Course Content
Earn What You're Really Worth
So welcome to our, session on m how to amp what you're really waff.
So in this session, we're gonna be looking at your pricing and some of the strategies and techniques that you can employ to, perhaps improve your pricing slightly.
We're gonna look at some of the mistakes that bookkeepers make when they, set their pricing as well.
So let's start off with, pick and mix.
Who has had one of these pick and mixes?
Might not have looked as colorful as this.
Certainly didn't when you were getting them from Willie's.
If you've had one of these pick and mixes, then you know what the downfall where these pick and mixes are.
Yeah.
I I love them too, Simone.
The problem with them is we had to put the scales because it was never mixed if we ever got the where you got the sweets.
You know?
You had a bag of fudge, and you were trying to hold it up to gauge how much it was gonna cost you.
And, you know, you you didn't actually find out how much you would actually spend until you got to the the the checkout, and it was a very brave person that at the checkout decided that they wanted to take some of the sweets out of the bag or they didn't want to take them after all.
So this is theirs in a pick and mix.
Does bookkeepers offer hourly rate as a price?
We give the client one half of the, the the sum to do so we can tell them how much it's gonna be per hour.
Just as Willie's told you, it was gonna be 79p a quarter, but we don't tell you how many hours it's gonna take until after we've done the job, just like Willie's didn't tell you how how much your bag was gonna cost until you got to the checkout.
So just as that caused a lot of bad feeling in pick and mix world, parents didn't really didn't really wanna buy their kids pick and mix.
They would rather buy something off the shelf.
Why?
Because they knew the price of it before they got to the checkout.
So Candy King came along, and Candy King changed things quite a bit.
Candy King brought out a cup, and you knew exactly what you were paying.
So you would fill your cup as soon as you could get it, squash all those, cherries and and flumps and marshmallows in, and force the lid on.
But you knew it didn't matter how full the cup was, how full the cup was filled.
You you knew what you were paying.
It was a single set price for everything.
What was the problem with Candy King's single set price cup?
It was that some people didn't want a full cup, and some people wanted more than a full cup.
So it didn't really cater for everybody.
It it sort of gave you, I suppose, the the the option of knowing how much you are paying, but it was a sort of standard service that maybe didn't totally suit your needs.
And this is is akin to our fixed price.
Loads and loads of bookkeepers now offering a fixed price, but it is just that.
It's a single fixed price.
So it might not be totally suitable to our clients.
We think we know what our clients want, but, actually, most of us don't really even know how to ask the clients what they want.
And the clients don't really know how to, relay to us what they actually want.
So they end up getting a service that's maybe only, you know, 70% of what they actually want.
The candy king solved this problem in the same way that bookkeepers are solving this problem.
What did they do?
They brought out a small cup, and they brought out a supersized cup.
That meant that suddenly you could choose.
So if you didn't want as many sweets as the the medium cup offered you, you had somewhere to go.
You had the small cup.
And if you felt a bit greedy today, you could go for the supersized cup or the sharing cup they called it.
I don't think I've ever shared one of these in my life.
The options of choosing which pricing point you wanted to go in at, how many suites you want, how big a cup you want is yours and yours alone.
And the same is true when we think about bookkeepers and the using menu pricing strategies, which is the one that I would advocate that most bookkeepers should be using for most of the time.
There is a place for early rate, but it's it's getting less and less, and I'll explain as we go through why that's the case.
Should say that no.
Let's move on, and then we'll we'll talk about it later.
So why three options?
Well, the three options came really from an experiment that was carried out by, two guys at Duke University, Joel Huber and Christopher Puto.
And Joel and Christopher, what they did is they, asked a group of students.
They showed them two two beers, and they asked them which one they would prefer to buy.
They showed them a budget can, $1.80 and a bottle at $2.60.
And they said to them, what which would you prefer?
So what happened was 33% chose the can and 66% chose the bottle.
Now ExistrFun Show did a few other experiments adding in a third option.
They wondered what would happen if they added a third option.
There are two of these.
They added the third option at the bottom, and they added the third option at the top.
