3 Option Pricing Tables Part I: The Power of Three

Why do we remember things in threes? Why do we say good, better, best, Past, present, future, beginning, middle, end, So if threes are so fundamental to how we think, how we remember things and how we make decisions, why do most professional services firms offer only one option to their clients? Let's talk about it today on Breaking Biz Dev. Welcome everybody to Breaking Biz Dev, the podcast that beats up, breaks down and redefines business development for the professional services firms of tomorrow.

I'm John. He's Mark. And today, mark, we're gonna talk about the rule of threes. Yeah, that and a few other things as well.

Hi John. I'm excited to talk about threes. just excited to talk about pricing today. How about you?

Yeah, I'm, I'm good. This is gonna be the first of a two-part episode series where we're gonna talk about the power of three and what the problem is facing these professional services firms. And then the second episode is really gonna be a little bit more of a deep dive into some of the more tactical elements of putting together these different pricing options that we're gonna talk about in today's episode. Mark, What's the importance of the number three?

Let's start there. it's such a, it's such a big deal and longtime listeners, by the way. Thanks for being here. Thanks for hanging with John and I today.

We've touched on this in the past, but over time I have realized this is. Such a critical conversation to have such an important topic in professional services firms. And I have been working with firms for a while who have been implementing this and been doing it successfully and maybe a little bit unsuccessfully. So I thought we'd come back and get into it again.

But yeah, the power of threes, right? I think it's this thing we know about, I think that some of us maybe have mostly subconsciously we sort of, embrace it. But it is known research, right? I don't have it at my fingertips, John.

I know it's out there. There's a ton of research that says that we can process and remember information more easily when it's in groups of three, and so that's a huge deal here. The other important thing about threes provides. Contrast in comparison and lets us clarify between different options.

That is the smallest number three that lets us get this comparison thing happening. You think there's two. Sure. but three actually gives you that greater context.

Three actually gives you the lowest and the highest. And then obviously offers something in the middle, right? Yeah, IW the way that I see it is it also relates to everyday life a little bit, right? Like we talked about this in, an episode we did about monthly recurring revenue where in your life you look at things on a monthly basis, right?

If you go to, McDonald's and like small, medium, and large, right? We're faced every day with these decisions about, three different options that we get to choose from. So it's familiar to us too, I think. Yeah.

And I, And I mentioned there, Goldilocks, right? I dunno how common that story is nowadays, John, but I know it was ever present when I was young. I tell it to my kids. Sure.

Absolutely. Goldilocks and the Three Bears, She had the lower one that was too cold. She had the third option, the hot porch, that was too hot, right? And then she would settle on the one that was in the middle and the beds and the, that was built in pretty, pretty early on.

And lo and behold, it doesn't just appear in, coffee shops and children's fables. It's all over the place in the world. I've spent a lot of time as folks know in the world of architecture and the built environment is filled with threes. Threes can create balance and harmony.

In design three doors or three windows or three, whatever peaks, whatever, it's a little more harmonic than maybe just one or four or two. three has a power there. in engineering, if you're building a structure, it's the minimal amount of supports or legs that you need in order to create a stable structure, Heck, even in like photography when you're capturing images. There's the rule of thirds and even your screen will get broken up into the nine boxes.

So you're centering the main focus, either a third of the way down or a third or two thirds of the way up, and a third on the left, or a third on the right, or Oh, I do it all the time in video framing with video podcasts. Yeah. this is moving a little bit beyond the rule of three, but this is more into the whole concept of giving our prospects options to choose from. And so there's a lot of cognitive biases at play here.

I think one I like to call the autonomy bias. And so this is where buyers feel like they're in control and empowered to make a decision. And because of that, they're more likely to be confident in the decision that they make and take an action. So there's a lot going on there, like from like a psychology perspective, but just by giving buyers an option, it introduces a whole new game.

Yeah. And I've said this in the past that, actually what we're really doing when we're selling our services or whatever else is that we're facilitating. Decision making, on behalf of the client, right? We're helping them make a good decision, right?

This isn't all about us. This is helping them navigate oftentimes a tricky, confusing buying situation. So we are, giving them choice, giving them autonomy. Helping them, frame information and frame choices in a way that reduces decision fatigue.

and three options does not make decision making harder. actually facilitates better decision making. Giving someone one option, you would think, oh, that's the simplest solution here. But it's actually not because our brains start to lock up because our brains start to say, shoot, what if this, what if that, what's the loan?

