Aaron Hoos

As your contacts make their way through your sales funnel, some of them will eventually reach the point where they agree that you can help them and they become your customers.

So what are you going to sell them?

It’s easy to choose a product or service and just pound that one out over and over, handing it to each customer and taking their cash. But you’ll end up putting in a lot of time attracting an audience, generating leads, and presenting to prospects. What you need is a series of products that you can sell to your customers. So how do you come up with these?

I’m going to show you a simple chart I’ve been using. I’ve been using it for a few clients’ businesses, as well as my own business. Now, the process I’m going to show you can be used for any business, although I’m giving you an example of a company that sells info products and does consulting (because that is what a lot of my clients do). However, you can apply this to any business, especially if your existing business is trying to branch into selling info products.
Start with a 2×2 chart, below. I’ve labelled the horizontal line “DIY” (Do-It-Yourself) and “DIFM” (Do-It-For-Me). This spectrum is the amount of empowering advice or “hands-on” help you provide. I’ve labelled the vertical line “Specific” and “General”. This spectrum is the amount of detail you provide.

Once you have this chart built, it’s time to add the products or services you offer (or plan to offer). I’ve given you a typical example of the kind of offerings that a lot of my clients have.

In this example of a “typical” client, they have charted out an ebook that empowers their do-it-yourself customer with high-level but still helpful content. Other products and services are placed in the appropriate places – ecourse, toolkit, coaching, and project management. Consulting is the most detailed and most hands-on of all the products and services offered by this example customer.

In general, customers tend to move from general/DIY products and services toward specific/DIFM products and services. (See below). The general/DIY ones (lower left) are “entry level” while the specific DIFM ones (upper right) are for more sophisticated, successful customers.

That’s the easy part. Anyone can plot their existing or planned products and generally figure out where they should go.

THESE NEXT STEPS MAKE ALL THE DIFFERENCE

Price your products with ease
Pricing is your products is now simplified because your products and services tend to increase in price in the same direction that your customers become more advanced. (Not always, but usually). This makes sense: They’re willing to get their feet wet with an early-stage purchase. As they discover the potential value you provide, they’ll be willing to part with more and more of their money while handing over more hands-on responsibility to you. If you know any of your ideal price points, you can work forwards or backwards to help you decide on the others.

Create a “sales funnel within a sales funnel” for your customers
Once you have plotted out your existing or planned products, draw a path from your entry products to your more sophisticated ones. I’m not saying that you should draw arrows from each product to every other product. Rather, strategically think about what your customers will want to do next. Give them a couple of options, DON’T overwhelm them.

Once you’ve decided on a “sales funnel within a sales funnel”, set up your business so that your customers will be naturally presented with the next thing at the right time. For example, at the end of your ebook, put a link to a sales page for your ecourse or for your toolkit (and include a coupon code so they are incentivized to buy!). Or, at the end of your toolkit, offer a link to your coaching and project management offerings (and include a special “2 hours of free coaching or project management” incentive).

Build additional products and services
One of the goals of your business should be to increase the amount of money your customers spend with you. After all, you’ve already done the hard work of selling to them, now it’s just a matter of reminding them the great value you already provided them and letting them know that even greater value is available. (Okay, I’m simplifying it a bit, but it IS easier to sell to existing customers than to existing prospects).

Using the same chart, identify the gaps and develop products and services that can be added.

You’ll notice that there are no products or services offered in the entry-level DIFM area (lower right). Perhaps you would consider a lower-priced outsourced version of your consulting practice, or maybe you might want to licence your system for others to do.
There’s also a big space in the specific DIY area (upper left). This might be a good place to offer roundtables, master classes, and insiders’ clubs.

And there’s a big gap between the project management offering and the consulting offering (upper right). Is there a middle ground you can offer between project management and consulting? Maybe a guided coaching/consulting hybrid service can be added here, where you do some of the work and the customer does some, too.

WHAT’S NEXT
This is a simple tool to use, and it works for new and existing businesses who are trying to figure out what to do with existing products and services or planned ones.

This chart still works for businesses that don’t sell information products. In fact, several types of businesses can use the chart as-is to sell their services and advice. A dentist, for example, would have their dentistry in the upper right corner, but on the lower-left corner they might sell toothbrushes. (Okay, that’s maybe an extreme example but I wanted to show you what I meant).

If you have existing products and want to sell more, or if you are thinking about product development right now, get a sheet of paper and start thinking about your sales funnel within a sales funnel.

I’m on a bit of a health-kick so I stopped in at a health food store and wandered around the aisles. Wasn’t looking for anything specific but was just acquainting myself with the probiotic/organic/gluten-free melee of over-priced, ultra-hyped foods and snake oils.

There were 3 clerks at the counter (and it was a tiny store so I’m a little curious about their staffing costs, but that’s another blog) and one of them asked if I needed anything. I told her I had just happened to be walking by and thought I’d browse around; I wasn’t looking for anything specific.

