Strong differentiator #10: pricing

Today we’re on to strong differentiator #10: Pricing (premium/budget, predictability, flexibility).

Remember that weak forms of differentiation are claims that almost any of your competitors can credibly make. “We have a great process.” “We have a great team.” That kind of thing…

Pricing can be a very strong differentiator, but not if your only goal is to be cheaper than the competition. That’s called a race to the bottom, and at the finish line of that race sits a small desk with a man very busy accepting bankruptcy filings.

In general, pricing can be a strong differentiator when your pricing follows one of these patterns:

Premium or Budget Pricing
If your prices are higher than the alternatives to hiring you, two things happen:

    1. You almost compel prospects to understand why your pricing is so high. You’ll ignite their curiosity about why the hell you are charging so much and they will increase their engagement in the sales process in an effort to discover the value. Ex: go to https://www.brentblack.com/pages/best_02.html, read the first 4 lines on that page, and then tell me if you’re able to stop reading there or whether you feel curious to learn more about the product described there. (HT to my friend and software manager coach Marcus Blankenship for first telling me about this product. No, I don’t own one 😉 He might though, I’ll have to ask him sometime.)
    2. You activate several biases that automatically associate high price with quality, status, or excellence. Of course you have to provide evidence of this quality, status, or excellence and you have to deliver on it, but the high price sends a signal that clients can expect exceptional quality, status, or excellence.

I realize you can only reveal pricing before you have a sales conversation if we’re talking about a fixed price + fixed scope (so-called productized) service. Still thought it was worth mentioning…

Pricing Predictability
Because of how many self-employed service providers still operate on an hourly billing basis, many clients expect a high degree of uncertainty about the final cost of custom software. You can set yourself apart from other developers by offering greater predictability about cost.

How do you do this? Once again, I refer you to the Picasso of Pricing (Jonathan Stark) for more details on this: https://expensiveproblem.com/list

Pricing Flexibility
Finally, offering more flexibility in your pricing can be a strong differentiator. That may be as simple as offering options in your proposals, or it may be a more far-reaching change in how you structure your services so that cost can scale more easily from low to high depending on client needs.

As I was writing this email, I just remembered ANOTHER strong differentiator. Bonus differentiator #11: YOUR CLIENT LIST, YO.

Your client list is one of the best powerful differentiators, as well as one of the hardest to develop.

Want to see this for yourself?

Do the following:

    1. Open up clutch.co in a browser tab.
    2. Click Web & Software Development in the top nav bar, and then click Software Development Firms from the drop-down.
    3. In the Sort by box, choose Clutch rank.
    4. Open the website of each of the top 10 firms in a different browser tab.
    5. Scan through those 10 websites one after the next.

Imagine that you are a potential client looking for a software development partner. Look at the websites for all 10 of the top firms one after another.

When I do this (which I have, multiple times when doing research for clients), all of those top 10 firm websites blend together into a gray, undifferentiated blob in my mind. All the claims and weak differentiators and convoluted ways of describing services and benefits melt together into a homogenous blob of blech. Only two things ever stand out to me:

    1. The firm’s client list
    2. Any truly unique IP the firm has created

Of course as an expert in this field I notice other stuff too, but when I’m imagining that I’m a somewhat jaded potential client looking for a software development partner, the client list and unique IP are the two things that stand out as real, credible differentiators. Everything else frankly comes across as bullshit.

Try the “clutch.co taste test” for yourself now. How do you stack up against what you see there? Would a potential client be compelled by the differences they see between you and your competition, or would you be just another shade of gray in the large gray blob of “me too” dev shops?

if you don’t like what you see after doing the clutch.co taste test, start setting your business apart from the pack: http://thepositioningmanual.com

Talk to you soon,
-P

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