What's the high end? Am I paying too much? three feels complete, right? When we're giving options, it's not overwhelming.

So we're facilitating this good decision making by presenting them a buying opportunity that feels complete and helps them be confident. It adds context to the conversation. I think that's the big piece and the difference, and it's a reframe from win or lose. These are the possible directions that we could go to help you solve your challenge, depending on how you want to approach it.

And so I think that's like the big reframe here for people that are listening is. It changes it from a zero sum game to something completely different. Yeah, true. So we're gonna stay kind of a little bit higher level in this conversation.

like we mentioned, we've got a part two that gets into some of the nitty gritty on this. 'cause I think a lot of folks that I know and I work with, want to get into the nitty gritty right away. They're like, oh, mark, just send me a template, show me how to do it. Even outlining these two episodes we started with the nitty gritty and you had to pump the brakes and say, Hey, John, okay, pull back.

Let's start like at the high level and then we can zoom in. Yeah, and who knows, somebody may just skip over this one and be like, I just want to go to the nitty gritty, but This initial stuff is super important. It sets the stage for a successful rethinking on how People price. One of the things that I say, and I'll probably say this again, this episode, I I, I say it quite oftenly and frankly I don't own this.

Someone has said this in the past, I can't recall who it was, but I think it's a fantastic way to reframe all of this and, and it's. we want our prospective clients to figure out how they want to work with us, not if they want to work with us. That is critical in all of this. And when we put forward three well-sorted options, they start to navigate those and figure out how they're gonna make this work, I gotta tell you, mark, I started implementing these like three option tables when we first started talking about this.

And I gotta tell you it's changed my approach and my view on business development, and it's opened my mind a little bit. I'm not saying that I'm doing it perfectly, by all means. I'm learning all the time even like preparing for this episode, but. it is really helpful and you see the wheels turning in your counterparts and you kind of see that going on and it's beneficial to them 'cause they're in control.

Okay, we've got a couple caveats on this. we're gonna keep on This power of threes, the power of the triumvirate. We're gonna keep hammering on this, but there's a few clarifications in caveats in this whole conversation, and this is the first one here because I know there's, some listeners out here that are saying. I'm already offering options.

Mark and John, you guys don't need to belabor this. I already offer my clients options, but I'm gonna tell you, listener, to your listener, our friends, you're doing it wrong because what you're doing is you're offering a single price with a la carte options. And here's the rub. A la carte pricing On the surface, it looks flexible.

It looks like, yeah, we could add this, we could add that, sure, but it actually ends up creating confusion by offering these individual add-ons, these individual a la carte elements on top of a single price. You create dozens, heck, maybe more of possible permutations. Yeah, On the ultimate price and start to force clients to assemble the solution on their own when they don't even fully understand it, right? They're trying to get their head wrapped around all this.

Professional services we've said this, John, this is complex stuff. They're trying to get their head wrapped around that, and all of a sudden you start throwing all these options and they say you pick, and they've got dozens of permutations, and they get confused. Yeah, now they're in the position of trying to understand how the sausage is made at the same time of making a buying decision. Yeah.

So conversely, three distinct options. Simplify the whole process maybe you take your a la carte options and start bundling them together into three groups start moving those into three discrete options with clear outcomes. That are easier for the clients to understand and then they're able to make an easier choice with more confidence right? That's a huge part of it.

It just, a la carte falls short. It turns the whole process into a checklist where they start checking stuff they want or checking stuff they don't want. Yeah, I've heard this called the Chinese menu and I've used it a few times early in my career, not to any success. And the whole concept was we're gonna empower buyers with this, and they can self-select and be involved in the process.

But It actually can backfire because once someone gets confused and they're overwhelmed, they will default back to something, and typically they will default back to the very lowest, option. So all of these additional options that you thought actually added some value and were actually better decisions for them to make, they don't, because they get confused and they just default back to this baseline. you put someone through this, terrible process of a la carte. They sign off on the cheap one, but lo and behold, that six months down the road, 12 months down the road, whatever else they're gonna need, other stuff, there's gonna be other things coming.

So you start having to come up with these additional service requests, or your margin blows up because you're trying to overdeliver based on this super small scope that they picked initially. So things just turn upside down, so it's terrible. Yeah, I could see how those small projects could snowball outta control. all right, so.

we've kind of teed it up with threes are familiar. there's a lot of power and psychology behind the rule of three. a la carte options don't work. Why don't more professional services firms adopt the three option pricing model?