We're gonna look at the results when they added the third option to the top, a super premium lager at $3.60.
What suddenly happened is that nobody wanted the cheapest option.
The bottom two options did not change, but suddenly nobody wanted to buy the cheapest option.
90% of people wanted to buy the bottle, and 10% of people wanted to buy the super premium.
The reason for this, Christopher and Joe, came up with was that when offered three options and you can't really tell the difference in terms of quality between the three, when related to the price, people will generally opt for the middle option.
It's the safe bet, the Goldilocks choice.
You save buying the most expensive option, you avoid the cheapest option, and you buy the middle option.
However, 10% of people did go for the more expensive option.
Those are the sort of early adopters, if you like, the people who were first in the queue every time that Apple launch a new phone or, you know, the first people to buy Betamax, if you remember Betamax.
These are the early adopters.
These are the people that need to have the absolute best, and it doesn't really matter what it's gonna cost them.
Now thinking about this, just by introducing a third option, a third option that very few people actually even wanted, what we've done is we've pushed the average buyer up substantially in terms of the the amount of money that they're willing to pay.
There was another experiment that was carried out by, Daniel Morkin for the Consumer Research Journal of America, and Daniel was again thinking about how having choices affects our willingness to buy.
So what Daniel did is he took a group of a 129 students, and he split them into three.
He showed the first group, a Sony, DVD player, the second group, a Philips DVD player, and the third group was shown both a Sony and a Philips DVD player.
And Daniel asked them, would you buy the DVD player that you see or one of the options that you see?
Interestingly, when shown one option, around 10% of people chose to buy.
That means 90% of people chose to defer that choice until they had found other options.
When they were shown both the Sony and the Philips, though, around the third decided to buy, the Sony and around the third decided to buy the Philips, the same DVD players that were shown to the other two groups.
So why would substantially more people want to buy them when they were chosen shown two?
And it's because as humans, we don't actually intrinsically know the value of things.
Economists would love to to have us believe that we we know the value of everything, but we don't.
So how we work out value is we compare and contrast.
And when we were allowed to compare and contrast in these two groups, then it was easier to make a decision than when we had to opt for something not knowing, any other options out there or whether it's a good option or a bad option.
You can think of it in ways of a suitcase.
If I fill a suitcase and I ask you to lift it and I ask you then to tell me the weight of the suitcase, you probably struggle to tell me the weight of the suitcase.
That's not how our bodies are built.
That's not how our brains are built.
But if I give you two suitcases and ask you to tell me which one's heaviest, you'll almost certainly be able to do that.
So we crave options.
We crave choices.
We want to feel that when we make a decision, it's a decision to make.
Interesting question for you.
What is the easiest way to sell an 8,800 pound watch?
And jewelers have known the answer to this for years.
But before I tell you, I want to ask you a question.
You've got an option to raise your hand.
So at this point, let's get some interaction going.
I know it's there in the morning.
I know we're all sitting at home.
Let's raise our hand.
I'm going to raise your hand if you think that the orange dot on the right looks bigger than the orange dot on the left.
So does the orange dot on the right look bigger than the orange dot on the left?
Let's see.
Raised hands.
Oh, only one hand raised.
That's scary.
Because, yeah, people often tell me both dots are the same size.
But, actually, the one on the right does look bigger than the one on the left.
I can show you they're the same size by taking the gray dots away, and they do look identical at that point.
But when I add the gray dots back in, the one on the left still looks smaller.
And that's because our brains are comparing and contrasting.
We're comparing the orange dot to the gray dots that surround it.
So when it's surrounded by small dots, it looks big.
When it's surrounded by big dots, it looks small.
So I asked you how you sell an £8,800 watch.
This is exactly how Jewelers do.
This is a picture I took of a Jewelers window, maybe a couple of years ago.
Where's the £8,800 watch?
It's next to the 12 watch and the 10,000 watch.
Because beside those watches, it looks like a better buy, a strategy that jewelers have been using for a long, long time, and a strategy that you start to see in the world all around you when you look for it, that three options.
So I bet you're sitting there thinking, this is this is great.
