Episode 213: Questioning Your Stories About Pricing—with Deb Zahn
Deb Zahn: Hi, I want to welcome you to this week's episode of the Craft of Consulting Podcast. On this podcast, it's going to be me talking about questioning your stories about your pricing, pricing your consulting services, and the narratives and stories that we create in our heads when we're trying to do that, that tend to cause us to underprice ourselves. And so I want to dig into that.
But before I do, I want to mention if you need to learn more about how the heck do I even price my consulting services, or you're not sure if you've really landed in the right place and you want to think about it in a different way.
I am going to be giving a free live training on LinkedIn: How to Price Your Consulting Services. It's going to be May 24th, 2023, in case you're listening to this later. It will be at 9:00 AM Pacific Daylight Time and 12:00 PM Eastern Daylight Time. And again, it's going to be on LinkedIn.
If you go to my show notes, there'll be the information that you need to enroll. And you can also go to my LinkedIn and register there as well. But it's going to be great.
The whole idea of it is the training will help you figure out how to price your consulting services right. How to get clients to say yes. And ultimately what you're really trying to do, which is to get paid for all of your value and earn the income that you need to earn, which your price obviously has everything to do with that.
Now, when you register, you're also going to get a free tool to develop your unique value proposition. Now, your value proposition essentially describes what your value is to ultimately who you want to buy your services.
And it is one of the most critical things to do in order to not just get clients, but also help you figure out your pricing. So, it's a fabulous tool that walks you through exactly how to do it. And by the end of it, if you dive in and you actually play with it, you're going to be able to have a clearly defined value proposition that will make so much more of what you have to do easier after that.
So, please join me if you've got a pricing, you're not quite sure if it's right or you don't even know where to start. Join me live. I'll also be answering questions as we go along. And one thing I'm going to do is it's not just the price. I'm going to be going through the pricing models. And for each model, I'm going to share the pros and cons of each, and I'm going to talk about when I would use them or not use them.
We'll also talk about ways to build and present your price, one, so you feel good about it; two, that you're willing to actually say it out loud; and three, so clients will actually say yes to it.
Now, in that training, I am going to be talking about a few mindset traps that are really common for consultants to fall into that cause them to artificially lower their prices below what they should be. But today I want to dive into a habit that many consultants get into that also causes them to underprice themselves. And so it's just so funny, this has been coming up so much recently in my membership and in other consultants I'm talking to. I couldn't resist talking about it. So, what it's really about, what this habit is, is creating stories or narratives that we tell ourselves and we often tell ourselves over and over again about pricing.
And the unfortunate thing is that we believe those stories. And because we believe those stories, that means that we're going to make decisions and take action that work against our best interests. And by the way, don't help our clients either.
So, my husband and I have a lot of sayings that we say all the time that sort of remind us about the nature of reality. We're kind of nerds that way. One of the things that we say to each other is, “We have to question our narratives.” And what that basically means is we have to stop and think is what we think true actually accurate, or have we created a story around it and it's not actually true? And we apply it to everything.
We apply it to when we're making a big purchase. We actually applied it first to chickens. We had convinced ourselves when we had our first chickens while living in New Jersey that they were acting nervous for all kinds of different reasons. We had just created stories around it. And then what it turned out to be is that there was a hawk that had been watching them. They knew it. They knew what reality was, and we were telling ourselves it was something different.
Luckily, none of them got injured, although the hawk did hit my husband in the head as he stood up when it was trying to get them. But that's actually our first application of it. But now we use it for everything, and it definitely applies to pricing. Another one that we mentioned a lot, which actually didn't come from us, which is Wittgenstein, a philosopher, who used the phrase, and I really love it, "A picture held us captive."
And that's the phrase we use. The rest of it, which is going to apply to what we're talking about is "A picture held us captive, and we could not get outside of it for it lay in our language, and the language seemed to repeat it to us endlessly." And what that essentially says is that we get a notion in our head, we get a picture or a story of how something should be, and we get locked into it. And that means that we don't allow for other possibilities. And because it's something that is part of our normal language, because I hear consultants talking about it all the time in terms of assumptions that they're making about pricing. And then the more that gets repeated and repeated, the more you get stuck in that loop. So, what I want to do today is if you're in that loop, I want to help you get out of it.
