Value-Based Pricing for I.T. Maintenance Agreements
Computer & Technology Consulting Maintenance Agreements
When three partners of a computer consultancy firm registered to attend the three-day Executive Wisdom Business College, I said, “Computer guys are going to hate my business approaches.” They charge by the hour (unethical), they continually engage in scope-creep (ineffective), and they are technically intelligent and strategically naïve.
On the afternoon of Day Two we reach the point of value-based pricing. “Oh boy, here we go.” The concept of offering consulting maintenance agreements was discussed. Not just any consulting maintenance agreement but a value-priced maintenance agreement.
These three computer entrepreneurs threw themselves into the activities and discussions with vigor. They listened closely and wrote copious notes in their folders. During the open discussions of the College they realised that one of their current clients was an ideal prospect for an upper level maintenance program.
So as a group, the College participants brainstormed this particular situation to design three levels in the initial offering of computer business. Customers like knowing the total price; hourly rates are open-ended and scare customers because who knows how long this might take.
The guys were understandably nervous. We included everything we thought their client would need and want in the program. Some of the items include unlimited technical support, advance training, new employee training, and creating email reminders for actions such as monthly closes, changing the tape back up, and periodic system maintenance.
In designing the written proposal for them to present their client, we had them request quarterly installments in advance. The total price for the annual agreement exceeded $45,000.
Back on the farm … the computer firm implemented the fixed price deal with the specific customer for this significant software customisation and installation.
Their client has accepted the proposal and sent a cheque for $11,000, along with the signed agreement. Here is a quote from an email they sent me:
“The total cost for all three of us to attend the College was $13,000 and we secured a $45,000 piece of business because we came along and learned how to do better business. That’s a return on investment you can “bank” on! Thanks Ric – and thanks to the other attendees who brainstormed this during the session with us. We thoroughly recommend The College!”
Comprehensive details on the Executive Wisdom Business College.
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