The Value Equation: How MSPs Set Price

If someone told you to give them one million dollars today, and in return, they would give you two million tomorrow… Would you do it?

Certainly, it would depend on who told you this.

If it was someone like Oprah, you would likely mortgage your house if you had to. You would do whatever you could to get that money because you would know that it would be an honest offer that she could uphold.

However, if this offer came from some random person in your email inbox, you would click out and think “Oh, that’s a scam.” (And, as you should, because in that case, it likely would be).

The point here is, that although you’ll see price is said to be the most common objection in sales…

The price itself is not actually what the person is objecting to.

What they are actually doing is working to evaluate the value and the trust risk balance. They’re doing this so that they can decide whether the investment is worth it to them.

So, while they may be very focused on price, it is actually not a deciding factor for them.

In this post, you will learn about the value equation and how to balance it. When you do this, you’ll see that your customers will buy every single time.

Debunking the Myth of Budgets

It’s true that the concept of budget almost always comes up in sales calls. Yet, it is completely irrelevant.

Why?

Let’s backtrack to that million-dollar metaphor I shared earlier.

If a person is given the option to make a million dollars in one day with a simple investment, they will do it every time, regardless of the price.

What actually matters, is whether they can trust the person proposing the offer. Because before they pay that kind of money upfront, they’ll want to be certain that the person will deliver the next day.

What this idea shows, is that when there is undeniable value and trust, a prospect will always buy.

They may still put importance on their budget in conversations with you. But in the end, they will be willing to bend it in the name of solving their problem. As long as it’s important enough to them.

So, when the value is high enough, the price won’t matter at all. Because the problem you are solving will be more important to them than the money they are investing in solving it.

And, when they can trust you, they will feel that they have far more to gain by working with you than what they may lose if you for some reason don’t deliver what you say you will.

But when either one of these factors is missing from the equation people will often use budget as an excuse.

Have you ever talked to someone with a budget roadblock who then walked away only to go to another company and pay double? That’s because it wasn’t their budget that was the issue. It was either the value they saw in your offer or the balance was off between their trust in you and the potential risk.

If this has happened to you, don’t worry. Here’s how you can harmonize the relationship between these critical factors.

The Relationship Between Value, Trust, and Price

These three factors are in constant relationship, and each influences the others.

To understand how to balance them, you’ll first have to understand what they are and how they function.

Value

It’s no secret that we’ve all head of value. But what is it?

Value is defined as the importance of the transformation in the mind of the customer.

How a customer perceives value relies on two things.

Relevancy

Importance

If an offer is relevant, this will open the door to interest. Once they become interested, they will begin seeking more information to determine whether there is substantial value for them.

When a customer sees your offer as the solution to a problem that is important for them to solve, there is value.

When the value is of high importance and relevancy, the price won’t matter.

Price

Price is pretty straightforward, I’m certain you already know that price is the amount of money paid for value.

What’s important here is that the price can be anything, as long as the value is higher and they trust you.

As your customers might say, they want a ‘bang for their buck’. This is not to say your prices should be low, but the value they’re getting must always outweigh what they’re paying. Hence, the ‘bang’.

If you establish a ton of trust and prove to bring results, you can charge higher prices with fewer objections.

If you’re just starting out, and working to establish trust and handle objections better… You can learn more about how to do that here in this podcast episode.

Trust

The balance between trust and risk is how much a prospect believes you can and will do what you say. And, at the same time are comfortable enough with the potential loss if you don’t provide.

Establishing this balance between trust and risk may seem tricky.

But in fact, it’s simple.

What they are considering here is: Can you and will you deliver?

They wonder if it really will all pan out as you say, or if they will lose money, not see results, and just end up regretting the whole thing.

So, how do you handle this? Well, you might go ahead and try to explain how you will deliver, you might make promises, and even reduce the price. But, reducing the price doesn’t build trust or cut risk. It actually, in some cases, devalues you in your customer’s eyes.

So what can you do?

The answer is to maximize trust and in doing so, you will minimize the risk.

You can maximize trust by promoting yourself using the customer value journey. Go out of your way to connect with your prospects. Work to build genuine relationships with them and nurture those relationships. You can do this by sharing valuable content without asking for anything in return (like this blog). And by sharing success stories from clients you’ve worked with in the past.

You can also build reciprocity with them by simply being honest about what you can and can’t do, posting when you say you will, and responding to comments.