Yeah. One of the things that comes to mind is that it makes things a little bit more labor intensive At the outset for the professional services firm, like you actually have to, through how to you have to think through all how you're gonna organize, how you gonna put it together and everything else. you can't just turn to your usual old Excel spreadsheet that's got the rows and columns and the numbers and the hours and it spits out a number at the bottom, and then you throw that at the client, right?

So it's more complex. it gets better with time, but it's more complex at least to on the onset as you're learning this stuff, right? There's the other sort of comment that every project, every client is different. How can we even reinvent this every single time for some new client?

it's never gonna work. So we need to come up with a customized, bespoke solution for them. And it's not gonna fit in this whole three option thing there's just gonna be one number, right? And in fact, that's what the client wants.

The client just wants the one number mark. They're gonna put their foot down and they say they don't want the three, they want the one number, right? And then they want to ask you to sharpen your pencil. Yeah.

Then. Right, right, right, right. So, another thing that comes to mind is you as the consultant are thinking we already know what number they want. That we know they're gonna just get the cheap one.

Or we know that they always pick the middle, so we're just gonna give them that one. Or this is the only way that we know that we can deliver on this. Yeah. Maybe they haven't explored any r and D op opportunities.

those are very common objections and there are more. I'm certain that others, hi listeners, you are welcome to, email, whatever, message us on LinkedIn, whatever, and say, oh yeah, here Mark, here's 10 more reasons why this isn't gonna work for my firm. Go Yeah. Why aren't you using three option yeah, let us have it.

Let us have it. But here's a reality check is that your firm is already. Creating options internally that you don't ultimately end up, showing to the client. Right.

You're, when you're putting together, when you're doing your rows and columns in your spreadsheet you're making choices and decisions in there already, right? You're making trade-offs on oh they're never gonna pay for that thing. So I have to either remove it or discount it heavily or whatever else, or, your hours and numbers. You're shifting those things around sometimes completely arbitrarily just because your brain is on fire right now, and you're like, oh, the client's not gonna do that, but they do that, we'll do this, they'll do that.

So you're just chewing away at this whole process of pricing and you are making a ton of decisions already. What you're not doing is actually just taking that decision making process and turning it back to the client and saying, all right, I came up with three options now. Here they are. Let's talk 'em through.

And now you pick, right? Here's the trick with this, right? One price isn't simpler, it's far more risky, right? Keep that in mind because most folks don't understand that.

That's one of the implications here is that you are actually putting your client in a riskier situation by giving them one price rather than three. And I've said this before, is that if you just give them one price, John, you're forcing them, telling them that they have to go somewhere else to get something to compare it to. You're listening to breaking biz dev the podcast that beats up, breaks down, and redefines business development for the professional services firms of tomorrow.

Your hosts are John Tyerman, founder of Red Cedar Marketing, the podcast marketing company for experts and professional services firms, And Mark Wainwright, principal consultant and founder of Wainwright Insight, the fractional sales manager and sales consultant to professional services firms. If you find this podcast helpful, please help us by following the show and leaving a review on Apple podcasts and now back to the show. Yep. Again, we want our counterparts to want to figure out how to work with us, not if they wanna work with us.

if you gave your prospective client one price, you literally forced them to go somewhere else to get another comparative price. I've seen them just go white as a ghost and look at me and said, I've been doing this for 20 years. It's like, yeah, you have, you gave them one price and some people you've got a relationship with and they're okay. But most of them, they're just like, oh man, now I need to go somewhere else and get another price.

You're forcing them to, that's a killer. Alright, so Let's talk about what this really is, right? we want to make sure we're, we've cleared the deck on any misconceptions here, So what is three option pricing? Yeah.

Three option pricing is a way to design the buying environment for your counterparts. It's a structured way to frame the specific services you're offering, what the client gets, what they don't. You're showing them. What they're missing out on, if they don't go with different options, what they get with ones, what they don't with others.

It's a challenge of displaying visual information, but it is a very powerful tool for clients. So I think that's really what it is. Yeah. And I'd add to that, it's a powerful tool to be used in a conversation, right?

We've talked about this in the past, but make sure that we weave this into today's episode that, these tables, these three option tables that we ultimately end up putting together are conversation tools for sure. So on the flip side, John what is three option pricing? Not. we're not trying to manipulate people.

We're not trying to trick people. we're trying to lean into different ways that people make decisions and try to make those little decisions easier and help guide our buyers to the best possible decision for them and their context and their environment for their firm. there's no convincing. Folks, there's no manipulation.

