Basic exercise for pricing B2B services

That made the difference in my experience.

During the last decade, since i’ve started working on my own, i’ve made hundreds of financial proposals for B2B services and played with tens of variations of prices for the knowledge products i’ve created and marketed over the years.

The basic pricing exercise that made the difference is designing a Good-Better-Best tiered pricing model.

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What is Good-Better-Best?

Here’s how i usually explain it:
(you can also check these HBR articles from 2013 and 2018)

When you offer a single price, there are minimum three scenarios:

A. Ideally: You nailed it. Your price & offering match the budget & expectations of your customer.

B. You left money on the table. You offered a price and associated offering that was under what the customer was willing to pay & their associated expectations of quality.

C. You scared the customer away. You offered a price that is above the acceptable / accessible level that the customer was willing or expecting to pay for doing something to address their need.

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So here comes the Good-Better-Best pricing, that increases the win probability:

• You offer a Good option that is accessible and covers the need well enough - caters to customers who want to get the best price, not placing a high value on quality.

• You offer a Better option that is more expensive than the Good one, yet provides a better quality - usually the Standard way to address the need, caters to customers who want to get a good value for the money, even if they don’t get the cheapest price.

• You offer a Best option that is even more expensive than the Better one, yet provides the best quality you can offer - usually the Premium or even Luxury way to address the need, caters to customers who want the best quality and afford to pay for it.

Among other effects:

• The Good option minimizes the probability of scenario C - scaring the customer away.

• The Best option minimizes the probability of scenario B - leaving money on the table.

• The Better option increases the probability of the compromise effect - mentioned last time.

The exercise is to design the Good-Better-Best pricing options for your offerings and, when possible, use it in the B2B proposals you make.

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G-B-B Example

For illustration purposes, let’s say a customer needs help for making their 2 day business strategy offsite a success = achieve its desired outcomes.

Participants: the 15 members of the extended leadership team (6 x sr. leadership + 9 x leaders at other levels in the organization) of a mid-sized company.

The G-B-B options could be:

Good: 1000€
↳ For: An expert review of the design of the 2 day strategy offsite that was created internally by the client or other employees in their company.

Better: 10000€
↳ 2000€: for expert design of the 2 days based on client brief, plus preparation on site.
↳ 8000€: expert facilitation of the 2 days strategy offsite.

Best: 15000€
↳ 3000€: for discovery through 1:1 interview with select group of participants to understand context, desired outcomes, possible dynamics and other nuances that might affect the probability of achieving the desired outcomes.
↳ 2000€: 2h workshop to co-design the 2 days based on insights from discovery talks and customer perspectives, refining the final design, plus preparation on site.
↳ 1000€: Preparations with counterparts for co-facilitated segments of the offsite.
↳ 8000€: expert co-facilitation of the 2 days strategy offsite.
↳ 1000€: 2h workshop for debriefing insights about designing and co-facilitating, to build internal capacity and capability for future strategy offsites.

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Try it yourself and share what worked and what didn’t when you used it 💡

Interested to practice? 👟
3 seats remaining for the one-time-only B2B pricing workshop next week.

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It’s a gym in the sense that you’re invited to practice and do the reps for the health of your own business. Get inspiration, DIY workouts and access to live practice sessions.

Hosted by Bülent Duagi, strategy adviser for CEOs in Tech.