The quality of the offering you make to your clients and your ability to fulfill the client's needs are the prime drivers of your career. What this means is that the economics are driven by the quality of your deliverables, not the reverse. Portable executives who are purely driven by economics and not by the quality of their products or services will have trouble achieving a satisfactory level of compensation over time. Therefore, the two main economic issues likely to affect a portable executive's success are pricing the offering and controlling the costs of doing business. You must attain the best possible price while maintaining the lowest possible cost consistent with rendering quality service.
Pricing
Pricing is a critical element of any business's operations-it represents what the customer is willing to pay for the assets acquired from the seller. The price that charges not only keeps bread on the table, but also signifies return the individual receives for the investment that he has made and will continue to make in the maintenance and development of his skill set. Your skill set, as we've mentioned before, constitutes not only your prime asset, but also your entire inventory, and must be priced to generate reasonable return on your investment.
Employees of a corporation approach pricing with an entirely different mind set. The organization sets the price for the employee in the form of the compensation level, which is affected by concerns of job security, status, perks, benefits, and even the interior design of the workplace. Longevity is also a significant factor in determining compensation for employees within corporations. And yet while all of these factors directly affect compensation, there is no measurable value assigned to them in many organizations. Compensation and, in effect, pricing within corporations, is not determined solely by an individual's accomplishments, but by the relative position of those accomplishments to other employees. Portable executives, on the other hand, tend to set their price on what specific value has been achieved by their efforts and are less governed by the relative value of others.
Pricing Strategy
For those who have had little or no experience with pricing during their careers, there are some basic, underlying elements of formulating a pricing strategy to consider. Regardless of which employment vehicle you have chosen to deliver your offering to the marketplace, your pricing strategies are rooted in your firm belief in the value of your core skills and a commitment to attain the optimum value for them.
Basis for Pricing
As you approach the development of a pricing strategy, keep in mind that compensation is a function of value given and received. Very often, individuals who are starting out as portable executives or consultants approach pricing by deciding what they want to earn rather than determining how valuable their product or service is to their clients. Portable executives must constantly test the marketplace to achieve the optimum price for their goods or services-the optimum price being the one that will generate re peat customers and offer an acceptable economic return.
In developing a pricing strategy, there are many different customs and factors that must be considered. For example, when an individual is offering a relatively standard product or service, there may be an industry custom to guide one's pricing. Certain industries, such as real estate and insurance, have fixed pricing standards, while other industries have fairly consistent pricing approaches. In the executive search field, for example, retained search firms charge an industry standard of 331/3 percent of an employee's first year base and bonus compensation. You can easily find what the pricing norms are for your industry by doing a little research at the library, mingling at trade associations, and networking. However, if you are offering a unique product or ser vice, you have a great deal more flexibility in pricing and should therefore charge on the basis of the uniqueness of the value received by the customer. For instance, in the early 1980s, Eileen O'Kane drove 240 miles round trip to the Fulton Fish Market in New York every day in order to buy fresh fish for trendy restaurants on eastern Long Island. The uniqueness of this service enabled her to achieve a price that made the effort very lucrative.
You must also be very sensitive to what your competition is charging, as the quality of your product or service gives you the opportunity to distinguish your offering from that of the competition. The added value that you bring to your clients will enable you to generate a better price. However, if you truly are a low cost producer, you should acknowledge this by giving the customer a favorable price as long as the economic returns can be maintained.
Un-bundling
Another factor that should be considered in building a price base is what costs are included in the price of the product or ser vice and what costs are billed separately. This requires testing to see how the marketplace reacts. For instance, some clients will readily pay for itemized add on costs like travel or printing but would react negatively if you raised your prices and included but did not identify-these costs. For instance, John Trost, who has a market research business, bills for computer tabulation costs (which can be clearly identified in terms of time and reports delivered) separately from qualitative research hours. Identifying your costs in this way enables you to avoid being perceived as having unjustifiable price differentials by the marketplace.