The Value Equation – Harmonizing The Critical Factors

People always buy when…

Price < Value – ( -The Risk You Won’t Do What You Say)

Here a few rules to live by:

The price can be anything as long as the value is greater, and they trust you.

With a high-value offer and foundation of trust, the price can be high and there won’t be many (if any) objections.

Without a foundation of trust, the value must be significantly higher than the price and there will likely be some more objections.

How to Increase Value

As I talked about above, ‘value’ is the importance of transformation in the mind of the customer.

So, while you may believe you have a great high-value offer… What actually makes a difference is what your prospects think.

You might have noticed that when you are talking to a potential client, they seem to be very focused on the price. But, what they’re really thinking is:

How important is it to me that I solve this problem? Value

How much money can I or will I lose if I don’t solve this problem OR how much can I or will I make? Value

Can I trust this person to deliver what they say they will? Trust Risk Balance

If they don’t deliver what they say they will, can I afford to take that loss? (If there is one) Trust Risk Balance

The price itself is rarely on their mind. And if it is, that is only because they don’t value solving their problem enough to invest in it.

So how do you increase this value?

First, you solve a problem that is important to them and do it very well. And, frame it in a way that they can recognize the value easily.

If you can make them money, save them money, and get them clients, you are not ‘providing a lead generation service’. You are recovering revenue and boosting their earning potential. That’s valuable.

If you can nurture their client relationships, you are not ‘providing customer service’. You are ensuring loss prevention. That is valuable.

If you can save them time, stress, or effort, you are not ‘providing assistant services’. You are providing an opportunity for them to focus more on the work they love. That’s valuable.

Once you understand what your clients value your service for and why, focus on that. Rather than the details of what you do.

Then, you overdeliver.

If you promised them a 10/10 result, give them an 11/10 result. Meaning, you deliver and then some.

If you promised something on Tuesday, send it on Monday.

If you promised them a glass of orange juice, squeeze it fresh and let them keep the glass.

Your clients should always feel like they are a priority to you.

So, surprising them in little ways that they don’t expect will make them appreciate and value you more.

And, in return for your great service, they may even send you referrals, or leave a testimonial.

How to Set Price

Knowing how to set your prices can be tricky. Most service-based businesses will price according to the cost of labor and materials.

This mistake often results in them eating into their profits as soon as a prospect points out the cost.

This misconception about pricing infers that the service provider decides the price.

But this is wrong. It is the buyer who decides the price.

The price is always dependent on the balance of supply and demand.

If the buyer is seeking value and they can get it from you or anyone else, they’ll look for the best price.

Alternatively, if they can only get the value from you they will pay whatever price you are charging. So long as it is still worth it in accordance with the value they are receiving.

For example, say you offer a snow removal service in a busy city. You’d likely get many calls from people looking for the best deal on snow removal. If they find a lower price than what you charge, they’ll likely go with that.

However, this would change if you offered the same service but lived in a more secluded area. Let’s say you are the only snow removal person in town. People will call you nonstop to come and remove their snow, and they will likely not even ask for a price, knowing you are their only option.

In the second case, supply is low, and demand is high. So, you would be able to charge much more than in the first scenario.

How to Build Trust

Building trust with your prospects is like building trust in any other relationship.

It starts with giving value without asking for anything in return and ends in doing the things you say you will do.

It is a fact that consumers will look at 3-5 pieces of content before making a purchasing decision.

Why do you think that is?

It’s because they want a bit of value before anything else. They want to establish a connection and see if they can trust the business that they’re engaging with.

Being consistent in checking in is another important factor in building trust.

If you didn’t text your friend back for 3 months, do you think they’ll feel like they can trust you? Your prospects and clients feel the same way.

They look forward to engaging with your content. So, show up for them regularly, answer their questions, and teach them something new. It will go a long way in building trust with them.

Here’s Your Homework

Take the word ‘budget’ out of your vocabulary.

Name your offer and the problem that it solves.

Define the types of people who find tremendous value in solving this problem.

Determine the value of your offer.

Audit the trust risk balance in your offer.

Evaluate your prices in relationship to value and trust risk balance.

Make adjustments to balance the scales.

Go deliver that bang for their buck!

And, last but not least…

Don’t answer emails from random people promising you a million dollars overnight, it’s always a scam.