These are power games.
There's been some research done, but it's probably been students.
They are not living in the finance world that we live in.
The people that we deal with business owners.
They are not gonna fall for any of these these tricks.
And I got it back quite a lot when I was when I was doing this presentation.
So about two years ago, I was doing this presentation for another organization, and I decided to reach out to the members in my Facebook group.
You may have been one of them.
And I asked a couple of questions.
I asked what your National Insurance number what the last two digits of your National Insurance number were, whether in pounds you were willing to pay that for a bottle of wine, and if not, how much would the maximum be that you'd be prepared to pay for a bottle of wine?
So here's what we find out.
If your national insurance number ended, the last two digits between ten and forty, because I wouldn't nobody end ended between zero and 10.
If it ended between 10 and 40, how much were you willing to pay?
Willing to pay £10.41.
Now I hope that you're sitting there agreeing with me that your National Insurance number is totally random and should have absolutely no impact on how much you're prepared to pay for a bottle of wine.
So does that if it ended in 41 to 70, on average, £15.62 is what bookkeepers like you were prepared to pay for a bottle of wine.
And if it ended in 71 to 99, The average was £25.12 that was willing to be paid.
So how can we use this information as bookkeepers?
How can we take what we've learned from these experiments and actually use it?
And this is how we do it.
We use menu pricing.
We give three different options, and we let our clients choose between them just like Candy King did with their, Pick n' Mix, just like, Christopher and Joe did with their bottles of beer and the choice just like Daniel did with his DVD players.
Excuse me for just one second.
Okay.
Hi, folks.
It looks like Terry's lost her Internet connection, but, hopefully, she'll be back in just a couple of seconds.
I know it's a struggle, but try to bear with us.
Sorry about that.
Terry's, Internet connection went down in the in the other screen.
So we're just trying to fix it.
The joys of running through a session that went maybe I shouldn't have gone first.
You just need to reload that then.
Okay.
So, yeah, how do we how do we use the information that we've learned here to, in bookkeeping?
And that's to use these menu structures.
I'm sure you've seen these menu places before.
Actually, just in the just in the feed, tell me, have you used a menu like this in your practice, or are you using still using fixed price or or early rate?
Just stick it in the chat box.
I'd love to know before we we go any further.
Still using.
Still we're still tailoring per client.
And, again, tailoring per client is is a great option.
It's a it's a nice halfway house.
Oh, use an elevator.
Okay.
Tailoring is a nice option.
It's a nice halfway house, but we don't always know what, clients want from us.
We think we know, and we surmise, what they might want, but we don't always know what they want.
I'll give you an example, actually.
I my very first client I ever had, I used to do his bookkeeping work, done it for a few years.
And he came to pick up his account one day.
And he was asking me how busy I was, what I had going on.
And I told him that, it was about Christmas time.
I said, oh, I'm I'm that's enough.
I've I've got a few bookkeeping stuff to do, few bookkeeping clients, and I've got about four or five self assessments to do.
And he looked at me, and he said, oh, he said, do you do self assessment?
And I said, I do.
He said, well, why am I taking all this paperwork away to my accountant to do my self assessment?
You should definitely just do a self assessment.
And that was that was a mistake that I made, and it's a mistake that I am now seeing more and more bookkeepers making.
And that is that we assume that our clients know the services that we provide.
Therefore, we assume that if the client needs that service from us that they're gonna ask us for it.
Maybe it's on our website.
Maybe we talk about it in social media.
But think about the services that you buy.
How often do you go and look at their website to see if there's another service that they are providing that you might need to use?
Probably not very often, and and, unfortunately, neither do our clients.
So, yeah, before we move on, let's, let's look at these packages.
So these packages do a couple of things.
Firstly, they break down what we offer.
So what they say to the client is, as we've said before, clients often people, humans, want to compare and contrast.
So what we are saying by offering this menu package is if you want to compare us to another bookkeeper, that's great.
Go and compare us, but at least let us show you what we are gonna do for that price.
Quite often, we'll set we'll negotiate a price for a client, for a specific service, and then we wrap it all up and call it bookkeeping.
