pricing, fees & billing rates

follow the standards.

by august j. aquila

in the old days you could go into a shoe store and purchase sneakers or gym shoes. nowadays, there are tennis shoes, running shoes, cross trainers, aerobic shoes, basketball shoes, soccer shoes and the list goes on and on.

more: make the value curve work for you | how utility and value affect pricing | the four phases of service life | marketing orientation is what firms need
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perhaps the billable hour paradigm soon will go the way of the gym shoe. accountants need to realize that in pricing their services, one pricing method will no longer do. as with athletic shoes, accounting and consulting services can be priced in many different ways.
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does your position match client perception?

by august j. aquila

there is a completely different way of looking at value and it is tied into the type of accounting or consulting work that is available in any given market and the type of accounting or consulting work that your firm provides. thirty-plus years ago william c. cobb wrote “the value curve and the folly of billing-rate pricing,” providing a great deal of insight into the concept of pricing and value. many of the ideas that follow are based on cobb’s article.

more: how competitors drive pricing | how to leverage demand in your pricing | the four phases of service life | what we know about pricing strategies | make the most of your marketing mix | marketing orientation is what firms need | when hourly billing hurts profits
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in discussing legal services, cobb notes that sophisticated clients do not tie benefits to hours. rather, there are certain types of services that have a significant impact on the client’s business. the key words here are “sophisticated” and “impact.”
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eight kinds of utility and four perceptions of value.

by august j. aquila

if indeed we believe the phrase “perception is reality,” then it is the client’s perception that is the only reality. ultimately, only a client can determine the value of your service, that is, the fee he or she is willing to pay. if the client perceives that he or she has received a benefit there will be some perceived value attached to the service.

more: how competitors drive pricing | how to leverage demand in your pricing | the four phases of service life | what we know about pricing strategies | make the most of your marketing mix | marketing orientation is what firms need | when hourly billing hurts profits
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consciously or unconsciously, the client’s determination of the correct fee for a service is related to two concepts: utility and value. let’s look at these two concepts and how they apply to setting prices.
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you need to know the four types of competition.

by august j. aquila

intensive price competition in most professional service industries is now a way of life, from hotels to airlines, from car rentals to telecommunications and from law firms to cpa firms.

more: how to leverage demand in your pricing | the four phases of service life | what we know about pricing strategies | make the most of your marketing mix | marketing orientation is what firms need | when hourly billing hurts profits
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an important factor affecting a cpa firm’s pricing policies is competition. as clients and prospects become more educated about cpa firms in their market, more sophisticated about the services offered, and more cost-conscious, pricing becomes more important and more firms stress the price of their services, especially in competitive request-for-proposal situations. read more →

implementing service differentiation, direct sales and promotion.

by august j. aquila

economists define demand as a schedule of the various amounts of an item (a good or service) that buyers will purchase at different price ranges during a given time period. according to the theory of price elasticity of demand, there is an inverse relationship between price and the quantity of an item bought. in other words, as the price of a service decreases, the quantity demanded increases and as the price of a service increases, the quantity demanded decreases.

more: the four phases of service life | what we know about pricing strategies | make the most of your marketing mix | marketing orientation is what firms need | when hourly billing hurts profits
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it’s very difficult for professional service firms to increase demand by offering a special pricing. for example, if a law firm offered a discount divorce, would happily married couples look for a divorce, or if an accountant offered a lower price for an irs tax examination, would people who did not receive a notice be at all interested?. in short, it has been difficult for most cpa firms to accurately estimate the demand for their services.
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where penetration comes in.

by august j. aquila

pricing in the real world is much different than in the accounting profession. usually, wholesalers and retailers set their prices by using markups as the product moves through a distribution channel.

more: make the most of your marketing mix | marketing orientation is what firms need | when hourly billing hurts profits
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producers or manufacturers usually set a list price. think of the manufacturer’s suggested list price on the window of a new car. car dealers will use various methods to price the new vehicle. let’s look at the most common pricing strategies that you may consider.
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