[This is the fourth article in a series.]
Thanks to the amazing work of your expert team you have identified your expertise and created solutions that capture both large and small chunks of repeatable work. You can demo, deploy and iterate on your solutions and your library continues to grow. Congratulations, your sales team can now use this innovation in multiple ways.
Let’s take the example of a simple but common nonprofit solution component: a Corporate Donation Match Form.
Your team has built these forms many times over the years, and each time you build them the solution you build always: 1) integrates with a third party tool; 2) has a set of common fields; and 3) has to include a workflow that informs staff when a VIP makes a donation over $1,000.
Because you’ve built this solution so many times, you have the experience to ask three simple questions that capture 90% of the variability you find among customers who want these kinds of forms. Your team has spent 20 hours building the most common type of matching form. You have a partnership with the integrated ISV (they may have even given you a discount because you added it to your solution) and additionally your team took a few additional hours and created two other form variations you most commonly see.
Normally, a form like this takes about eight hours to build and test from scratch but instead of selling those hours, you instead charge a $2,500 solution charge that is equivalent to 10 hours of your team’s billable time at $250/hr. Since it takes less than an hour for your team to add and configure this micro-solution, you just made over $2,000 in profit.
Even better, because you added this and other pre-configured solutions on the first day of project implementation, you’ve massively increased time-to-value, and when you demo the fruits of your first sprint to the customer, their jaws bounce off the ground when they see how much functionality you’ve already delivered.
Solution-based Business Models
So that’s a nice story. But how do you make solutions a viable business model for your consulting firm? We see three main options:
- Don’t charge at all. You can give them to customers for free – or even open-source them. Even if you’re not charging, you’re delivering more value per dollar, showing faster time to value, and if you’re open-sourcing, maybe shining the halo of your brand a bit. All of these can make your proposals more attractive than your competitors’. But this is hard to track rigorously, and that makes it hard to calibrate your level of investment appropriately.
- You do something along the lines of what we describe above – charge a one-time solution fee based on the value of your solution. This is an amount that is greater than the time it takes to install and configure the solution, but still significantly less than it would cost to build the solution entirely from scratch.
- You sell your solution as a traditional SaaS product, with an ongoing subscription and recurring revenue and support obligations that entails.
There’s no one right answer – much depends on the specifics of your target market, the problem your solution addresses, the cost of customer acquisition, and more. Zak Kaufman of Vera Solutions talks more about this in a comment on our previous article in this series.
The Shift to Value Solution Selling
Shifting to value-based selling requires focus and allows firms to capture more value and avoid becoming commodities in a crowded marketplace. As we shift to thoughtful solutions that are easy for your staff to make incremental investments in improving and modifying for each customer you take value selling begins to take off and the following benefits begin to show up:
Discovery becomes faster
More complete demos become easy to develop
Project risks go down as customers experience your solution earlier and can give informed feedback
Customer onboarding, training and documentation is a snap because repeatable solutions require little marginal effort
An obvious but important warning about value pricing:
You can either way over- or under-value a solution. It is often hard to know what the value of a solution to a customer is but overvaluing a solution will make a customer feel like they are getting ripped off and invite competitors to attack you. Undervaluing a solution means you are not capturing the value of the expertise your team has brought to that solution. Simple and low value solutions may just be a great freebie to give to clients to encourage them to work with you, while high value solutions may be a new business opportunity for the company to continue to invest in.
Co-Selling with Platform Sales Associates
An important aspect of working alongside a sales team at a platform company is the ability to position and deliver on implementations that align with “sales.” Shifting to a solution sale allows you to provide a clear up front cost, reference customers and time to value conversations that sales love. For any sales team the idea that you have a pre-built solution that is well aligned to the platform products, gets a customer live fast and can lead to the next solution even faster is music to your joint partnerships. Compare that to your competitors who are having the same conversation with Sales but instead they are saying they need to do more discovery before they can recommend a path. You get to swoop in, put some parameters around what you can offer for each solution package and indicate you are happy to do additional work that is needed as necessary. This and the fact that you and your staff already have the ISV add ons worked out and can start installing the solution almost immediately is music to any Sales team member's ears.
Do you have value pricing in your solutions? How do your customers react to it? What advice or experts did you engage to get smart about value pricing? And advice for your peers on value pricing?
Stay tuned for our next installment, in which we’ll discuss how Solution Innovation is not only good for your customers, but also helps you build pathways to career expertise for your time.