And then when they go and compare to another bookkeeper, they ask for bookkeeping.
But my bookkeeping is probably not gonna be the same as Lindsay's bookkeeping, and it is probably not gonna be the same as Kate's.
What I offer might be a slimmed down version, and that's why I can say to the client, I'll do it for cheaper.
I may take twice as long to do it.
So I might be able to say, I'll charge you, I don't know, I'll charge you £20 an hour when someone's charging you £30 an hour and the cheapest.
But, again, you've only got half of the half of the sum.
We don't we don't know how it's gonna end.
So by doing this menu pricing package, the first thing we're doing is breaking it down.
We're showing the client exactly what's gonna be included in that.
This is, this is first done by a a guy called Arthur Arthur Schaeffer.
And Arthur's probably a name you've not come across at all.
He died a few years ago.
There was some big bits in the press, but not a name that you know.
And Arthur actually designed the the sort of infomercials that you see in the QVC channel.
He had a block of knives to sell, and he was the first person that actually broke it down and decided to talk about the handles, talk about the knife block, talk about the blade.
Rather than saying here's a block of knives, he broke it down in much the same way that we're gonna break our bookkeeping down.
Michael Richard Sailor, who's an economist, he talks about not wrapping all your Christmas presents in one box.
And that is to say that if you were given your loved one a present for Christmas or birthday, then you wouldn't take five presents, put them in a big box, and wrap that box up because it doesn't look as much.
It looks less value.
It looks like you're giving them less.
And the same is true of of our bookkeeping services.
We want to break it then.
We want to show exactly what we're gonna do.
And it also plays on this three option system that we've seen working so well in other industries, other professions, and in some of the research that we've covered in this session.
Big companies do this as well.
So, Procter and Gamble.
Yeah, Procter and Gamble, Pampers released Pampers back when the only alternative to Pampers was cloth nappies.
Now next to cloth nappies, Pampers looked particularly expensive.
People weren't buying Pampers at the rates that Procter and Gamble thought they should be.
It was about to fail.
So instead of reducing the price or taking a loss or whatever other options were on the table for them, what they did was they brought in another nappy.
They brought in Luvs.
Luvs was their, more expensive premium nappy.
So Pampers suddenly sits between cloth nappies and this really expensive premium nappy.
What happens?
Sales of Pampers start to go through the roof because people have now seen this as a middle option on the supermarket shelves.
Interestingly, when people stopped using cloth nappies or or moved away from cloth nappies as as they did in the eighties, nineties, early noughties.
Pump Procter and Gamble repositioned Luvs as a budget nappy.
So they they positioned that to take the share of the supermarket owned brand, and suddenly Pampers was the was the more upmarket version.
What does somebody with a degree say?
Do you want fries with that?
Anyway, do you want fries with that?
Hugely successful for McDonald's.
Why?
Because they didn't make their money on the burgers.
They didn't make their money on the main.
They made their money on the fries and the Coke.
And the same is true as us as bookkeepers.
We can make the money on our upsells and our cross sells.
So why is it when we sell a service, we do that first pump in the air, and we think, yeah.
They've they've they've bought the bookkeeping service.
And then we think like I did with my first client.
I didn't tell them about the self assessment service that I offer.
I didn't tell them about payroll.
I assumed they didn't need any of this stuff.
But these are the upsells and cross sells that can really start to make us that money.
Amazon did it too.
Amazon put a thing on their website, good number of years ago now, that said people who bought this item also bought.
And you may have bought something that you didn't intend to buy when you saw this.
Amazon sales went up by 35% just by adding these upsells and cross sells.
So there's a good chance that you've used this.
So how do we upsell and cross sell when we are doing menu pricing?
This is what was in the back of my menu.
So I put up my menu, all printed out and laminated back in the days when we could meet in person.
And once the client had chosen the package that they wanted, then I could flip it over.
Now each of these had prices underneath them, I've removed for the purposes of this presentation.
But we offer things like business setups, so we'll let HMRC know that you're trading.
We'll register you for VAT.
We will review your VAT scheme and make sure you're on the right scheme.
