How 3-tiered pricing will increase profit for your accounting firm
Imagine if Goldilocks had only one option: only one bowl of porridge and it was too hot. Or only one bed and it was far too big. She would’ve left the three bears’ house hungry and unrested. Luckily, Goldilocks found three options for each, and so was well-fed and slept soundly.
Not too big, not too little, but just right. Except this time it’s not Goldilocks.
Instead, it’s the sound of your new 3-tiered pricing system signing a client onto a more profitable service plan.
Having a one-size-fits-all payment option can lose you revenue—if it’s too much, people will walk away, and if it’s too little, well, they’ll take it faster than you can say, “I’m undervaluing my services”.
When you think about pricing for a client, it’s difficult (borderline impossible) to know how much a client is willing to pay. It’s arguably one of the most sensitive parts of leading an accounting firm, and without a good deal of experience, it can be difficult to get right.
Grouping your services into tiers lets people choose the level of engagement they feel comfortable with—turning more prospects into clients. It will also help you leverage existing clients for more profit.
With a 3-tiered pricing structure, instead of asking yes or no, you’re asking how much, and even if they select the lowest tier, that’s still a new client that might’ve walked away from a ‘take it or leave it’ ultimatum.
Ryan Lazanis from Future Firm has partnered with Karbon to deliver a private podcast series, The 7 Quick Win Marketing Tactics for Accounting Firms to provide quick and impactful tactics you can implement today to grow your firm. In the fourth episode, Ryan tackles implementing a new pricing structure to increase conversion rates and maximize profit from current clients.
What is 3-tiered pricing for accounting firms?
3-tiered pricing (or the Goldilocks Method) for accounting firms is simple. Instead of giving one option for payment for your services, you split your services and pricing into three tiers:
1. Bronze
This will be your cheapest option, and if you’re changing an existing pricing structure from a one-size-fits-all to a 3-tiered, this will be the price your clients are already paying. It covers the basic services you offer with no frills.
2. Silver
More expensive than the bronze, this tier comes with additional features that aren’t covered in the basic package. People will feel like they’re getting a more exclusive service without breaking the bank. You’ll find the majority of people go for this option.
3. Gold
This is your premium package that includes all your best services. This tier should be priced significantly higher than the silver (even twice as much) and branded as a premier service package.
Naturally, fewer people will sign up for the gold tier than the silver because of its price. But its presence in the tiers will lead clients to the silver option, as the silver will no longer be the most expensive—your clients will subconsciously compromise.
Here is a basic example of the three tiers on action for a tax return service:
Bronze: filing the tax return
Silver: filing the return and having a meeting to discuss
Gold: The filing, the meeting, and a more comprehensive tax planning service
Pricing is psychological
All too often when deciding what to charge clients, firm owners tend to lean towards lower pricing because they’re eager to get the customer through the door—they’re afraid to lose them if they push for a higher price, even if it’s what the service is worth.
The benefit of the 3-tiered system is you can propose more aggressive pricing options knowing that if someone doesn’t like the look of them, they’ll go back to either your silver or bronze tiers. You won’t lose the client completely.
One of the reasons the majority of clients go for the middle option is they don’t want to miss out, and they usually (but not always) don’t want the most expensive option.
That’s why adjusting your focus to the 3-tiered pricing structure is beneficial: the messaging to your clients is going from ‘take it or leave it’ to ‘let’s figure out what’s right for you’.
How to implement 3-tiered pricing at your accounting firm
The 3-tiered pricing system can be used when signing on new clients, but can also be used effectively to leverage existing clients for more profit. It’s a lot easier to increase the revenue from a current client than to attract a new one.
Ryan Lazanis suggests a 4-step process to increase your spend-per-head of current clients:
1. Find a client you’re under servicing
They might be a firm that’s grown recently and you haven't changed the scale of your services or updated your pricing. Or you might just have a hunch that you could be doing more for a client.
2. Schedule a call
This can be elegantly phrased as a regular review of your services. Because they’re an existing client, you’ll generally have a good response to this request.
Once you’ve got them on the phone, your mission becomes discovery. Find out:
Their pain points
Their short and long-term goals
How you can help relieve those pain points and achieve those goals
3 Figure out how you can help
After the call, it’s time to work out how you can best help them achieve all the goals they outlined. Then group those services into the three tiers. The lowest tier can simply be the services you’re already offering them. It’s an easy way out if they’re hesitant to increase spending—no hard feelings and your current services continue. But the other two options will include new ways you can work to meet (and even exceed) their goals.
4. Present solutions
Once you’ve established how you can help and have grouped your solutions into three tiers, arrange another call to present the options to your client.
Many may want to stay with their current package, but you’ll be surprised at the number of people who will increase their plan, especially if you’ve listened well and factored their goals and pain points into your options.
Not sure how to price and package your services and attract clients? Here's a pricing for bookkeeping services guide.
Not too much, not too little, but just right
The 3-tiered marketing tactic will increase the revenue of your accounting firm. It takes the pressure off when offering premium prices for a premium product and it’s a risk-free way to try to increase your profits while still being transparent about what clients are getting.
The 3-tiered pricing structure will help your firm and your clients grow together—so you and your clients, just like Goldilocks, can get what’s just right.