New eBook Available (with a chapter by moi)

I am honored to have a chapter in this new free eBook. Here is more from the press release:

Entrepreneurs starting their own businesses now have a little more help. Start with a Profit: Best-Practice Tips for New Entrepreneurs from Top Accounting Industry Leaders is the latest guide to helping new business owners become successful. 

Editor Sandi Leyva, CPA, asked fellow accounting industry thought leaders one question:  “For someone who wants to start a new business from scratch today, what is the most important strategy or tactic you’d tell them about to help them succeed?” One dozen thought leaders along with Sandi provided their answers.  Co-authors include:

  • Alison Ball, Senior Manager of the Global Influencer Program of Intuit, Inc.
  • Sharada Bhansali, Co-Founder of AccountantsWorld
  • Randy Johnston, CEO of Network Management Group, Inc.
  • Ed Kless, Senior Director of Partner Development and Strategy of Sage
  • Sandi Leyva, Founder of Accountant’s Accelerator
  • Monika Miles, President of Miles Consulting Group, Inc.
  • Clayton Oates, Chief Solutions Officer of QA Business Pty Ltd.
  • Edi Osborne, CEO of MentorPlus
  • Leslie Shiner, Owner of the ShinerGroup
  • Doug Sleeter, Founder of the Sleeter Group
  • Sandra Wiley, COO and Shareholder of Boomer Consulting
  • Geni Whitehouse, Countess of Communication of Even a Nerd Can Be Heard
  • Scott Zarret, President of CPA Academy

“To my knowledge, it’s the first collaborative work of thought leaders in the accounting industry,” says Sandi Leyva.  This is Sandi’s 30th book and her first collaboration as editor. 

Although each author’s contribution is quite unique, a few client-centric themes emerged, including how to market most effectively, how to build customer relationships, and how to interact with clients.  Others focused on business models and pricing.  Still others urged the entrepreneur to embrace their passion and their “why.”

 

Pricing That Makes You Go, “Huh?”

images-4So this morning I called to renew my, errr, son’s subscription to the MLB Insiders Club. It gets us him some “free” stuff as well as a monthly baseball magazine. Overall, I think it is a good deal.

I called because the letter I received had no place where I could renew on-line and, well, filling out a form and sending via the USPS is beneath me. I found it odd that you can join the program on-line, but not renew. So be it.

On the mail-in form the prices for renewal were listed thusly:

  • Three years – $59.00
  • Two years – $44.00
  • One year – $24.00

Not bad. This is pretty standard term-based preferred pricing, but here is where is gets weird.

When I called, the representative took my member number and said she would be happy to renew me at the following “rates:”

  • One year – $9.00
  • Two years – $18.00
  • Three years – $27.00

I renewed for three years, but now I am totally confused.

First, why is it cheaper, significantly cheaper, to call to renew as opposed to sending in the form?

Second, why did they present the prices highest to lowest on the mail piece, but lowest to highest over the phone?

Third, in both cases they used even dollar “9” pricing as the base, yet the form used the three-year price as the base and the call-in used the one-year price as the base. Why is that?

Fourth, why is it that via mail, I get a preferred price for a longer subscription, but via the phone, the price is less, but there is no preferred price for multiple years?

Fifth, is this an example of a great price discrimination strategy – charging more to the people who just renew using old technology (i.e., the mail) or an example of a company without a fricking clue as to pricing?

Sixth, why do I even care about this?

Sorry, that last question was my inside voice.

Your thoughts on the first five questions would be appreciated. I’ll reserve the last one for my shrink.

Rethinking Unlimited Access Level Agreements

While watching Rory Sutherland’s Zeitgeist presentation for the 20th time, I was struck (finally or again) by his story about Spotify and how they have not gotten much traction with their offer of unlimited downloads per month. He suggests that they change it to some absurdly high number like 180 songs a month.

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Sutherland reasons that unlimited provides no context to the offering. As he put it, “Nobody knows what unlimited music is worth. It is a bit like asking, ‘Would you like to buy my unicorn?’”

The 180 song per month limit would give the price context in that it could be compared to iTunes at $0.99 per song. So for $9.99 a month you could enjoy $180 worth of music.

This got me to thinking.

Perhaps access level agreements should have a similar notion. Instead of saying unlimited access, perhaps it should be changed to 30 contacts (phone calls or emails) per month. Now, this would be more than anyone could possible need, and would therefore it would not be a barrier to any customer in terms of being worried about wasting a call on their particular issue. It would, however, allow them to compare it to other plans where there is a per call fee, thereby increase the perceived value of your offering.

What are your thoughts?

