Consulting Example: Price Calculation
Your business philosophy—remember, you’re the seller in this situation
—is that you want to provide your prospects with a minimum of a 100
percent return the ﬁrst year. That means that the price of each of the
above options is one half of the option’s value. Here are the price points
this calculation would create:
Option one $ 62,800 ($125,600 ×50%)
Option two $ 87,800 ($175,600 ×50%)
Option three $102,800 ($205,600 ×50%)
Remember that our goal is to guide this prospect to the greatest
beneﬁt he or she can get. That beneﬁt lies in option three because it in-
volves the development of new habits. As good fortune would have it,
in this example there isn’t a great deal of price difference between op-
tions two or three, especially when you consider the likelihood that the
savings will be annuitized is greater with option three. The additional
$25,000 cost of option three over option two pales in comparison to a
second year of $205,600 savings.
What if the price gap between two and three wasn’t so narrow?
What if option three’s price is $125,600 versus the $87,600 of option
two? With a gap that large, it may be more difﬁcult for prospects to
choose option three. What do you do then? Remember, your goal is to
help buyers choose the best option available to them, and you know that
option three offers the greatest long-term beneﬁt.
The answer is “narrow the gap.” You can do that in one of two
ways—you can either reduce the price of option three or raise the price
of option two. I’m sure some of you are recalling my comment above
about the value of ethical business practices and wondering “Is raising
the price of option two ethical when the value didn’t change?” I believe
it is. You may or may not agree with me, after all ethics is a lot more sub-
jective and more difﬁcult to deﬁne than many of us would like to think.
Having acknowledged the legitimacy of your concern, here are my rea-
sons for raising the price of option two.
Option two has a much greater chance of producing long-term re-
sults than option one, which means that the likelihood of annuitizing
savings is signiﬁcantly higher—not as high as option three, but signiﬁ-
146 Pricing for Proﬁt