Fixed Price Consultancy
Value Based Consultancy – Fixed Cost Consultancy
As the recession swings in, more clients are looking to fix their costs, especially in areas such as legal and consultancy, where huge costs can be ran up.
The benefits to the client are clear, but few lawyers or business consultants are keen to embrace Fixed-Time, Fixed Price Consultancy models.
The demand for flat fee consultancy will not go away and can be very successful in attracting new business. It is also playing with fire.
How to Run Fixed Price Consultancy Projects (Just a short top level review, books are dedicated to such things)
1. Protect Your Brand. Ensure offering fixed price services does not diminish your brand by appearing to be discounting. Some people like reassuringly expensive, that’s one reason why Magic Circle Lawyers and McKinsey Consulting do well (apart from they are also very good).
2. Watch for canibalisation. Calculate revenue canibalisation from existing clients demanding a move to a Flat Fee Model
3. Look Ahead. Introduce Flat Fee models only in areas where you have very accurate knowledge of time/resource costs for the next 12 months. I recently bought US contractors in Dollars and then saw the £ drop 15% below my currency hedge. Nasty.
4. Resist scope creep at all costs, make it clear up front that the project will needs to be very well scoped/planned and that creep will be proactively managed.
5. Stick to what you know. Favour Fixed Price Consulting where “We’ve done this thing a million times before”, NEVER when “I think my estimates look ok, it’s a bit like what we did last time, I guess we can do this”. Make sure there is clear start point, clear process and clear sign off, use time and materials for everything else.
6. Be realistic. Fortune favours the brave, Fixed Cost favours the very realistic. Count all the time it takes to do a project including client management.
7. Add a safety margin: Calculate the hourly rate to carry out the project and then add 15%.
8. Look for time savings: Calculate how much time can be saved on time tracking and complicated billing that is removed by a flat fee. Treat that saving like it’s VAT and save it in a project fund called “Oh My God – I looked away for 5 minutes and now have a huge overrun on a fixed cost project”
9. Focus on efficiency: Introduce new equipment and efficient processes wherever possible in relation to fixed price projects. Efficiency has to be invested in.
10. Delegate. Now the client is not paying for a named individuals time, offload the simple tasks to a junior staff member who should enjoy a more varied workload
11. Talk to customers: Is there a demand for fixed price services in your industry, if demand is weak then consider shelving the idea until demand grows. If you do run with a Flat Fee service offering, get as much feedback from those trialing the model (staff and clients) and modify as needed. Openly say to happy fixed price clients “This pricing model is quite new for us, we’d like to try it out with more clients, is there anyone you know open to trialing this model. It’s a direct request for a referral, but there clearly a benefit for the new prospective client.
12. Try it out: Once you have a plan, start small and try it with a single client. A few weeks later you will almost certainly have made a few tweaks. Continue to roll out the pricing model slowly and make sure your financial backers such as banks understand what is happening so they understand the benefits as well as the risks.
The aim should be to maintain or grow revenue and profit whilst differentiating yourself in the market. Win win for clients peace of mind and consultants finances.
Online Marketing Spend
When buying online media it is useful to compare website user statistics to offline audience figures so you don’t lose perspective.
When buying media or generating revenues strategies for online publishers I compare costs/incomes to audited offline media such as newspapers and magazines.
Whilst there are huge differences in what you can do online compared to a printed page, at the end of the day advertising dollars should follow the audience and the biggest ROI.
One online network is charging around £6.00 CPM for a mass market run of site marketing campaign, yet I can buy the same quality eyeballs and attention in a London morning newspaper for slightly less in terms of comparative presence and audience impact. I will use this to leverage a discount where possible.
Regardless of being an offline or online marketing consultant, it is important to tell your client where to put their money to gain best effects, and sometimes that is where you traditionally buy.
ABC provide a PDF certificate of distribution for many publications. For instance The London Paper is distributed at 641 locations including 173 locations around train stations and has a average distribution of 501,329 issues per day, and carries around 39% advertising content. I know this and can show my client this because it’s certificated: http://abcpdfcerts.abc.org.uk/pdf/certificates/15571687.pdf
.Net magazine has 18,001 copies distributed but I would wager money that many of the advertisers do not realize 34.6% of copies are sent internationally and never reach a UK or Ireland address. Over a third of the readers are unlikely to buy their UK targeted services. How do I know..because I have a calculator and…the audit certificate http://abcpdfcerts.abc.org.uk/pdf/certificates/14775673.pdf
Surprisingly, offline media has much better transparency in some areas, assuming you take the figures with a small pinch of salt.
Don’t assume online is the best place for your clients money, and if it is…leverage offline advertising rates to bargain down to a rate based that reflects the cost of marketing to that audience (regardless of medium). 2009 is a year to negotiate down the rising costs of online marketing.
IP Location increasingly inaccurate as mobile Internet takes off
IP Address Location, often referred to as IP to Location is a powerful way to increase relevance of adverts and content by geo targeting but the accuracy of IP Targeting is declining as fast as mobile internet access is increasing.