Because the thing is that, again, if you believe the stories you're telling yourself about your price or decisions you're making related to your pricing, then you're going to likely end up underpricing yourself. Now, occasionally, very occasionally I have met folks who tell themselves different stories, and those stories cause them to overprice themselves. But I would say if you're hearing this, don't worry about it because that is a relatively rare event. So, if you fall anywhere on the continuum, it's likely you're going to fall on the underpricing side.
Now, if you've been doing this a while and you're like, Deb, I nailed it. I got the right price. That's fabulous. I want to celebrate you doing that, but still worth listening to because it's also helpful to always take a look back and say, am I stuck in a story that I've had for a while and maybe it's time to adjust my price up because of X, Y, and Z?
So, one thing I want to talk a little bit about, if you read a recent newsletter I did, I talked about a story that I got locked into when I first started consulting. And so when I first started consulting, who I really wanted to work with is nonprofit organizations, particular ones in the healthcare sector. That's where my heart was. That's what I wanted to do. And by the way, it still is. That's who I work with. And so the narrative I got stuck on essentially went like this. They're broke. They're always bargain-hunting because they can't afford anything. I told myself that they always had to have a discount because their budgets are always tight. And so what I essentially was doing, and it went on and on from there, and this is very common with folks that work with nonprofits. I was essentially building a case against pricing myself fairly.
And this was all because I decided that this story that I created was true. Now, it was easy to create that story because I knew a number of nonprofits that that story actually matched. But what I did is I took those limited experiences and applied them to all nonprofits. I decided—without evidence—that it's going to be true for all of them. And what I found out is, yeah, sometimes it's true. It's not always true. And in fact, I've even found out it's not generally true. And I found that out based on experience and based on finding out what actual reality is like. And what I wasn't doing is I wasn't giving them the benefit of the doubt that they could be really well run financially sound organizations that really all they wanted to do was they just wanted to get as much value as they could afford, and they wanted to make sure that they weren't going to shell up money and not get enough in return.
And that's true of any type of client. But I had locked into that story, and so much so as I said in the newsletter, I kept discounting my price even though there was no good reason to do it. And the other truth is a lot of nonprofits have access to dollars that they can get to pay consultants, and they were willing to pay for the best consultants. They're willing to pay that price if they're able to get the results that are greatly meaningful to them. And it was funny because I had just written that, and then someone in my membership, when we were on a group coaching call, brought it up. She was also thinking because she had a lot of nonprofits who were coming to her for assistance, and she did the same thing I did, which was start to build a story as if what you think is true about them is true for all of them, like they're a monolith.
And so she's thinking, oh, this is what they can't do related to price. And because I had just reflected on this is perfect, and I said, go look at their 990s. Now, 990s are financial forms that nonprofits have to make available publicly because of their nonprofit status. And you could go look at those and they're a good indicator of their financial situation. They actually give you a lot of really helpful information. And when you go look at 990s, what you see is that nonprofits vary widely, widely. You can have nonprofits that have really, really small budgets. So, I actually just started a nonprofit, and I will tell you, our budget is really, really small. Can I go out and pay top dollar for a top consultant? No, I can't do that right now. Eventually, I hope to be able to, but I can't right now.
But there are also nonprofits that are huge organizations that have a budget of several hundred million dollars. They're still operating as nonprofits. They're still doing really good things in the world. So, there's a huge, huge continuum of the financial situation of nonprofits. But if all you do is you default to, oh, no, no, no, this is what a nonprofit means and they're always broken and there's all those other things that I said, you're going to miss an opportunity to do some really valuable mission work and get paid well to do that good mission work and to have clients be delighted to pay you for what you want.
Now, she was wise enough to know that she was constructing a story around it. And so she knew that it was important to interrupt that story before it got really embedded and interrogate it to see if it was actually true. And the good thing about my membership, there's a bunch of people in it, including myself who work with nonprofits. So, she asked the question and the same question I had asked myself, which is, okay, here's the story I'm telling. Is this true?
And when she gave an honest answer and when I gave an honest answer, the answer was, "I don't know." And then she went and found evidence of what is actually true. And so while she was actually on the group coaching, she looked up their 990s and was delighted by what she saw, and it helped her dispel her assumptions and change her approach to pricing because she didn't have the baggage associated with the story that she was telling herself. So, that's one version that tends to show up, and that's one sort of storyline trap that I've gotten caught in.
