.” Uh-huh…
Next, my article on using project management to replace the timesheet finally made it into the Journal of Accountancy. Please comment there as I would love to get a big long string going.
Could it be that the Mets getting out of the gate strongly? I can only hope!
While I have heard the objection of revenue recognition to fixed price and service level agreements before, there has been a recent spate of them and my default value reply is to say, “Really, that’s all you got!”
The more detailed answer is to ask, “Are you a publically traded company? If not, there is really no problem.”
This is usually met with silence followed by some mumbling about a possible future creditor using WIP or receivables to secure a loan. The response is then to say, “What about using the signed agreement from your customers? Isn’t that better than time either billed and not collected or time not billed at all? Besides, I recommend you get paid upfront.”
Again, more silence followed by, “Yeah, but if they prepay me, I can’t recognize the income.” My reply, “So, you are complaining that you will have too much cash is the bank? Maybe you won’t need a loan in the first place.”
That usually ends the argument, as if there was one in the first place.
While some objections to pricing on purpose and service level agreements are better than others, this one takes the cake. It is just a non-starter.