(This post was originally published on the International Coaching Federation’s blog, July 24, 2015)
Wow – there is a lot of interest around pricing. We had 13 coaches from around the world sign up for Tea with Tana, a live, interactive conversation about Part One (a Coaching Approach to Pricing your 1:1 Coaching Programs) of this 2-part post on Pricing and four requests for a PDF of the blog post.
Today’s post – Part Two – A Coaching Approach to Pricing your OTHER Offerings, will 1) encourage you to consider diversifying your portfolio of offerings to increase the chances of building a sustainable, long-term business, and 2) provide a detailed example of how to think about pricing these other offerings.
Thank you to Grace, who replied on the ICF Blog and who said she has noticed that “coaches in the main are very reluctant to talk about their pricing philosophy with fellow coaches”.
Our belief in the global community of coaches we are co-creating that it’s important to model collaboration and support each other by sharing openly as we build our businesses. And that we override ego and remind ourselves that there are more than enough clients out there for all of us. One coach will resonate with me, and another will resonate with you.
All of our gifts are needed as the world needs lots of course corrections right now.
So – back to pricing….
Here are 3 different philosophies identified by Andreas Hinterhuber and Stephan Liozu in an MIT Sloan article called “Is it Time to Rethink your Pricing Strategy?” to consider when pricing your coaching services, as well as any other offerings or products you have.
1. Cost-based pricing.
Here, pricing decisions are influenced primarily by accounting data, with the objective of getting a certain return on investment or a certain markup on costs. Typical examples of cost-based pricing approaches are cost-plus pricing, target return pricing, markup pricing or break-even pricing. The main weakness of cost-based pricing is that aspects related to demand (willingness to pay, price elasticity) and competition (competitive price levels) are ignored. The main advantage of this approach is that the data you need to set prices are usually easy to find.
2. Competition-based pricing.
This approach uses data on competitive price levels or on anticipated or observed actions of actual or potential competitors as a primary source to determine appropriate price levels. The main advantage of this approach is that the competitive situation is taken into account, and the main disadvantage is that aspects related to the demand function are again ignored. In addition, a strong competitive focus in setting prices can exacerbate the risk of a price war. The 2005-2009 price wars in the domestic car industry in the United States are a good example of this, and similar developments have occurred in the U.S. airline industry. Competition-based pricing approaches are frequently justified on the grounds that price is one of the most important purchase criteria for customers.
3. Customer value-based pricing.
This approach, which is also often called “value-based pricing,” uses data on the perceived customer value of the product as the main factor for determining the final selling price. Instead of asking, “How can we realize higher prices despite intense competition?” customer value-based pricing asks, “How can we create additional customer value and increase customer willingness to pay, despite intense competition?” The subjective and quantified value of a purchase offering to actual and potential customers is the primary driver in setting prices. Customer value-based pricing approaches are driven by a deep understanding of customer needs, of customer perceptions of value, of price elasticity and of customers’ willingness to pay.
In addition, as I shared in the Part One blog post on Pricing, it is important to decide if based on your experience and skill, as well as your personal clarity, you want to be known as low cost, good value or high end in your pricing. And whether you want to be known for discounts or staying firm on your pricing and being willing to lose the client if they are not a right fit. This provides guidance for the end pricing as well.
The following is a pricing example for our offering of a 10-week group conversation series (for example, Authentic Leadership Conversations™ for up to 15 participants.
Pricing Philosophy: Cost-based pricing (series for the public where you sell seats to separate individuals)
Your costs include:
- Room Rental of $100
- Refreshment costs of $150
- Materials printing costs of $150
Your time (1 hour prep and 2 hours delivery / session for 10 sessions = 30 hours @ $175/hour = $5250
Return on your investment expected (ROI) is 10% of expenses = $565
Subtotal Costs = $5650
Total Costs + ROI = $6215
Price/participant/Series (@15 participants) = $415
Pricing Philosophy: Competition-based pricing (series for a department or team in an organization where you provide a proposal to the team leader)
Research shows other facilitators charge between $150 and $350/hour for similar facilitation.