There's no forcing people to buy something they wouldn't want to buy in the first place. So we're not trying to force people into making bad decisions. Actually. We want them to make good decisions, which is why we do this, right?

This isn't a way for us to just make more money sometimes. You will see, and I would say quite often you will see an increase in your sort of estimated contract amount if you go through this process because ultimately the client ends up opting into more stuff than you would have initially presented to them because they see the value, they understand it, and then they opt in to it. Lo and behold, it might work for you quite well. But it's definitely gonna work for your clients.

So this is completely a win-win situation for sure. Sure, And a group that is hypersensitive. About being salesy. Are people in professional services firms?

Our friends, the architects, the engineers, the lawyers, the accountants, all those folks. They are, They have a reputation to maintain. yeah, they've exactly. So they're super, super sensitive to all this.

But conversely, John why do we think that three option pricing works specifically? for professional services firms? Yeah, I think it displays that you understand the market. It displays that you've been there before, right?

Because if you're presenting different options, you're saying, Hey, based on my experience, based on my knowledge of the market, here's a couple different directions that we could go. That signals that you know your stuff, right? It signals that you're taking a holistic perspective and you've got the best intentions of the buyer in mind. So if you wanna be a trusted advisor, the three option pricing tables help support that.

I totally agree, and I I, I love that you led with that. I think that's a perfect example of why this is so good for professional services firms because whether you're being explicit or just implicit about your sort of breadth of knowledge and awareness and expertise, it lets that come through early on in the process when you're doing your scoping and pricing and everything. And it's not just, look, we're the experts. You've got only one way to do this, and there's only one price.

It's like you're coming into this saying like, actually we've gone a number of different ways with this, and you could take this a number of different directions. So let's have a conversation to see where you want to go? So I think that's good. Another thing that you mentioned a little bit earlier was making it really clear what's included and not included.

And I think professional services firms a lot of times fail with that. Yeah, I think that's important. 'cause again, like you said earlier, Mark, this is a tool for a conversation, right? And when selling a professional service, there's a lot of moving parts, there's a lot of things that could be included, could not be included.

We could go in all the different directions, all the different elements. So visually displaying that can be challenging. And we'll talk about that on the next episode where, we break down the different elements of these tables, but, it could be as simple as a dash versus a checkbox, To visually show the difference there. the visual cues are really helpful.

What we're really doing, when we're walking through this process, where we're showing things, what's included, what's not included, and hopefully people are picturing sort of those green check marks and red xs and things like that. We'll get into that. But. We are as clearly and carefully as we can showing what's included and what's not included in certain choices and certain options so that there's nothing ambiguous in the situation, right?

There's no sort of: six months down the road, oh, I thought that you would be doing this. So I thought that you would be doing that. Oh, I thought this was included. And inevitably, we weren't explicit enough about it, we didn't clarify enough.

We start saying yes to things that we wouldn't have otherwise said yes to, and then scope creeps and everything else. So we're really explicit about it. The other part of that is that someone said, oh, but that wasn't included initially, but it's pretty clear that we want it right now. They're like, what's that gonna cost?

They're like, oh, there you go. There's your choices between that option and the other option you didn't choose. So it's the difference between those two. It's right there in front of you.

Clear. Yep. All right. So that's a couple of the reasons why we think specifically it works well for expert firms, for professional services firms.

Mark, you've got a section here on caveats we'll probably dive a little bit more deeply into this that, and hopefully people are starting to, get to a point when I talk to firms and individuals about this, I can start to see the gears start to spin in their heads and they start to figure out how they're gonna start to assemble these options breaking free of the single option mindset. and move into three options, and all of a sudden They start building these three options, and a lot of times I have to, okay, stop.

Here's the big caveat with this is that these options need to be built in a way that you know are meaningful and valuable to your clients. Which means that they can't just be constructed outta thin air. Right. You start building these three options and you think, what are my options?

you actually have to rewind or maybe just think back to some of your initial conversations did you do thorough enough discovery to understand what. things are most important to them and what things are least important to them. Did you do that? If you haven't done that, that's really critical because when you put together these options, the options need to be meaningful.

the client or prospective customer or a client, they need to understand them. They need to care about each option, and frankly, the elements that comprise each option. The components need to be meaningful. The easy example of that is, here's your sundae, and I can give you, extra butter scotch, and an extra cherry on the top.

