Any purchase entails risk. This presentation explores different types of risk your customers or clients consider when they are purchasing your solution, and how you can deal with them. Part of Mastering Value Pricing online course on value pricing. http://www.masteringvaluepricing.com

1. RISK
12 TYPES OF CUSTOMER
masteringvaluepricing.com
from
online course by Lauri Jutila
MASTERING VALUE PRICING
HOW TO DEAL WITH THEM
AND

2. What is Value-Based Pricing?
Value-Based Pricing or Value Pricing is a powerful
pricing strategy where companies price their
offerings based on the contextual, measurable
value and subjective, perceived value of the
offering to the buyer or client.

3. Different Types of Customer Risk
This presentation explores different types of risk
your customers or clients consider when they are
purchasing your solution. Your task is to lower,
mitigate or eliminate those risks.

4. Master value pricing and transform your business, profits and client satisfaction
Get the Master Class

5. all purchases entail
RISK

6. can be negative or positive
RISK

7. examples of negative risks
Risk of financial loss
Risk of poor performance
Risk of time lost
Risk of opportunity lost
Risk of psychological or physical harm
Risk of social or cultural harm

8. examples of positive risks
Risk of financial gain, greater revenue or profits
Risk of emerging new opportunities
Risk of unlocking new unexpected value
Risk of improved performance

9. “Risk is of the essence, and
risk making and risk taking
constitute the basic function
of enterprise.”
– Peter Drucker

10. drucker’s categories of risk
affordable, non-affordable and compulsory
“First, there was the risk a business could afford to take. If it succeeded at
the innovation, it would not achieve major results, and if it failed, it would
not do great corporate damage. Second, there was the risk a business could
not afford to take. This risk usually involved an innovation that the company
lacked the knowledge to implement, and usually would end up building the
competition’s business. Third, there was the risk a business could not afford
not to take. Failure to undertake this innovation meant there might not be a
business several years hence.”

11. It is of the essence that a
business takes on risk.
That’s where the profits lie.

12. Unfortunately, clients
tend to focus on negative
risks while contemplating
purchasing your solution.

13. RISKS RELATED TO YOU
AND YOUR SOLUTION

14. FINANCIAL RISK
Risk that there are monetary losses incurred due to the
failure of your solution, the poor implementation of
the solution or being cash-strapped because of the
investment.
Your solution is not optimally implemented and client
loses money because the change did not happen,
it happened in an unintended manner, your solution
ends up costing more than originally planned or
your solution just made them lose money otherwise.

15. PERFORMANCE RISK
Risk that your solution does not perform or deliver the
value and benefits originally intended.
Your solution fails to achieved Expected Value and make
the change stick in client organization.

16. RISK OF TIME LOST
Risk that the client will lose time due to the failure of
your solution.
Your client loses time over an unsuccessful, delayed or
otherwise troublesome implementation of the solution.

17. OPPORTUNITY RISK
Risk that the client will lose an important market
opportunity due to the failure of your solution.
Your client misses a market opportunity, ability to capture
new market share, win important business or launch a new
offering because your solution did not deliver Expected Value.

18. RISK OF “CHOICE”
Risk of choosing one solution (yours) over the others
(competition, no-change) and end up investing in a
non-profitable solution.
Your client makes a wrong choice of solution to his business
context and suffers tangible, intangible or emotional losses
because of it whereas a competing solution would have
prevented or minimised the losses.

19. PROVIDER RISK
Risk of becoming dependent of the solution provider
over the long term, especially if service or solution is
continuous in nature.
Your client feels a vendor lock-in will hamper his ability
to do business optimally in a changing environment if
he chooses your solution.

20. INDIVIDUAL RISKS

21. PSYCHOLOGICAL RISK
Risk that the purchased solution does not fit with the
individual’s self-concept.
Your client feels the proposed solution might not or will
not fit well with his individual self-concept. For example,
a client might not invest in your solution if it can be seen
to conflict with his values.

22. SOCIAL RISK
Risk that purchasing a solution will not meet the
approval of others who are significant to the client.
Your client feels his superiors, peers or other social groups
important to him won’t approve or will frown upon the
purchase of your solution.

23. PHYSICAL RISK
Risk that purchased solution will actually cause
physical harm to the client.
Your client feels he’ll end up in a hospital during implementation
phase or when the solution is in production use.

24. ORGANIZATIONAL
RISKS

25. CULTURAL RISK
Risk that purchased solution will change the cultural
configuration of the client organization, especially in
a detrimental manner.
Your client feels the solution will change company culture
in ways that will make the work place less secure, friendly,
cooperative, or otherwise detrimental.