You price at an hourly rate of $175 (for 1 hour prep and 2 hours delivery)/session = $525 (plus tax and client pays expenses for materials, travel and refreshments)
Pricing for your 10-session series is $5250 (plus tax and expenses for materials, travel and refreshments)
Pricing Philosophy: Customer value-based pricing (series for a department or team in an organization where you provide a proposal to the team leader)
Based on the organizational client you are providing the proposal to, and conversations you have had to identify what they value and how your program can support you to deliver that value, you have determined the value drivers to be:
- Improved team engagement
- Improved team member wellness
- Improved ability to communicate effectively in difficult conversations
- Improved ability to be authentic and make emotionally intelligent choices
In order to deliver this value, you may intuitively believe that the client will pay $7500 for this value as they would have paid $5000 plus for individual coaching proposals for their team members.
Pricing is $7500 for the 10-week series (plus tax and expenses for materials, travel and refreshments)
Here are some questions you can reflect on to develop your pricing philosophy for your OTHER offerings. Most of them are the same as the Part One – Pricing blog post. I have included the initial questions here, with a few important additions, for ease of reference.
The questions begin with getting the Right Mindset and Clarity to develop your pricing philosophy; second is to set up the Business Rigor and Discipline that is required to ensure everything you do in terms of pricing is aligned to your personal brand; Somatic Support is third (i.e. how will you align your body with your mind and heart in order to manage the “discomfort of the ask” for the pricing you have decided upon); and the final bucket is Learnings and Celebration as you learn and evolve.
Right Mindset (Clarity for Your Personal Brand)
- How do you think about pricing currently?
- What is your pricing philosophy? Do you want to be known as high-end, good value or low cost? What feels right given your personal values, vision – i.e. personal brand?
- What are your primary clients’ expectations for pricing? Your secondary clients?
- Are they the same or different?
- Do your clients work with other kinds of practitioners where they are familiar with the range pricing fits within?
- What fees do other coaches in your field use? Do they have the same pricing philosophy as you do?
- Have you tested your pricing out with your primary clients? What feedback have you received?
Business Discipline and Rigor
- What OTHER offerings do you have? How will each offering support you to both add value for your clients and allow them to know you as a potential Coach for themselves and others? (i.e. from our example above, an Authentic Leadership Conversation™ Series provides both a learning opportunity for participants, as well as a way for you to build a pipeline of potential 1:1 coaching clients).
- How much will you price your OTHER offerings?
- Will you price them using a cost-based, competition-based or customer value-based model?
- Will you have “hard” costs of materials you provide to clients (i.e. an assessment or reference book)? How are these included in your pricing?
- Will you offer complimentary sessions? If so, how long and what will is your intention for them?
- How and when will you communicate your pricing? In an initial meeting? Through a formal proposal (that when agreed upon becomes the contract)?
- If the overall price for your OTHER offerings is too high for the client, what is your default response? Do you reduce the price or the scope?
Somatic Support (Right Body Language)
Do you have an ongoing practice of paying attention to when you are aligned with your authentic self and values? If not, reflect on the following:
- What occurs for you in the body when you reflect on your OTHER offerings? Is it aligned with your authentic self or your personal brand? Where do you notice it in the body? What do you notice?
- What occurs for you in the body when your pricing is out of alignment with your personal brand? What do you notice in the body and where?
- How will you adjust your pricing to bring it into alignment?
How could you shift your body language, in the moment, to support you to stay present through the discomfort of asking for the pricing that feels aligned with your personal brand?
As a reminder, have you learned about the ABCs of self-managing? How often are you practicing this each day?
Learnings and Celebration
- What are you learning about your clients as you test your pricing?
- What are you learning about your self as you evolve your pricing philosophy?
- How will you apply what you are learning?
- What is going well in terms of pricing? How will you celebrate your success?
Email me at email@example.com if you would like a PDF copy of this blog post.
Want to discuss this topic some more? Join me for a FREE group “Virtual Tea” and conversation on the following date and times. This is a live interaction with Tana and other coaches – questions are encouraged!
Simply RSVP for the time that works best for you. See you soon!
Date: August 10th