Win Strategy - Fee Development
Understand your Firm’s Market Position
Brand Positioning: Your firm is positioned at the top of the acceptable price band, akin to brands like Rolex or BMW. However, this positioning can vary depending on market conditions, the sector, type of work, service, client, building, and location.
Value Proposition: Your firm's higher prices are justified by its superior features: the best people, research, systems, experience, breadth of expertise, and ability to offer augmented services. However, it's crucial to understand each client's price/value proposition and articulate the benefits effectively.
Market Creativity and Commerciality: In the current market, it is essential to question if your approach is creative and commercial enough. Consider if there is a viable low-cost option, akin to basic specifications for an automobile, to offer clients who may be price-sensitive.
If your firm’s position is at the upper pricing tier, communicate why in your proposal materials. Clients may be willing to pay a premium for several reasons, such as service innovation, superior quality, convenience, trust, risk mitigation/guarantee of success, long-term cost savings, or additional services. Your materials need to clearly illustrate these.
Pricing Strategy Considerations
Market Rate and Scope: Understand the market rate for your services and what is typically included in that scope. Work up the figures from the bottom up and adapt the price to meet the market rate. Consider the market you are targeting and whether decisions are based solely on price or if the client values quality.
Competitor Analysis: Ask the client who your competitors are and consider what they might charge. Understanding your competitors’ pricing strategies can help you position your bid effectively.
Go/No-Go Decision: If, after considering all factors, you determine that your price will be too high no matter what strategies you apply, it may be best not to bid. Focus your efforts on opportunities where you have a better chance of winning.
Pricing Team: Form a dedicated pricing team to ensure your bid receives the right focus. Price should not be an afterthought but a primary consideration from the beginning.
Transparent Pricing: Clearly outline what is included in your price and list any added-value items as optional extras. Explain the benefits of these extras in terms of better, faster, or cheaper outcomes.
Continued Client Dialogue: Encourage open communication about your fee schedule with the client. Deliver bids personally when possible and be prepared to discuss different pricing models.
Resource Allocation: Avoid over-resourcing your bids. Be realistic about staff utilization and consider cost/profit reports from previous projects to optimize resource allocation.
Project Timelines: Consider project timelines. Short-term projects may allow for lower profit margins, while long-term projects require careful consideration to avoid being locked into low rates.
Avoid Over-Delivery: Communicate clearly with your team about the time and resources allocated in the bid. Ensure tasks are completed efficiently and within the allocated time to maintain profitability.
Pricing Models
Open Book: Offer a fee equal to the net cost of resources plus an agreed uplift for overheads and profit, ensuring transparency for the client.
Capped Fee: Agree on an initial target fee with a cap and offer potential rebates based on actual costs.
Minimum Service Offer: Provide a lean service model with optional bolt-on services, clearly communicating any additional fees for repeat work.
Payment Discounts: Offer discounts for prompt or frequent payments to incentivize timely client payments.