We'll register you for PAYE.
Actually, these those first four options, stick your hand up if you offer these services, but do it for free.
Most bookkeepers will help the client register for VAT and never charge for it.
Most bookkeepers will make sure the client's in the right VAT scheme, something that can be worth a huge amount of money to a client and never actually charge for that service.
We could send out invoices.
We can improve your cash cash flow by invoicing your client.
What an easy service to offer.
And, again, I bet most of you are offering this service for free when it's something that there's a huge amount of value in for the client.
Job cost and cash flow statements, cash flow forecast.
These are just some other things that you can do is web design telephone answering are two services that I offer.
I didn't do web design at that time, and I didn't do telephone answering.
What I did have is partners that I could cross refer to, and I could earn a better commission of of a service that the client was looking to buy anyway.
I could see Johan in the room, and, hopefully, you don't mind me telling you this.
Johan has made a a fair amount recently on trust referring to financial advisers for mortgages.
So think about who else offers services that your client might need.
Discounting.
Menu prices help prevent discounting.
Discounting is you got 2,000 cross sales this month from services that Johan can't actually offer, but has found a partner that offers.
So it's something else that we can start to think about.
Discounting is is a is a horrible thing.
Again, in the I'm gonna tell you a story.
And as I'm going in the comments, just just tell me if you've ever experienced this.
I know from delivering this presentation loads of times that most bookkeepers have experienced something like this at some point.
You meet the client.
You talk to the client about what services they want from you.
They ask you for a price.
You put together a price in your head at that point.
And before the price comes out your mouth, you think, I can't ask this person for that amount of money.
This person is never gonna pay that amount of money.
So before you deliver the price, you discount it you discount it in your head, and then you deliver the price, the discounted price, not the price that you wanted to charge, not the price you should be charging for the service, but a discounted price.
And then the client sits back for a second or two seconds, which seems like five minutes in your head, and there's that awkward silence, and you fill that awkward silence.
And how do you fill it?
You fill it by discounting some more.
You fill it by saying, actually, though, we could probably do that for you for this amount of money.
I've done this I've done this more times than I care to remember.
Using menu prices prevents you from discounting, because the price is written down there.
If the client doesn't want to pay that price, then there's somewhere for them to go.
There's a lower option.
You can start to talk about the services that they will miss out on if they take the lower option, but there is that option that they can go down a bit if that price is too expensive for them.
If they are making the choice, they are selling themselves.
It allows for, at least for using direct debits.
So I would always advocate direct debit as opposed to standard order.
Go cargos might cost a bit more now than spend in order, but you're in control of the money.
So when the services go up, then you control the direct debit.
You control how much money you you get.
Again, when the when it comes to changing your price as we all do every year, we all up our prices, don't we?
We all review our prices, and we all make the increases as necessary.
You don't need to tell the client again.
Netflix, local gyms have huge huge success with this model, albeit in the current time.
Netflix has have been slightly more success than your local gym.
How do you move current clients?
I did a I did a podcast on this just the other week.
This is, like, the number one question that people ask.
That's great.
I understand the benefits of menu pricing, but I already have clients.
How do I move them over?
So here's how Mars does it with their Maltesers.
They are selling their Maltesers.
So what did they do?
They they don't want to increase the pound bag because pound bag is the sweet spot for, confectionery right now.
It would seem most people most, companies are selling the the sweets for around a pound a bar or a pound a pack.
So what did maltasels do?
If you look carefully, they went from a 121 grams in a bag to a 103 grams in a bag.
They offered the product at the same price, but less of the product.
Took out, some of the Alps and the the chocolate, offer less of the product instead of changing the price point.
So as bookkeepers, we can look at the services that the client already gets.
We can look at the services that they actually need.
And then what we'll do is we'll do a trimmed down level of the services that they're currently getting, which will form level one in our menu.
But the price for level one is the price that they're paying just now on average a month.
Therefore, we are doing the same as Mars.
We're doing the same as Toblerone.
We're offering a slightly lesser service for the same amount of money.