Right now Google is offering me Swedish adverts on Google.com searches, the same goes for Google’s adverts on Ask.com.
Yahoo are appending “&fp_ip=SE” (he’s in Sweden) to my search string.
Only MSN Live seems to ignore my IP and annotates “&mkt=en-us” which suggests MSN is crudely reading my browser language setting and assuming I am a US user because I bought the laptop there.
Yet MSN is no less correct than Google, Yahoo or Ask on where I am.
While I may appear to be in Sweden based on IP, I am actually travelling at 225 Km/Hour through the English countryside on a National Express Train using Icomera Mobile System (IMS) internet.
Icomera are based in Sweden and using servers based in Sweden to power the mobile internet service. I may be looking East over the North Sea but as far as the IP targeted advertising servers at Google are concerned I am in Strängnäs, home to Sweden’s second oldest Gymnasium (population 31,152).
In 2007 500,000 train passengers used Icomera’s Wi-Fi on this route where it was provided free to 1stClass and at over $10 to Standard class passengers. In 2008 the train company changed hands and the new owner provides Wi-Fi free to all passengers.
All 500,000 users last year were shown miss-targeted advertising by Google if they carry out a search from the train Wi-Fi. I was incorectly targeted on every trip.
Today 52 trains equipped with the Icomera technology will travel in the UK, each with a minimum passenger capacity of 488 people. That is a potential passenger load of 25, 376 passengers. If every passenger was crammed on and used Wi-Fi, this would appear as if 81% of the Strängnäs population logged on.
From the Swedish advertisers perspective this is no gravy train for them, as most of today’s onboard clicks will be paying to confuse British rail passengers with Swedish language landing pages.
I log off Icomera and start using my Vodafone mobile broadband card. Suddenly I am shown UK advertising again. But now I am in Newbury according to IP location. Newbury is the HQ for Vodafone.Close, well, only 320 miles away, but no cigar.
Maybe I’ll stop off at Starbucks in Edinburgh and use their T-Mobile hotspot where I will suddenly be IP transported to Dusseldorf or Cologne in Germany.
While adoption of mobile internet is still relatively low this may be an acceptable statistical error, but soon it will become a noticeable headache. Those using mobile internet are typically higher income and in highly desirable e-commerce demographic that is becoming harder to geo-locate while search engines deliver irrelevant advertising to consumers and expensive lost opportunities to retailers.
Rip off Britain – Thinkpad T61 costs 33% more in UK than US
A T61 Lenovo Thinkpad bought direct from manufacturer in the UK costs £342 more than the same model bought from the manufacturer’s US site, over 33% more expensive.
The UK model is quoted at £1,022.25 including VAT at 17.5%.
The US model is quoted at £680.24 assuming CA 8.5% sales tax, recycling fees and FX at £ = $1.96.
Choosing random dates in February, it would be £65.50 cheaper to fly to San Francisco (let alone New York) and buy the laptop than order it here.
(Of course VAT would be payable on the laptops value over your personal allowance of around £145)
Online Revenue Optimization
“Usability and accessibility” was mentioned to a potential client recently while we were reviewing their online portfolio of properties. The group energy that had been present in the discussion of SEO versus PPC waned at the mention of accessibility. If speech bubbles were real, we’d have seen “Oh here we go…AAA accessibility…focus groups, usability eye tracking… yady yada.”
While it was not required that the Search team lead should intervene when a perfectly capable usability expert was speaking, I couldn’t help myself on this occasion.
Knowing the main conversant had a background in Airline Yield Management I bucketed all the tasks and disciplines into one activity, declaring the whole of the parts to be “Online Revenue Optimization”.
Here we had a single discipline that I cannot believe does not exist already. This “Online Revenue Optimization” would unify SEO, SEM, and Advertising Managers with usability expertise backed by a rock solid analytics person. Suddenly what sounded like yet another overhead to serve minority interests had become an integral part of the cash funnel. Of course, it’s semantics.
It’s sad that agencies and clients tend to only fully commit to usability ahead of cool design in troubled economic situations… but like Silicon Valley geeks in Ubuntu t-shirts who can fly their private jets over the prom queen’s trailer, every dog has its day.
The credit crunch is concentrating the minds of clients requiring online work and while 2008 may be a great year for advertisers, design and build agencies should make quite sure that their solutions don’t just look great but are revenue engines that can achieve their clients overall financial goals.
For a little while, some of the expensive bells and whistles that have taken hold over the last few years in web builds are going to be swapped out of new website projects in favour of sites that can prove their ability to generate traffic and convert efficiently. I would not be surprised to also see websites increasingly launched in phases that only roll forward if each previous phase hits its financial performance targets.
While I may choose to downgrade my Itsu lunch and pay off my credit cards I hope we will see the strained economy deliver Laissez-faire driven usability and overall better site design across Europe and the US in 2008.
If I’m a good boy I might even get to see Online Revenue Optimization become a discipline in its own right and the first thing we discuss is financial targets for a website not what colour it should be.
