It seems that increasingly I am underbid by someone offering fixed rate services at rates that I can't compete with. My consulting service is impeccable and clients seem to keep coming back, but I am afraid my competitors will continue to cut into my business. Any advice?
You are not dreaming about this phenomenon. Services are increasingly being commoditized and sold off schedules. This started in force with the federal government that, along with health care, is the largest consumer of management consulting services. Want a strategic plan? Buy it off the schedule. Need to train your staff in lean manufacturing? Again, pick from a menu of vendors, some much lower priced than others.
Some consulting services are really commoditized. They are becoming undifferentiated in the eyes of the consumer, despite our feelings of how unique they are. This has become especially true of assessments and training. Need to "check out" your people? "Hire a firm to do a DISC, Harrison, MBTI, Prevue or any other one. They're all the same so just get me the cheapest one."
To see an example of this phenomenon, go to GSA Advantage
, the government's procurement schedule. Search for "strategic plan" and see if your prices and offerings can compete with the 4,000 companies who will sell you one. (Note that the federal government negotiates rates that are discounted from commercial rates.) Tip:
Create a menu of your services. How would you sell a specific outcome (e.g., marketing plan, performance measurement system, process design, more effective sales force, supply chain security) for a fixed price? Not easy, is it? Put yourself in a client's shoes. Menu pricing makes it easier to see if you are providing something of value and not based on your hourly rate - you may be over or under pricing your services. With that warning in mind, the only way to compete with commoditized services offered by your competitors is through differentiation of your services in the mind of the client - the a la carte items that can't be sold as substitutes of each other.© 2010 Institute of Management Consultants USA