The service that they currently get becomes the middle option, and the price for that is slightly increased.
And then we add a a a higher option, a a place for upsells to go.
I've talked for a while.
We are about ten minutes away from the end of the session, and I just I want to stop at this point and ask if there are any questions about anything that I've covered today or anything else to do with pricing that you think I should have covered but didn't cover.
Excellent.
Does if you charge by the hour or you charge a single fixed price, does any of the research you've held today because it's it's not my research.
It's people much smarter than me that are researching these things.
Does any of the research convince you that it may be time to try to make that move?
Yeah.
Fantastic.
Excellent.
Yeah.
The the the time can be the time can be a problem.
It's it's not an easy system to do, but here's what I'll say to you, Kate, is that you don't wanna move your clients' lock, stock, and barrel.
So when you're moving clients existing clients over to the new system, first thing you wanna do is rank your clients a through d, and then we wanna move our d clients over first.
We wanna move the people that we probably don't care if they up sticks and leave us.
If we make a mistake at this, then we don't want to lose all our clients at the same time.
So by moving the declines over, and you can move one over and then another over and another.
So you can do it as as little as one client at a time until you start building the confidence in arranging these packages.
If you work with similar types of people, similar types of business, similar sizes of business, and perhaps one menu will do for all of these clients.
If you get some different types of clients, then you might need two or three different menus.
But quite honestly, they're not that hard to put together.
And, actually, we are working on some software.
We've got a we've got a spreadsheet that will do it for you, but it's quite rudimentary.
We're currently working on some software, online software that will do your pricing for you, that will prepare your menus for you.
Johan, I am glad to hear that you've made the move.
I know that it's something that for a while, there's the people out there talking about pricing that don't believe in menu pricing.
I know there are.
But most people most behavioral economists or most people who've understood the research advocate menu pricing, and there's a reason behind that.
Thank you for listening to me this morning.
If there are no other questions fantastic.
Excellent.
I it's something that you definitely, see a huge benefit from.
Just time for one more one more one more story, one one of my worst stories.
I'll tell you one about implementing menu pricing, and it was I was asked to quote for a car wash.
So, guy, all all I knew is that he'd run a car wash.
And I really didn't want it work for somebody to run a car wash.
It sounded like a cash business to me.
It didn't sound particularly great.
It sounded like it'd be a MLR nightmare.
I thought it worked for them.
So when I prepared the menu before I'd met the the the guy, I've got to say, I prepared the menu, and I prepared it in three prices.
I think it was about I can't remember the bottom price.
I think the bottom price is about 70 or £89 a month, but I wasn't doing particularly much for that.
And I had a £99 a month, but I'll always remember the top level.
It was a £139 a month I was gonna charge him for the top level.
And, by then, that that was that was quite a lot compared to the other clients I had.
He was a sole trader.
He wasn't VAT registered.
So he was relatively small, but, again, cash based business, absolute nightmare.
I met him, and that was when I found out that although he run a car wash, it wasn't the kind of car wash that I thought about.
He basically, the contract for three of the local car dealerships, he washed their cars.
He had a team of two people, both PAYE.
He was issuing three invoices a month, one to each of the garages.
They were paying them by, bank transfer.
He was buying his products from one particular supplier, so he had about four invoices from that supplier a month.
Other than that, just the usual stuff, mobile phone, business ex office expenses.
And he actually got free office space from one of his clients.
We didn't even have rent or electricity or gas.
He had next to nothing in terms of expenses.
And I looked at my menus, and I thought, wow.
I have messed this up badly.
I've really overpriced this.
I straightaway took a £139 option.
I would never have quoted a £139 to that guy.
And if I'd done it hourly, I would probably have made 40 or £50 a month.
So my my parting, comment to you is don't assume that you know what people want, and don't assume that you know what people will be prepared to pay for what they want.
Everybody is different.
Thanks for listening to me.
I'll, I'll let you go back to the lounge for the next fifteen, twenty minutes, and then your next two sessions you can choose from is GDPR and privacy policies with Michael, bank Franca or marketing with, Claire Owen Jones.
And I'll catch you later.
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