How to Develop Solutions-Based Pricing

A few months ago, I received a request from a large company that wanted me to speak to their 100+ marketing and communications team about the PESO Model? . When I quoted my price, he gasped and said, “But it’s only an hour of your time! Surely you don’t charge that as an hourly rate.”

No, I don’t. And it’s not just an hour of my time.

I told him the price is built upon the years and years I’ve spent building my expertise. It’s the decade I’ve spent perfecting the PESO Model. It’s the marketing I’ve put behind the brand so that, ten years later, he’d want to hire me to fast-track his team to learn how to use it.

He still couldn’t understand it, and I refused to lower the price to $500, which is what he wanted to pay me, so you can see we arrived at an impasse. I know some people would say, “But Gini! You gave up $500 to prove a point!”?

And maybe you’re right.?

But training 100+ marketing and communications professionals on my intellectual property is worth far more than $500. If they put all those people through the PESO Model Certification? , they would pay more than a million bucks.?

But sure, let me fast-track it for you and train all of them for $500. After all, it’s just an hour of my time.?

I also believe some of the pushback is because I’m a woman, but that’s a topic for another time.

All the Different Pricing Models

A small group of agency owners and I recently discussed value-based pricing , which technically is setting a price based on the value your client places on the service. But when agency owners talk about value-based pricing, they mean, “I’m going to charge you a premium for my expertise.” This is actually prestige pricing , not value-based pricing, but we talk about it as if it’s the latter.?

Semantics aside, I’m not sure either approach is right. It’s incredibly challenging to price based on how you value your service because the end-user should determine what they’re willing to pay for it. But you should definitely be paid for your expertise and intellectual property, and sometimes that means the client doesn’t value it the same way you do (as evidenced in the speaking request I got).?

In our business, what’s important to an executive or client? Whether or not we can help them tell their story in an interesting and compelling way that drives their customers to action.?

How do you do that?

Charging for Your Expertise

For some of you, it might be through your media contacts who will publish feature stories and in-depth articles about the organization, its products or services, or the people inside it. For others, it might be through owned media and using shared, earned, and paid media to distribute and grow your reach. For others, it might be one specialty, such as videos or podcasts.?

Whatever it is, your expertise is in helping to tell a story that drives someone to action—and that’s what you should be paid to do.

I’m one of the fastest writers on earth. People say to me all the time, “How do you produce so much content?” Truthfully, it’s because I’m fast and efficient. Sure, I spend a lot of time reading and observing. I ask a lot of questions. I’m curious. But when I put proverbial pen to paper, I can pump out 2,500 words or more in less than an hour.?

So, let’s say I’m writing a white paper for a client, and it takes me an hour to draft the whole thing. With a few tweaks and some typo edits, it’s ready for design. Should the client pay for an hour of my time? Or should they pay for the value of the white paper??

Obviously for the value of the white paper!

An Oldie But Goodie

Likewise, in 1994, FedEx was looking to update its brand identity. They hired Landor Associates to create a new logo . During the design process, the team noticed that the negative space between the ‘E’ and ‘X’ could form an arrow. This insight came serendipitously and was not something they anguished over for hours. They presented it, and FedEx loved it. They have used the logo for 30 years. It has won 40 design awards and is considered one of the most recognizable logos in the world.

And yet, it emerged from a simple yet brilliant idea that took only moments to conceive but has had a lasting effect on the brand’s identity and value.

It further demonstrates my point. Should FedEx have paid for the 15 minutes of brilliance and the two hours it took to create the arrow in the logo? Or for the $18B in brand value it helped to create?

I’m going to assume your answer is the latter.?

Enter Solutions-Based Pricing

And I can hear some of you now…”But Gini. How do we get paid on brand value 30 years later?”?

It’s a fair question. And that’s where solutions-based pricing comes into play, which is different from prestige-based and value-based pricing.

Do you hate me yet? LOL!?

Whatever you want to call it, values-based, prestige-based, solutions-based, or just how the heck you price your work, you essentially want to price your services based on the value of the solution you provide to the problem versus the time or resources you spend. This approach focuses on outcomes and benefits rather than inputs.?

Nine Steps to Solution-Based Pricing

Solution-based pricing considers what clients are willing to pay for your service’s benefits, results, or solutions. This strategy aims to maximize profits while ensuring that your clients value the service they receive, which can lead to increased customer loyalty, retention, and satisfaction.

Get a notebook and pen out. You’ll follow a nine-step process to charge only for solutions, so you’ll want to take notes!

The nine steps are:

1. Conduct a value assessment
2. Develop solution packages
3. Use case studies and ROI examples
4. Implement value-based discovery sessions
5. Educate clients on the value proposition
6. Develop a solutions-based pricing formula
7. Incorporate ongoing value assessments
8. Address common objections
9. Gradual transition strategies

Let’s go through each of them.