26. INNOVATION RISK
Risk that implementing purchased solution,
a new innovation will unearth new, yet unknown risks.
Your client feels a new innovative solution will unearth new,
yet unknown risks that end up being costly or impossible to
eliminate, mitigate or otherwise manage.

27. SOCIETAL RISK
Risk that the purchased solution will change the external
societal configuration or perception of client’s environment,
especially in a detrimental manner.
Your client feels purchasing your solution will change the
perception of external stakeholders of the client company,
or how they will interact with the client company towards
negative or hostile direction.

28. OBSERVATIONS
ABOUT THESE RISKS

29. all of these risks are
PERCEIVED
RISKS
(and not necessarily actual)

30. They can be lowered,
mitigated or eliminated
with assessing risk from
client point of view and
employing value pricing.

31. Perform risk analyses using the different
types of risk from the client point of view.
Find ways to lower, mitigate or eliminate
those risks and you’ll have lowered the
risk barrier to a purchase.

32. Keep in mind that it is the perceived risk to
the client that is important, regardless of
the probability of a risk event actually
becoming a reality.

33. HOW TO LOWER
THE PERCEPTION OF
THESE RISKS FOR
YOUR CLIENTS?

34. FINANCIAL RISK
To address the fear of spending more than originally planned
and intented, offer a value-based price and price guarantee.
Your clients know right in the beginning of the project and
throughout it what their total investment will be.

35. PERFORMANCE RISK
To address the fear of not realising desired performance
and value, offer service guarantee or even performance
guarantee, if you are confident in your abilities and have
evidence to back them up.
You can also offer unlimited access as an option to help
the client feel they can consult you when faced with
challenges in implementation and change.

36. RISK OF “CHOICE”
To address the risk of choice, present yourself as a trusted
advisor whose mission is to help the client make the best
decision for his business situation and context. Even if the
best decision would mean acquiring a solution from the
competition or doing nothing.

37. PROVIDER RISK
To address provider risk, demonstrate to the client that they
have a perceived ability to move to another solution in the
future should he choose to do so.
Obviously, you want to increase switching costs over time,
but the client must feel their business will not cease to exist
if they abandon your solution.

38. PSYCHOLOGICAL RISK
Employ value diagnosis to find out what really matters
to the client and what he values. Then you can help him
to make the decision about the correct solution for his
context and situation.

39. SOCIAL RISK
To address social risk, ask the client to involve parties
significant to him to the value and solution design
phase. This will help to get the social buy-in and
approval from people significant to the client.

40. CULTURAL RISK
To address cultural risk, convince the client that you will be
part of the solution implementation and value delivery,
making sure that the right kind of change happens in client
organization.
You can also offer unlimited access as an option to help
the client feel they can consult you when faced with
challenges in implementation and change.

41. INNOVATION RISK
To address innovation risk, offer the client a specific risk
assessment for the new innovation after the Expected Value
has been determined and solution design phase is complete.

42. “We will never have complete and
perfect information. The best way
to succeed is to revel in ambiguity.”
– Grant Hammond

43. Get the Master Class
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masteringvaluepricing.com

44. EPILOGUE
factors that influence
perception of risk

45. involuntary
VSvoluntary
Actions or decisions are seen as less risky if we
choose to voluntarily participate in the action or
making the decision over an involuntary one.
Bungee jumping vs. being pushed off a cliff

46. uncontrollable
VScontrollable
When people are not in control of an action, they
tend to feel the action carries greater risk. Being
in control tends to lower the perception of risk.
Accepting solution at face value vs. participating in
the design of the solution

47. unfamiliar
VSfamiliar
If people are dealing with “risky matters” that are
familiar to them, they tend to view them as less
risky than matters they know little or nothing
about.
Driving a speeding car vs. living near a nuclear
reactor

48. uncertain
VScertain
“Risky actions” carrying a certain or proven
consequences are more readily accepted than
uncertain ones.
Smoking cigarettes vs. exposure to ammonium
thiosulphate

49. catastrophic
VSordinary
Actions with catastrophic consequences are
often perceived as more risky even if presented
compelling evidence about diminishing
probability.
Flying on airplane vs. driving a car

50. unfair
VSfair
If taking on a risk carries no perceivable benefit, it
is seen as unfair and not worth pursuing.

51. untrustworthy
VStrustworthy
Risky actions with or from trustworthy sources
are perceived as less risky than the same actions
with or from untrustworthy sources.

52. THANK YOU!