Another one that's really, really common is that, look, I can't command a high price when I first start consulting. A lot of particularly new consultants or even consultants in their first couple years don't allow themselves to imagine being able to charge a really good price for what they're worth. And often what I see is that you may believe that you have to prove yourself as a consultant, right? You're less valuable because you haven't been a consultant before. And I see that a lot. So, what happens is, which is exactly what I did, is you may end up discounting your price. You feel like you have to have a starter price, right? Because you haven't done this long enough to be able to establish yourself enough as a consultant to command the price that you should be charging. Or worse, you do the work for free. So, that is the ultimate 100% discount that you give folks. So, you're still pricing it, but you're pricing it at zero because you don't think that you have what it takes and you don't have the experience, and you don't have the things that you can point to, to show that you're valuable enough to command a high price.
That is all because of stories. So, that if that's something you're experiencing, that is a story that you have created about what clients will and won't do. And if the story is clients aren't going to pay enough for me because I've only been a consultant for two weeks, I've only been a consultant for two months. Some people are like, because I've only been a consultant for a year. And what I find is when I talk to consultants about this is generally it's really a story based on them having to prove to themselves that they're worthy of commanding the right price. They have to prove to themselves that what they offer is valuable enough to worth paying for, and that that's what sort of generates that story. And then you get into that story loop and it's easier to do this free work or offer a starter price or artificially deflate your prices over a long period of time.
Now, the reality is, and they would find this out if, and I found this out once I stopped discounting and once I realized, “Wait a minute, there's no reason I can't charge for my full value” is that clients aren't paying for how long you've been a consultant. Clients are paying for the results that you can help them achieve. And if you have experience, if you have knowledge, if you have skills that can help them achieve those things, that's the value that you offer them. And that's what your price should be based on. And if you can show up and help them understand that you can help them achieve that, they'll be happy to pay the price. Now, there are some folks that are price sensitive and that's fine. I'm going to talk about that in a second. But most folks would be very happy to pay that price if they believe that you can actually get them that result.
Now, one of the other elements of the story is often, well, I don't have any results that I can point to since I've been a consultant. And often I don't hear the “since I've been a consultant.” But that's kind of implied. And here's the thing is you've got past experience. You have things that you've done. So, if you've been in the work world and you made really good things happen or you contributed to important results being achieved and they are similar to or exactly what they're trying to get, then you have something to demonstrate that you can achieve things.
In fact, what I have found, and I've definitely found this in my own consulting practice, is that often pointing to that experience when you were in an organization where you were in a company and you had to make something happen often gives you more credibility because you had to achieve those results in a real-world setting and you had to live with what happened afterward. So, it wasn't theoretical to you, you were actually in it. You weren't a random consultant who got airlifted in, fussed with things, said, “Oh, here's what you should do,” then left and didn't have to live with the consequences of the recommendations or whatever they did. You were in it and you had to live with those consequences.
That type of experience is extraordinarily valuable and should be part of what your price is based on. And clients are delighted to hear about things like that. So, if this is sort of a story loop that you're finding yourself getting caught in, one of the things that you can do is start to think through, okay, wait a minute. What results have I helped achieve? What results did I directly achieve in other areas that I've worked in? What additional knowledge and skills am I bringing to the table that are really useful for helping the clients that I most want to work with achieve the things that matter to them and solve problems that are vexing them?
And that's part of what you think about when you think about what your price is. And included in that, by the way, is the things that you can help them experience because you're going to show up and you're going to be a consultant that's going to be very responsive to them, and they're going to feel like you care and all of those good things. That's a lot of what clients want to pay for. And it doesn't matter if you're in your first week as a consultant, it doesn't matter if you're in first two months for six months, whatever it is, those are all things that you can talk about today. Those are all things that you can demonstrate today, and those are the things that relate most to your price and what clients ultimately want to pay for.
Now, another one is kind of a big vague story. And so vague stories are really tricky because they're often tied to something that's real, but they're so kind of vague and floating around that it's kind of hard to put your hand on them and say, "Hey, wait a minute. Let me look at you." But the sort of big vague story is if I say a price that feels too high to me or that scares me, then I'm going to get rejected based on that price.