ET HORA LIBELLUM DELENDA EST

Speaking at the Professional Pricing Society Conference

One month from today, my friend and pricing mentor, Ron Baker and I will be delivering a 2-Day Workshop entitled, Creating and Capturing Value in an Intellectual Capital Economy on Tuesday and Wednesday, October 25-26 at Caesar’s Palace in Las Vegas for the Professional Pricing Society.

If you are interested in attending, click the flyer below.

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ET HORA LIBELLUM DELENDA EST

On Angie’s List Pricing (or how NOT to price in one easy lesson)

Last week, I surfed into Angie’s List, a site which allows people to exchange information about local services providers like carpenters, yard services, etc. I knew it was a paid membership site, and I was curious about the pricing. Long story short, I did not sign up for a membership.

This morning I received the following email from them with the subject: Oops! We meant to give you a bigger discount

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So, let me get this straight. Angie’s List does a poll that indicates that 80 percent of companies do not have the confidence in their product or service to stand by a price they have given a prospective customer. In other words, they are liars – their “price” was not their price! Angie’s List then decides that rather than being an indication of a problem, they adopt this policy themselves.

In addition, they cast doubt upon all the vendors who use their service and tell me that they (Angie’s List) are liars (their price was not their price), but that they would really like me to sign up with my PayPal account and get even more off. Ahhh, no thanks!

Have I missed anything?

An Economic Theory of Everything

One of my all time favorite TEDTalks is by Rory Sutherland, a principal at the advertising firm Ogilvy. His brilliant analysis was on display again at Zeitgeist 2011.

 

The lessons here are many, but for me key learning is the link between Austrian and Behavioral economics:

  • All value is subjective, AND…
  • All prices are contextual.

The implications of these two statements together are profound and in my opinion amount to an economic theory of everything.

On Sensational Saturday for SAN Members

On Saturday, July 9, 2011 the Sage Accountants Network (SAN) is presenting Sensational Saturday at Sage Summit 2011 at the Gaylord National Hotel just outside Washington, DC.

The main draw is entitled, Tomorrow Is Today: The Accounting Firm of 2011 to be delivered by Darren Root of RootWorks and Ron Baker of the VeraSage Institute. (Oh yeah, a guy by the name of Ed Kless is going to be there to moderate the fireworks.)

imageDarren is the co-author (with Michael Gerber) of The E-Myth Accountant. Ron’s just released book is Implementing Value Pricing. While the two agree on many topics, including the need for professionals to set fixed prices for engagements, there are other areas where they are not in alignment. This, to me, is where the fun will begin.

imageThe presentation runs from 9am to 5pm and is dedicated to the possibility that accounting firms as we traditionally think of them are dying quickly. In order to ensure their survival, firms need to radically transform themselves. Creating such an organization is hard work and not for everyone and many firms will not be able to make the transition at all because this transition requires us to think differently than we have in the past about what it is that we do. You are invited to open a dialogue on a different model for creating success in a professional firm.

Click here for more information about the Sage Accountants Network.

On Why Specialization Often Fails

My friend, VeraSage Senior Fellow and author of the new and essential Social Media Strategies for Professionals and Their Firms, Michelle Golden, was recently interviewed by CPATrendlines on why it is that specialization in professional firms often fails.

Her solution is simple, but not easy for many firms to do.

So if the choice is specialize and increase price or don’t specialize, what are firms more likely to do?

Decoy Effect Pricing Example

Sage Business Partner Wayne Schulz of Schulz Consulting posted this great example of using the decoy effect in pricing options from the New York Post on my Facebook page. This is similar to the example Dan Ariely used in his TEDtalk about the Economist. However, in that case, the publisher seemed to believe they had made a mistake and pulled the ad when Ariely questioned them on it.

In this case, I think the Post knows exactly what they are doing. In addition to the dominated option (4 weeks for $9.18), they have also included two anchor products -  $2 for a single issue and $5 for a back issue.

Adding the .18 to the dominated option also gives it an air of precision and simultaneously draws your attention to it. I originally thought this was a bad idea and I wrote Wayne telling him that. I have changed my mind, I think it is brilliant.

I also find it intriguing that they do not list the price per issue of each of the options. Most subscription pricing options provide this. I think not providing it is the smarter idea.

The lesson for professional firms is that you can use the dominated option to influence customers to a higher or lower level (see the decoy effect), but only if you provide options in your proposal. A range of hours from low to high for the same result is not options pricing. In fact, if anything, it is confusing to the customer.

Imagine if instead of a price on an item in a supermarket, they just gave us a range. A loaf of bread would be listed as between $2 – $4. Once you got home from the store (I originally was going to write ‘got to the cashier,’ but that is not accurate), they would send you a final bill indicating that you paid $3.75 for loaf. It sounds crazy, but this is exactly what professionals do when they provide a prospect with a range of hours proposal. It is, in effect, an infinite number of options. It is confusing to the customer.

Don’t do it.! Use options pricing instead.