by 
When sales are sluggish you push harder.
And then things happen.
Some of these things are the desirable outcomes you seek, like new leads and closed deals. And some are the unintended consequences you didn’t foresee.
Here are four specific activities that you might be employing today, each of which puts downward pressure on the perceived value of your offering.
1. Selling Thinking in Units of Doing
“The fastest way to commodify your thinking is to sell it in units of doing.”
—The Win Without Pitching Manifesto
This first, common approach to commodifying a firm’s offering is untethered from sales pressure and is just endemic to those who sell time.
Setting aside for now the issue of whether or not you should be selling time, if you do succumb to client pressure to price by the hour make sure that you price only the services that are time dependent and you draw the line at selling thinking in units of time.
Design application, development and production are examples of “doing” tasks that are more strictly time dependent. Strategy (arising from analysis and insight) and creative concept development are examples of the higher value “thinking” activities that are far less time dependent.
If your firm is large enough, you can have billable people with hourly rates (people working with their hands) and billable people without hourly rates (strategists and creative directors). That way you can easily push back on requests to break down your pricing by saying that the more strategic or thinking-based services you don’t deliver by the hour—those people don’t have hourly rates.
If you’re smaller, you would just say, “We don’t charge for thinking in units of doing.” Then don’t get dragged into justifying price. Simply say, “This is what we charge clients like you for work like this.”
2. Cutting Price Early and Without Reciprocation
I’m not a fan of cutting price to win a new client as it sets a bad precedent, but when you do discount, there’s a wrong way and a right way.
The wrong way is to cut price early and/or without a conditional agreement. At the first sign of a stall, the price cut is offered, unprovoked, even when price is not the obstacle. I find myself on the buying side of this behavior a lot lately, even from people who should know better than to negotiate with themselves.
The right way is to trial close first. A trial close is the conditional agreement I referred to above. It’s a simple if-then question.
“If we were able to do this at that price, would we have a deal or is there something else standing in the way?”
“I would do the deal.”
“There’s nobody else that needs to approve this first?”
“Nobody.”
“There’s nothing else you need to consider—it’s really down to meeting that price?”
“Nothing else. If you can deliver that price then I’m in.”
Now you can cut price—if you must. The rule is that you make sure every other obstacle is removed first and you make your price cut conditional on the removal of those obstacles.
“Alright. If we can agree now then I will commit to that price.”
Now onto the less obvious commodifying behaviors.
3. Using Tech to Scale Your Delivery
This commodifying behavior, while a little less common, is a byproduct of pursuing scale.
I’ve had many clients over the years who decided to employ technology to lower prices and go down market with the belief that they could easily generate a volume of lower priced work to get them through tough times, only to have it backfire.
During the 2008/2009 recession it was website templates. During Covid it was online courses. Now it’s AI-enabled services.
Each of these could be a legitimate business but the mistake is to think there are quick wins to be had here by a business that is not staffed for scale, does not have a culture of scale and is not willing to fund and do the hard, expensive work required to build a more scaled business model.
What happens instead is the higher priced customized brand gets tarnished by the $5k website template, the $97 course, the $49/month AI tool.
This is poorly understood but the mechanism by which you scale your offering is also the mechanism by which you will commodify it.
Undertake these activities with considerable deliberation—they are new business models, not quick wins easily tacked onto different models.
4. Using an Efficiency Advantage as a Reason to Hire You
We’re going to see a lot of this one.
You’re likely using AI tools to get work done quicker today. Some of these tools have generated cost savings. You might even have had a breakthrough on this front, doing work in considerably less time, with considerably less expensive talent, or both.
This is fantastic if it’s true. Bank that margin.
The mistake that will commodify your offering is trying to leverage this advantage in a sale, because as soon as you claim a production advantage you have to lower your prices. Your clients will not let those savings accrue to you, they will claim them. All of them.
A message of “Hire us because we use AI to be more productive” has to be reflected in a lower price for the client. What other reason would they have to care about your production advantage?
A message of “Hire us because we use AI to build a better product” can sustain a price premium. Given that we’re in an arm’s race, however, your price premium isn’t likely to last. Your margin is someone else’s opportunity.
The best position to be in is using these tools to gain a production advantage without your client knowing. So if you are using AI to lower your costs and you want to keep that extra margin, keep quiet about your advantage and bank the margin until it gets competed away.
In summary, if you want to stay differentiated and maintain pricing power:
- Don’t sell thinking in units of doing.
- Don’t cut price without a trial close.
- Don’t leverage technology to offer a cheaper, scaled solution unless you are willing to fund and launch an entirely new business.
- Don’t use production advantages (like AI) as reasons to hire you unless you’re willing to pass those savings on to the client.