So, that's very similar to the story I was telling myself about nonprofits. That's all the client cares about is what you're going to say about your price. And so there's often a fear of saying a number that feels too big to you. And in this story, we load all kinds of things into that price, like our fears and our feelings of self-worth and all of that stuff so that the price has a big charge to it, and it's our charge. It's not the client's charge; it's our charge. And then we tell ourselves that because I'm feeling this way, the client's going to feel this way and it's going to feel too big to them.
Here's the truth of the situation: unless a prospective client has told you, “Look, we got these budget limitations” or “We're concerned about the price.” So, they've indicated in some way that there's price sensitivities, the truth is you don't know. You really don't know how they're necessarily going to respond to the price. Now, hopefully you've done market intel, and you've looked at sort of things in market. I'm going to talk about that in a second, but you truly don't know at that point what they're going to think about your price, and you're not going to know what they think about the cost of what it is for them to get what they want.
And the tricky thing is, I actually think, and this is kind of counterintuitive, but I think we're telling ourselves that story because not knowing is really tough for a lot of us. It's really tough to sit in the discomfort of uncertainty. And I find that myself and many other consultants will do darn near anything to get away from that place of uncertainty as soon as possible. And deflating our prices often feels like a way to get out of that, right? It's our shortcut to get away from uncertainty. But the problem is that the more you give into that, the more that becomes part of the story you're telling yourself is, no, no, no, this is true. And since this is true, I don't have to sort of confront the discomfort I have with this, that it becomes ingrained. The more you do it, it becomes your unquestioned default.
And again, ultimately what you want to do is you want to replace what you think but really don't know with evidence of what is actually true. So, again, that's where the interrupt. So, interrupt the stories and say, "Hey, hang on, I want to poke and prod at this a little bit and see if it's actually true and identify what I truly don't know. And then what I don't know, I actually want to go see if I can get evidence of what is actually true." And that's the interrupt, interrogate, and then go find evidence of what is actually true so that you have an opportunity to feel a little more confident about the prices that you're putting out. There's still going to be things that might be uncertain. That's part of the gig of being a consultant, but there's ways to manage that. One is, and this is how I like to say it, which is don't let the price be lonely.
So, if you're presenting a price to a client, whether you're saying it verbally or you're putting it into a proposal, don't leave it to sit all by itself hoping to be loved. What you really want to do is you want to pair it with a description of the value for the client, and you want to pair it with that every single time because the price only makes sense in the context of the value that you're going to provide to the client. And that's sort of answering the question, "Hey, what am I getting for the money?" And that's really what clients want to understand. And the problem is what I see a lot is that the price in a proposal, for example, will just be sitting by itself, and often they'll put it first before there's been any description of the results they're going to help the client achieve, before there's any description of how they're going to help them achieve that.
And then when it's all by itself, then one, we feel sort of nervous because now it's going to be, oh my gosh, they're going to reject it because I think it's going to be too high. But it also increases the likelihood that that might happen because they have no context yet to understand what that price is. So, they're just going to look at it and say, do I like that number or not? And that doesn't make any sense. So, one of the ways that you can break out of the story of, oh my God, if a price is high, it's going to be rejected, is to make sure that you have demonstrated, I get you. I get what you're trying to achieve. Here's how I can help you achieve that. And don't mention your price until you've done that. That description of value leads into a price so that now they can say, okay, if that's the value I want, am I willing to pay this price for it?
And a lot of times the answer will be yes. Sometimes the answer will be like, I wish I could afford all of that, but I can't. But how much value could I get for what I can actually afford? So, if you add always, always value into your equation and value into how you describe and ultimately lead people to see what the price is, it'll break up some of the stories that you might be defaulting to. The other thing is that there are ways to present the price that account for price sensitivities either actual or perceived or possible. You may not know if they actually have them, but if you're not certain or you got a little hint that there was, instead of lowering your price because your story tells you, oh, the only way I can handle this is to lower my price, you could instead say, I don't actually know, or they told me they're price sensitive.