How about that? For just a dollar more. And someone says, I don't like butter, scotch, and keep the cherries, right? It's like no value.

like in its simplest form, like that's, it is like you offered options that someone didn't care about and frankly maybe rubbed them the wrong way. They're like, you didn't ask me in the first place if I liked butterscotch. why are we even having this conversation? So we're there, right?

That's a good. The other part of this is what I said is the caveat is there that the options need to be meaningful and they need to be valuable, meaning that the client understands them to the degree that they are able to assign value to each different option, maybe even a dollar sign so that they can differentiate between the three, if the options are built in a way that the client is unable to differentiate value. Between the three different options and they can't assign a dollar figure one way or another, then we haven't offered up the right things, right?

Or we haven't gotten to the point where the client is aware and educated enough in this whole process that they're able to determine higher value, lower value, et cetera. So those are the two little caveats right there. And that's why these three options, are so critical to be built on a good foundation of That's exactly where, that's exactly where I was gonna go is both of those caveats that you gave were like it structural and foundational in your understanding once we understand what elements.

Throughout this whole process, we're hopefully, we're having good conversations, good discovery. Hopefully we've qualified well initially that this is a good fit. This client's gonna, we're gonna be able to be successful with these folks once we've determined good fit. And we've put together our, our three options here.

Once we understand the client enough, we can put together these elements. That are most and least meaningful and valuable to the client so that they can choose easily, we can facilitate a really good decision making process. So that's another caveat. and that's another big one here, is that we cannot do this without really understanding what people understand, and what people assign value to.

We're gonna tease this, right? So our next episode, we're gonna dive deeper into some examples of this. But one really easy example, we'll drag in the architects who are near and dear, even engineers and other folks. Maybe this is for some sort of a study or some early design work to be done for a prospective client where option A is called essential, option B is recommended, and option C is strategic, right?

So essential is just some basic sort of building code review, some basic shapes of. Buildings and things and some high level costs. Recommended really starts to flesh all that with multiple options, maybe a workshop with decision makers and stakeholders, and then some sort of analysis of the risks involved in the project. Option three is strategic where it's we're testing the market.

We're understanding the lifecycle costs of these various options that we could design and build. Entitlements is, are they gonna sell this thing down the road or, whatever else. and that, that was a lot of architect language in there. But there's a bunch of different ways you can put together these options.

And we talked about the same project, it's the same client. There's just different levels of work engagement insight, expertise, risk, all that sort of stuff that we can Split out into three options and let the client choose. So that's just one kind of random option. Yeah, that's one example.

And we're gonna dive into a lot more on our next episode and all the different details of how to build those three option tables and use that as the tool, as part of those synchronous conversations. mark, as we close here, what are some of your parting thoughts? start with some basic, I'll call 'em draft proposals, right? So don't try to roll this into some, really evolved kind of formal contract, situation.

Make these sort of drafty in nature. Make sure They're conversational, right? Maybe just start in one service area with one service offering. Keep it simple.

Don't try to roll this out across your entire organization. make sure to keep your pricing differences, your different options meaningful, right? they can't be meaningless, three different choices the client has to make, has to be meaningful and they have to be able to see the value in each. An easy one, and this is kind of a tactical one that we'll get into next time, John, is that maybe label one option is recommended, right?

Because I think at the end of the day, one of the things that's gonna happen outta this whole process is the client's gonna come back to you and they're gonna look at the three options. They're gonna understand them, they're gonna take 'em in. They're gonna have some ideas on which direction they want to go, but they're gonna come back and they're gonna say, I don't know. John, what do you think?

Yeah. the other thing, and this is most important, is that right? This has to be a conversation. Use a narrative, talk them through it.

Help your clients navigate this. Just don't throw up spreadsheets and numbers, right? This is not that conversation. This is a narrative.

There needs to be some meaning, some values, some. Some kind of understanding around this whole thing and not just, it's not a, it's not a spreadsheet, so that means of course, folks, don't stick this on an email and send it off to your client with your fingers crossed. Don't do that. synchronous conversation.

Schedule that synchronous conversation. All right, there's a part two on this, so we will get there. But here's the hopeful reframe on this, right. Threes are already how people's brains are working.

It's already how your clients are making decisions. The question isn't, whether or not you should use this. It's like, why haven't you done this already? ponder that, and then on the next episode of Breaking Biz Dev, come back with a refreshed mind so we can dive into how you can start putting these three option pricing tables together for your proposals.

Mark. This has been a fantastic episode. Until next time. Until next time, John.