Blair Enns, an expert on business positioning and pricing, dives into the dangers of commodifying services, especially during economic downturns. He discusses how strong branding and strategic thinking can help maintain a business’s unique value. The conversation explores the pitfalls of hourly billing and urges adopting strategic pricing that reflects client value. Additionally, Blair highlights challenges in marketing educational offerings and shares insights on leveraging AI without surrendering perceived value. Practical tips for negotiation are also featured, emphasizing the importance of maintaining distinctiveness.
Commodification occurs when services are sold by the hour, diluting perceived value and risking long-term pricing integrity.
Using technology to scale services through lower-priced offerings can undermine perceived value, highlighting the need for quality differentiation.
Deep dives
Avoid Selling Thinking as Doing
Selling services by billing hours or days leads to commodification of offerings. Selling thought-based services, such as diagnosis and prescription, as units of doing dilutes perceived value, creating a downward spiral. Instead, it is recommended to productize those thinking services with standardized packages that do not attach a specific price tag to the effort. This approach allows professionals to convey their unique expertise while maintaining the integrity of their pricing structure.
Strategic Price Cutting
Cutting prices prematurely, without proper justification or negotiation, risks commodifying services and undermining their value. Instead of hastily reducing costs when faced with objections, a better approach is to ensure all other decision-making factors are addressed first. This involves using trial closes to confirm a buyer’s intention before agreeing to any discounts. Making price cuts contingent on commitment solidifies the perceived value in the marketplace instead of establishing a precedent for future negotiations.
Tech Utilization and Its Pitfalls
Using technology to scale services can inadvertently lead to commodification if not handled carefully. Many firms attempt to create online courses at lower prices, thinking they can attract a higher volume of customers, but often fail to generate significant interest or revenue. This strategy undermines the perceived value of the primary services because the market equates lower prices with diminished value. Focusing on quality and differentiated offerings is essential to avoid sending the wrong signals to potential clients regarding expertise and worth.
Blair sees four common behaviors when business owners are looking to get deals moving in times of economic decline, stagnation, or uncertainty that end up doing long term harm to their positioning and pricing.