Then she said: “We’re having a huge store-wide sale on almost everything on Friday. Why don’t you take a flyer and check it out.”

Uhh, okay. Without actually saying the words, she basically told me not to buy anything today but rather to come back on Friday and spend less.

From a customer-perspective, I appreciate that. I want to spend less, just as every consumer does in any given transaction. But from a business-perspective, it’s not so good. I could have been easily coaxed into buying something today.

Big, advertised sales are dangerous that way. The argument could be made that people spend more at your store during a sale than they would have spent during periods of regular pricing. However, I think big sales run the risk of keeping people away until sale time.  And if you have sales regularly enough, you’ll end up getting the people who ONLY shop when you have a sale.

Now, there are times when a store-wide sale is appropriate but, in general, you should consider putting just a few items on sale (perhaps rotating what goes on sale). That way, you’ll get the customers (like me) who are willing to spend full retail price but the sales items help to make non-impulse items into impulse items (because of the unpredictability of what is on sale). You’ll also help ease another situation: Where regular customers pay the regular high prices and perhaps miss out on a sale and feel that they are getting hosed.

In case you’re wondering, here’s what she should have done instead:

After I said I was just browsing, she should have asked if I was looking to get healthier or to manage a food allergy. From that response (I would have answered “to get healthier), she should have asked about my current food intake and level of activity. Just general, non-threatening questions. Then she could have directed me to the front of the store where the vitamins and minerals were or to the back of the store where some of more intense health foods were.

While I’m on my rant, I should say this: Health food stores have a huge opportunity that they are missing out on. (Not just this health food store but others that I’ve seen, too). Health food stores have an opportunity to position themselves in the same way that pharmacists and dentists and optometrists are positioning themselves right now: As integral members of “your healthcare team”. Health food stores should have well-trained clerks dressed in white lab coats with access to a bunch of health resources. (Yes, I’m aware of the risks that could come with these clerks making a diagnosis and I would never suggest that they should go that far).

I read a great article written last year by Adrian Kingsley-Hughes in ZDNet.com called “The Price Factor” that talked about the problem of falling computer prices.

It’s a problem because computer companies risked it all for marketshare to the point where profit margins are razor thin.

And, as Kingsley-Hughes points out, consumers don’t know any better because they don’t understand the relationship between price and value of the computer they bought. He humorously points out how intelligent consumers will buy the cheapest computer possible but expect it to be a supercomputer when they get it out of the box.

THERE’S A DEEPER ISSUE
Computer manufacturers have not done themselves any favors with this low-cost provider mentality. But the real problem, in my opinion, is the price-to-value ratio that customers perceive.

If they buy a $1,000 computer or a $5,000 computer, can they tell the difference? Only the savvier, educated consumer would but most wouldn’t. Maybe down the road the average consumer will discover the difference but early on in the sales funnel they certainly wouldn’t. A computer is a mysterious device to most people and price isn’t clearly linked to value prior to the purchase. It’s not really linked to value until long after the product has been paid for.

And it’s true for other products and services as well: When the value is unclear, customers will measure with price because that’s all they can measure by. The result is likely to be an unhappy customer… no matter what price they paid. (Mabye they found a place to buy it cheaper or because the service isn’t very good, etc.).

However, when value is clear, they can make a more educated purchase decision. But this leads to the next problem: Business owners who understand the importance of highlighting value can end up spending too much time on features and end up commoditizing their product. Their menu of products or services works like a dial: Customers who want to spend less can dial down the service and receive less; customers who want to spend more can dial up the service and receive more.

AN EXAMPLE
A perfect example is going on right now in the Smartphone industry. Smartphones are highly commoditized — in hardware features and service features, and the resulting prices. In the midst of this price-war, Apple’s iPhone is happily a higher-end phone that is in such demand there are waiting lists for it.

While most phones are commoditized, Apple has clearly and cleverly established charge-what-it-wants dominance because of the value people associate with the iPhone.

HOW CAN IT BE FIXED?
First, educate your customers so that they know that your prices aren’t arbitrary. Help them to understand that your products and services are priced higher because they have a higher value. Bring clarity to what goes into your products or services. However, be mindful that you don’t commoditize your prices. There is a relationship between price and value but it shouldn’t be a strict apples-to-apples ratio. Avoid pricing your products so that they pay X for a widget and X+1 for a widget with one extra feature.

Next, focus on the value of the benefits (not the value of the features) and make your price an expression of that value.

Then, make sure that you recognize and position the value of the product or service in relation to the price all the way along your sales funnel, not just as a quick obstacle the prospect needs to overcome before they become customers. Think about your price-to-value ratio as an ongoing element throughout your sales funnel — something you highlight in every stage.

In his excellent article (from 2008) about the fees you charge, Duct Tape Marketing’s John Jantsch says that you should avoid hourly rates and instead set your fees based on the value you deliver.