Conduct a Value Assessment?

The first step is to master the art of value assessment. This process involves fully understanding the potential effectiveness of your services on a client’s business. This means you have to figure out how your work affects the goals of your clients’ organizations.

For instance, can you point your work to revenue increases or cost savings? What about risk mitigation or reputation saving? What about lead generation or pipeline filling??

Look at all of the results you’ve gotten for clients in the past year or two, or, if you’re just starting out, look at the results you got as part of a team at your last job. This is where you’ll start.

If you can tell a prospect that you can increase their revenue by X%, fill their pipeline with X leads, rebuild trust after a crisis, or predict the next one, suddenly, you’re talking about real business effectiveness, which almost everyone is willing to pay for.?

Remember, the goal is to shift the conversation from “How much time will this take?” to “What is the potential return on this investment?”

Create Solutions-Based Pricing Packages

I have a client who offers a 45-day strategic planning package, which allows them to get to know their new clients really quickly and the senior leadership teams to get to know her agency and her team. Plus, she and her team are able to deliver something tangible within the first month of working together, which you know is a pain point for most clients.

She charges a pretty penny for it and probably does one or two a month. Her clients find a lot of value from it for all of the reasons I mentioned, but also because they work together to craft the plan, and everyone fully understands the stakes at play.

But every once in a while, a prospect comes along who can’t afford the price tag but really wants to work with her and her team—and, likewise, they’d like to work with the prospect.

So she took her in-person and resource-heavy program and made it into a DIY program that the prospect can do independently. She charges about 85% less than the big package, but she’s able to sell a handful of those every month without much work from her or her team.

Creating tiered solution packages works, and you know I love passive income for agencies.?

Start by identifying your clients’ most common problems and the solutions you provide. Then, create three to four packages that address these issues at different levels of comprehensiveness.

For example, you might offer a “Brand Awareness Boost” package, a “Crisis Management” package, or a “Full-Scale Reputation Management” package.?

Each package should clearly describe what’s included, the expected outcomes, and a fixed price. This approach allows clients to choose based on their needs and budget while also demonstrating the value you provide beyond your time.?

It also simplifies the buying and selling processes for clients and you, and it works without you putting a lot of time into the new business process.

Use Case Studies and ROI Examples

Leveraging past successes through case studies and ROI examples is crucial in justifying solutions-based pricing. These real-world examples provide tangible evidence of your value, making it easier for potential clients to understand and accept your pricing structure.

When creating case studies, focus on the outcomes you achieved for your clients. Highlight specific metrics such as increased website traffic, improved conversion rates, or market share or stock price growth.?

If possible, translate these achievements into monetary values. For instance, “When we did this work for a client in the tech space, it resulted in a 30% increase in website traffic, leading to a $500,000 boost in annual revenue for them.”?

I know exactly what our averages are on the things that our clients care about: leads, marketing qualified leads, and sales qualified leads. They want to know how we’re filing their pipeline and keeping those people interested enough to talk to sales.

So when I talk to a prospect, I can say, “On average, our conversion from lead to MQL is 34%, MQL to SQL is 75%, and SQL to marketing demo is 23%.”?

Not only are they real numbers, but a prospect’s face lights up, and they ask me how. That’s when I know I can charge for those outcomes and not for the time we spend getting them there.?

By presenting this information, you’re selling your time or effort and the real, measurable investment your services can have on a business.

Implement Discovery Sessions

Discovery sessions based on values are in-depth conversations with prospects that go beyond surface-level discussions about services. They dive into the core of what the client truly needs and values. The goal is to uncover the underlying business challenges, aspirations, and the potential value of solving their problems.

During these sessions, ask probing questions like “What would it mean for your business if we could solve this problem?” or “How would achieving this goal affect your bottom line?”?

Listen carefully to their responses and use this information to tailor your solution and inform your solutions-based pricing strategy. These sessions help you price more accurately and demonstrate your commitment to understanding and addressing the client’s specific needs, setting the stage for a value-focused relationship from the start.

Educate Clients On the Value Proposition

Shifting from time-based to solution-based pricing requires clear communication with your clients. Many clients are accustomed to either retainer or hourly billing and may be skeptical of a new pricing model. Your task is to educate them on the benefits of focusing on outcomes rather than inputs.

Start by explaining that solutions-based pricing allows you to focus entirely on delivering results. Emphasize that this model incentivizes efficiency and effectiveness, as you’re not rewarded for taking longer to complete a task.?

Use analogies they can relate to, for instance, “When you go to a doctor, you’re paying for their expertise and the solution to your health problem, not for the minutes you spend in their office.”?

