Transcription
So, I had two questions on the main Luxury Academy channel that were really essentially the same question. One was from a lawyer who asked, "I'm a lawyer, can I charge? How do I charge luxury prices?" And the other one was from um somebody called Carol who asked whether the rules that I talk about in terms of pricing and what have you and charging more um can be applied in professional services like management consulting, you know, as a way for a boutique firm to to compete with big brands and break the client's perception that consulting is a commodity and then to be seen as an advisor instead.
And the short answer to that is you can, but probably not in the way you might actually imagine. You see, the difficulty here, I mean, it's real. It isn't you know, that that that difficulty isn't one that that you've invented in your own head. It is a real difficulty.
When somebody buys an object that they can inspect, it gives them a sense of reassurance. You know, they can pick up the bag. They They can look at the stitching. They can feel the weight of it and even if they know nothing whatsoever about leather, they can come away feeling that they've examined something. Nobody can do that with with your advice though, can they? And I mean, it goes further than that really because, you know, six months later when the deal has gone through or the strategy has worked or the client simply feels better than they did if you're a therapist, they [snorts] still have no way of knowing whether that was you being exceptional or whether it was always going to turn out that way anyway and any competent person could have got them there.
That's called um credence good, meaning something whose quality the buyer can't verify even after they've had it. So, you know, you get this with law, with consulting, or coaching, or with training, or with therapy, or wealth management, or photography, or you know, loads of different service industry, but it's all the same problem, really. And people don't just live with that uncertainty. They want to resolve it. So, they look around for something that they can observe, and they use it as a stand-in for the thing that they can't actually judge, physical product. And the loudest thing available is, of course, your price. And we call this price-quality inference. And it's very well established. It goes hand-in-hand with price-quality bias, but it's not quite the same thing. The thing with price-quality inference is the less able somebody is to assess a thing on its merits, the more weight they put on what it costs. So, your fee is evidence. And in a service, it's very often the strongest piece of evidence that the client has about you, whether you intended it that way or not.
You know, think if if you had a toothache, and you were presented with three dentists. One dentist was £85, one was 160, and one was 320. Suddenly, you wouldn't be going with the £85 one, because you think, "What the hell is wrong with them?" So, you'd be going with the 120, or the 320, or whatever I said. Um most people, if they were in excruciating pain, would probably go to the £300 one, because we just don't trust cheap. And that changes the question, really, doesn't it? It isn't how you justify a high price, because the fee is doing the work of persuading them all by itself. It's what you do around that fee that I either supports it or destroys it. And the thing that destroys it almost always is the breakdown. You take your fee and you split it into things like preparation days and delivery days and travel and materials and what have you. And you do that because it looks, I don't know, it looks thorough or maybe it feels honest and because you know somebody in procurement, you know, a few years ago has asked you for it once or whatever. But what it does do is it turns your fee into a sum of parts. And every one of those parts is something the client can question or remove or hold up against the equivalent part of somebody else's proposal. And that's where commoditization actually comes from. Clients aren't sitting there believing that all client that all consultants or all services are identical. That's not the way the human brain works. What they're doing is they're just working with that breakdown that you essentially handed them.
You know, the hourly rate itself is never really the problem. Um which does surprise people. The most expensive firms in the world bill by the hour at rates that would make your eyes water and nobody is sitting across the table from them feeling that they're buying a commodity. You know, so it's not the hourly rate. It's the showing of your workings that does the damage. So stop putting them into the document. It's as simple as that. You know, familiarity breeds contempt. That's a that's a phrase for a reason.
So what goes in instead is stages. You define the work as a series of pieces. So much for the diagnostic, so much for the build, so much for the handover or whatever the equivalent is in the industry that you work in. Each one is a fixed number attached to a defined piece of work with a stated end, right? So, all of them go in the same document, of course, because obviously no client is going to sign off on the first stage and then trust you to reveal the second stage later on. >> [gasps] >> And the uncertainty that you're all worried about, the case that, you know, runs for 2 years, or the client who changes their mind halfway through, which they do, we all know that. That gets handled by being precise about what each stage covers and what would fall outside it. What you're not doing anywhere in that document is describing your own time and your own effort. So, you're not selling time. This is the most important thing. The document says what the client is getting and what's being lifted off them. It doesn't say how many days it's going to cost you, because the moment somebody reads something like, you know, 3 days preparation on a page, they're going to wonder whether it really needs 3 days. Could it not do 2 days so that I can get that price down? You know, then at some point they're going to challenge your fee. That goes without saying, you know.