The conclusion of that story doesn't have to be me artificially lowering my price. The conclusion of that story can be that I'm going to present them with options for them to pick. So, this is where I will often do something like tiering an offer. And what I mean by tiering an offer is I will present three levels of value. So, here's the basic, here's exactly what you said was most important to you when I talk to you, or here's the basic minimal viable product that I offer that still gives you value that's important to you, and here's what it is, here's why it's fabulous, and here's the price of that. And then you go up a level and then that is everything you get in the basic plus some other things that will get you additional value. And then there's the top tier. And the top tier is the knock it out of the park value.
This is where you're going to get all of this tremendous stuff. You get everything in tier one, tier two, plus you get other things that you've said are valuable or I think are valuable to you. And what that does is it lets the client pick how much value they can actually afford. And so instead of you forcing them on a diet, so you're going to offer sort of minimal price, or you're going to offer them sort of the minimum of what you can do. Even though they told you that they're hungry, you're going to basically say, look, here's three tiers of what I can do for you. You pick the one that works for you, you pick the one that works for your budget, and that's what my price is associated with. And so that's a way to present it instead of giving into the story of I can't present a big number or something that feels big to me or feels too big to me because they're automatically going to reject it.
That's when you think about, well, how do I present it? And if I really, really drive home what the value is of this, does that make the price make sense? Well, if the price makes sense, now you can have a conversation with the client if I'm uncertain about their price sensitivities, if I present it in a tiered offer, that allows them to choose and they're going to choose what they most want and what they can afford.
And so those are the things that I want to sort of drive home. And there's other stories. Oh my gosh, there's so many stories we tell ourselves about pricing. That's what I want you to consider for yourself is what stories are you telling yourself about pricing? So, it's important to pause and ask. And particularly until you get comfortable with charging the price that you should be charging or creating prices or picking pricing models that are right for you is to pause and say, is there a story in this mix when I'm thinking about this that could potentially cause me to underprice myself?
And so maybe what you can do if you're not exactly sure of the answer to that question is think about the last time you created or had to say your price out loud and ask yourself if you held any unverified assumptions. So, if you had things filled in in your story that you hadn't actually verified whether or not that was true and that all got baked into your price, and so maybe think about the last time or the last couple times you had to do pricing and how did stories play into that? And now I say, when you think about that, think about just imagine increasing your price by 10%. Imagine increasing it by 15%, and what was the first things that you felt and the first things that you thought when I said that, right? So, for a lot of folks, this'll give you insights into what your stories are because it's going to tell you, oh my gosh, what's my immediate reaction to that?
And if your immediate reaction was fear, if it was panic or some other sort of immediate negative reaction to it or immediately saying, here's why I can't, can't, can't, then that points to stories that are worth taking a look at. Now, if you've done market research on your price, you know where you fall sort of in the market in terms of what you charge. You've positioned yourself not to be the bargain-basement consultant, but you've positioned yourself well within your market such that you can command the price that you should command, then maybe a 10 or 15% increase isn't right. But if there was a lot of storytelling going on in your head that caused you a land at your price, and you imagine raising it and you're like, oh, Deb, don't make me do that, don't make me think of that, then that tells you where you need to pay attention to.
And those might be ones that you need to interrupt those stories and interrogate them to tease out what is true and what is not true. And that's the funny thing about stories is the ones that stick the best in our head have elements of truth. So, you actually might find things that are actually true in there, but you have to interrogate, are they always true in every circumstance with every potential client? And then what untrue things am I sort of glomming onto that to create the fullness of what this pricing story is. And because what you ultimately want to do is you want to replace those stories with descriptions of what is actually true and what is actually reality. So, in those stories, whatever is actually true, that's great. Keep that. What isn't true or what you're not sure about, that's what you need to dig into.
And the reality of your circumstance, your market, your situation, what you're able to offer, that's what your price should be based on. So, hopefully that was helpful. It's so funny, this has been coming up so much recently, particularly in my membership and other folks that I've been talking to that I just had to do a podcast about it because I don't want stories getting in the way of you earning the income you want. Now, I want to remind you again about my free live training, How To Price Your Consulting Services. Again, it's May 24th, 2023, and you can sign up. It's going to be on LinkedIn. And again, the whole goal of this is to have a better understanding of the variables that go into both picking a pricing model and picking your price and getting clients to say yes to it and getting you the income that you need in your pocket.
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