Help them understand that by paying for solutions, they’re investing in outcomes that directly affect their business rather than simply buying your time.

Develop a Pricing Formula

I’ve had to create a solutions-based pricing formula for two things outside of our normal client work: speaking and licensing the PESO Model? for commercial use. For speaking, I have several different tiers, but they’re consistent. For instance, PRSA and IABC chapters get one price for virtual speaking and another for in-person. The same goes for companies and for events. The price depends on who is asking, but it is consistent.

The same goes for licensing: schools have one price, and companies have another.?

Doing it this way helps you streamline your approach to solutions-based pricing and ensure you’re considering all relevant factors. And it takes the guesswork out of how to charge a prospect because you already know exactly what kinds of results you can get, based on previous experience.

While the exact formula will vary depending on your agency and services, it should generally take into account the following elements: the results of your solution, the level of expertise required, the complexity of the problem, market rates, and your desired profit margin.

For example, your formula might look something like this: Price = (Estimated Value to Client x Results) + (Expertise Level x Complexity Factor) + (Market Rate Adjustment) + Profit Margin.

The ‘Results’ and ‘Complexity Factor’ are predetermined scales you’ve developed based on the averages you’ve accomplished for clients in the past.?

I know many of you are averse to math, and this is most definitely math, but this formula allows you to adjust pricing based on the specific circumstances of each project while maintaining a consistent approach.?

The goal isn’t to arrive at an exact science, but to have a structured way of thinking about pricing that reflects the value you provide.

Incorporate Ongoing Value Assessments

Solutions-based pricing shouldn’t be a one-and-done process. To maintain its effectiveness and ensure ongoing client satisfaction, incorporate regular value assessments into your quarterly meetings with the senior leadership team. These assessments serve as check-ins to evaluate the value being delivered and, if necessary, allow you to adjust your pricing or services accordingly, both when it comes time for contract renewal and with new clients.

Set up quarterly or bi-annual reviews with your clients where you can discuss the outcomes achieved, the progress towards their goals, and any changes in their business landscape. Use these sessions to quantify the value you’ve delivered so far and to realign on priorities if needed.?

This ongoing dialogue helps justify your pricing and strengthens your relationship with the client by demonstrating your commitment to their success. It also provides opportunities to upsell or cross-sell additional solutions as new needs arise.

Address Common Objections

When transitioning to solutions-based pricing, you’re likely to encounter some resistance or objections from clients. Being prepared to address these concerns will allow you to implement it successfully. Common objections might include concerns about risk, lack of cost predictability, or simply resistance to change.

To address the risk concern, consider offering a pilot project to demonstrate value. For clients worried about cost predictability, explain how solutions-based pricing can be as predictable as retainer billing and certainly more than hourly billing because they know upfront what they’ll pay for a given outcome.?

For those resistant to change, focus on the benefits: better alignment of interests, focus on results rather than time spent, and potentially greater value for their investment. Always be ready to provide examples and case studies that support your solutions-based pricing model.

Gradual Transition Strategies

Shifting your entire agency to solutions-based pricing overnight can be challenging and risky. Instead, consider implementing a gradual transition strategy, such as starting it with brand new clients or with a small subset of current clients who have contracts to renew.?

This approach allows you to test and refine your new solutions-based pricing model while minimizing disruption to your existing business.

As you gain confidence and refine your approach, gradually expand the new model to more clients. This measured approach allows you to learn from experience, gather success stories, and smooth out any kinks before rolling out the model agency-wide.

Get Paid What You’re Worth

For those of you that this applies to—solopreneurs, agency owners, agency principals, and agency leaders—you have years of experience and strong expertise. Clients hire you to make their lives easier, so they should pay for that. Just like they pay crisis comms experts in the middle of a firestorm, they are paying you to help them solve a problem and get some results.?

One question I ask my coaching clients at the beginning of every relationship is, ‘If you were working in-house or at a large agency, how much would your salary be?” They also tell me at least $150,000—and some significantly higher.?

We then add in benefits, 401K, PTO, and the like and get them to a real salary. And then I ask, “So why are you charging only $75 an hour?”?

To start to get close to your worth, you’d have to bill 60 hours a week—and that doesn’t include all the non-billable work you do to run your business.

Charge what you’re worth. Charge for your expertise. Charge for results. You’ll be much happier, and so will your clients.

Resources

This section is dedicated to all our available resources to help make your life easier.

• Spin Sucks Podcast
• Spin Sucks Newsletter
• Spin Sucks Community
• PESO Model? Guide
• PESO Model Certification?
• One-on-One Coaching
• Fundamentals of Media Measurement