Jantsch is correct and as I was reading this article I kept agreeing with everything he said: Yes, charging per hour (or per-word or per page) does commoditize work. Yes, charging per hour (let’s call it “per-[metric]“) does sometimes cause disagreements with clients about how long things should take. Yes, charging value-based fees does place the emphasis on the value of your work rather than on how long you spent doing it.

As usual, Jantsch had good things to say on this topic (and what’s more, he quoted a consultant and author whose books I own and read — Alan Weiss).

HERE’S WHERE I DISAGREE WITH JANTSCH
Charging value-based fees is not as easy as Jantsch makes it sound. It’s not simply a matter of suddenly switching from one to the other and I think there is a case to be made for per-[metric] rates.

Per-[metric] fees are transparent: Frankly, it’s easier to set your prices on an easily identifiable metric that all parties can agree on. There’s transparency in a per-word rate or per-page rate or per-hour rate. Clients like seeing the common denominator that things “boil down” to.

Per-[metric] fees are expected: Like many other writers, I quote on all three rates (per-word, per-page, and per-hour, depending on the type of project) simply because that’s the “language” that my clients speak. They expect it and I find it convenient because I don’t have to explain the metric to them. Most of my work is achieved through proposals and the requests for proposal that I’m responding to will frequently outline the exact metric that they expect to use… and it’s never “business value”.

Per-[metric] fees take less time to quote: I don’t have to quote and quote and quote every time they need a new project. My clients know what I charge and if they see the value I offer, they will often find the budget to pay for additional work.

Per-[metric] fees rely less on past value added: In the highly competitive markets I work in, my clients aren’t exactly forthcoming about the successes they’ve had and the degree to which my work contributed (making measurable testimonials a little more challenging).

Per-[metric] fees are easier medicine to swallow, especially for small clients: Per-[metric] fees aren’t that different than unbundled fees you see in other selling scenarios. Clients — especially small businesses — will find an ongoing, seemingly more quantifiable rate much more affordable and “accessible” than a great big unexplained dollar amount from a value-based fee (even if that dollar amount is spread over several months).

Per-[metric] fees keep project scope manageable: Maybe it’s me (yes, it’s probably me) but when I see a value-based fee, I expect that to be for the finished service. And scope creep doesn’t seem to be accounted for because the value of the end state doesn’t change. So charging a value-based fee seems to be an invitation for scope creep. But a per-[metric] fee is a great way to help manage scope because you can point to the changing metric as a need to increase the budget or maintain the current scope.

IS JOHN JANTSCH WRONG?
I don’t think so. I agree with Jantsch in theory but I find his advice (on this matter) to be less helpful in practice. Jantsch is a respected guru and didn’t get where he is by being wrong.

Value based fees DO work and I would love to live in a world where my work could easily be quoted based on value. Certainly a degree of fame can help you charge whatever you want and the value perception will be there. But I’m not there (yet).

And, to some degree, I think Jantsch realizes this as well. After all, his books The Referral Engine and Duct Tape Marketing are priced under $20 and his Ultimate Small Business Marketing System costs up to $399… (even though the value of each product is arguably much more than that).

THE END OF THE STORY IS THE SAME
Regardless of whether you charge a value-based fee or a per-[metric] rate, the end of the story is the same: You’ll only be hired if people are willing to spend that amount. And one of the ways they will decide whether to hire you or not is by considering the value they will derive from your work. (Yes, they WILL make that consideration even with your per-[metric] rate).

So your job is to position yourself as being worth what you charge… no matter how you charge.

IT ALL COMES BACK TO POSITIONING
How you present yourself and your products or services is the factor that will determine whether or not people spend what you ask them to spend. So, if you want to make more money then don’t worry so much about whether you’re charging value-based fees or a per-[metric] rate… instead, market yourself even more than you have. Explore new marketing opportunities. Flood the web with content by you and about you. Collect testimonials. Network relentlessly.

Then you can charge whatever you want… and however you want.

I was at the mall on Sunday and walked past a nutrition supplements store. (You know, the kind that sell Omega-whatever or Ginseng-something-or-other). Prominently displayed in their window was a sign that said:

“We’ll beat any competitor’s price by a dollar!”

This seems absurd to me — a frigging buck! They have products in the store that retail for anywhere between $2 and $200. Sure, on the smaller-priced items, that dollar might mean something. But on the larger priced items it becomes a ridiculous offer.

How many people are going to see something at one store, get in their car and drive to the other store to save a dollar? Maybe they’re hoping for people who get flyers in the mail to bring in a competitor’s flyer… but $1.00 isn’t a compelling enough offer. It might get people who were going to go into the store anyway but it won’t bring in people who weren’t going to come in.

If you’re going to have a price guarantee, give it some teeth. Don’t just offer to match prices, and don’t offer something insulting like $1.00 off. Make it substantial and you’ll get people into your store who weren’t going to come in anyway. Make it substantial and you’ll have people remembering it and telling their friends and actively looking for things to buy from your store.

[Image credit: gopal1035]