Um the thing I would say to you is never ever discount. If you're in the luxury industry and you start discounting, or you want to be in the luxury it start if you want to be in the luxury industry and you start discounting, you're destroying your credibility. Move the scope instead. So, a client, you know, a discount tells a client basically the first number you gave them, you plucked out of thin air. You invented it. And that every number that you give them from that day forward is actually an opening position. And you you're never going to recover from that. So, you take something out instead. So, you can say something like, you know, well, your own team can do the data gathering and then that can make this stage more aligned with your budget. Or you could you know, if you're if you're a coach or a trainer or a therapist or whatever, you could say, "We could do six sessions instead of 10, and then re-evaluate it after the sixth one." So that, you know, they're paying for six sessions instead of 10, but you know, you you What you don't want to do is bring the price down for the 10 sessions, because now they're discussing what they're buying rather than what you're worth, and your rate is still standing um as it was when the conversation ends.
They're also going to compare you with somebody cheaper. That goes without saying. We've all had that, you know, um "Oh, well, such and such charges X amount of money." I mean, don't pretend you don't know what your competition charges, because of course you do. And they know you know what your competition charges, and the queenness of that, don't say things like, "Oh, I don't know how much they charge." It makes you look evasive. Agree with them. Say, "Yes, we are more expensive, absolutely. Or we do cost more." And then attach the difference to something specific and checkable. I get this [snorts] all the time. People will say, "Oh, well, um you're far more expensive than X trainer." And I will say, "Yes, we are, absolutely." Because we specialize in luxury companies. They don't. I don't say that, but the inference is there. You know, so you could say something like, "Well, you'll be working with me directly rather than a junior that you've never met." You know, that's But don't um don't underestimate the the importance of working directly with you, because when you do hire these much larger firms that you're talking about, they They tend to Yes, you'll be talking to a senior partner when you you know, sign the contract. But once the contract is signed, you'll be immediately handed over to somebody more junior.
The thing is though, what you do have to be sure about is that whatever you say has to be fact. If the only thing that you can point to is quality or service or attention to detail or any of these other buzzwords, which you shouldn't be using because they're Um then I'm afraid the client is right. You are interchangeable and you should be charging what everybody else is charging in the mid-market. So I mean essentially everything comes back to being different in a way that you can actually name, right? Yeah. If you can finish this sentence, they come to me when and then what follows has to be something a client would recognize as their own situation in their own words rather than yours, then you're on on the right track. If what you offer, for example, is strategic advisory services for growth-focused businesses or whatever other string of buzzwords AI has given you, no amount of clever pricing is going to rescue that because the a price only becomes plausible once the thing it's attached to is specific.
And that also has a consequence that people don't like, which is that if you're the person for a particular kind of problem like us as luxury trainers you have to be prepared to say no to the work that isn't it. So you if you're a luxury trainer, you have to be prepared to say no to clients who are not in the luxury industry. And is that difficult? Hell yes, that's difficult. Especially when you're new and you're trying to get established. It's it's a a traumatic experience to have to say to a client, "I'm very sorry, we are not the right training company for you." You know, anybody can put a specialism on a website. That costs absolutely nothing to write. What makes it believable is the client sitting in front of you being told that the their job or what they want isn't the thing that you are best at and isn't the thing that you offer. Of course, the temptation is, especially if it's a quiet month, to say, "You know what? I'll make [snorts] an exception and do it." What you should be saying is that I can't help you with that. I don't think we would be the best partner for you. Here's who you ought to be calling instead. Because most of the time, that's actually the only refusal a client will ever actually witness. Um and yes, it cost you real money on the day to do it. But that's precisely why it carries weight. That's what we mean by costly signaling. You know, it's something that would be too expensive for a worse operator to to imitate. And it's the difference between having a specialism and having a paragraph of marketing buzzwords. But is it difficult? Yeah, it's difficult.
So, you know, if you want to start charging more, get rid of all the surplus crap around your fees. Um put them all together into stages and um you know, turn away business that doesn't align with what you're doing. Is that going to be difficult? Sure, it's going to be difficult, but you have to do it. Anyway, there you go. I hope that answers your questions and helps. If you've got any more questions or whatever, put them in the comments and I'll get to them. See you in the next one.