5 Ways To Ethically 10X+ Your Average Profit Per Client While Increasing Their Satisfaction

There are only 2 primary levers to grow a business.

To increase the Number Of Customers and to increase the Average Profit Per Customer.

Most businesses tend to focus on the first lever because it is generally considered to be “easier” as it is just a byproduct of being louder in the marketplace. 

A critical problem occurs when marketing becomes the ONLY lever a business relies on to grow. 

As the market becomes increasingly competitive and noisy, many businesses inevitably fall into the trap of competing with lower prices or higher marketing budgets.

The end results are profit margins that get squeezed between higher costs and lower prices. 

Over time, profit margins will shrink to the point where a business may make just enough to keep the lights on. 

This is the story of commoditization and it is the reality of many businesses that compete by being a little cheaper, a little better or a little louder.

An alternative approach is the way of De-Commodification…

The process of serving customers (or clients) where they become 10X+ more profitable to your business while also becoming 10X+ more delighted in the process.

There are only 3 ways to increase the average profit per customer.

– To increase price

– To decrease cost

– To increase the average # of repeat purchases

Here are 5 methods our clients and our businesses continuously use to achieve those results.

1. Charge What It’s Worth. Not What It Costs.

The large majority of service businesses are process driven.

They specialize in a skillset and typically charge by time, labor or cost markup.

In most cases, this is a disadvantage to both the service provider and the client.

The service provider succumbs to a severely limited profit margin due to commoditization (aka lack of differentiation), and the client often pays for a ballooning cost that does not necessarily increase in proportion to the value they receive.

There is a clear misalignment of incentives.

In fact, the incentive misalignment of pricing by time, labor or cost markup is actually one of the root causes for the worst performing industries in the world in terms of getting clients what they want.

This includes part of the healthcare industry that prefers to prescribe on-going medication instead of preventative treatment, the construction industry where delays and budget overruns become the norm rather than the exception, and the marketing industry that is filled with vanity metrics that do not produce a return on investment. 

Businesses have the opportunity to become far more profitable when they are able to to transcend from a process-driven model to an outcome-driven model.

Afterall, the value of a surgeon is based on the improved welfare of their patient, not on the hours they spend in the operating room.

Clients are far happier to pay a higher price if they know that doing so is in alignment with the outcome they desire to achieve.

Here is a demonstration:

Would you rather pay $100,000 for a complete remission of a terminal condition…

Or would you rather pay $10,000 for a surgery?

Even though the first option is 10X more expensive, that is what most people choose.

The “value” people are happy and willing to pay for is in achieving Desired Outcomes, particularly when it involves solving big painful problems.

As long as a person perceives the VALUE to be GREATER than the PRICE, they will be delighted to pay any amount (assuming they have access to the money).

The more you are able to shift your business towards selling higher value (aka more desirable) outcomes, the more you will be able to charge what your service is worth, rather than what it costs.

One helpful exercise to help define exactly why you exist in the market is to complete this sentence:

I help    Target Market    get    Outcome    by doing    Method   . 

Here is ours for example: 

We help Service Businesses become $20M+ Enterprises with Marketing That Pays For Itself.

This sentence gives us clarity in exactly who our business serves, what our business does, and the outcome our business continuously optimizes for.

For clients within our target market, this statement/offer is far more compelling than what our “competitors” try to promote (eg. SEO packages, online advertising and web design).

Even though we may offer similar capabilities as a part of our service delivery, the “thing” our clients buy is the outcome we work with them towards, not the process that is merely a means to an end. 

The value of your service is in the TRANSFORMATION you deliver, not the process. 

There is NO LIMIT to how much more value you can deliver.

However, there IS A LIMIT to how low you can charge.

Fall in love with solving your target market’s problems.

Optimize your business to sell solution-driven outcomes.

Then charge in proportion to the value you deliver instead of doing so in proportion to your costs.

Your profit, purpose and prospects will thank you for it.

2. Specialization

There is a reason brain surgeons get compensated more than general practitioners. 

According to Payscale, the average salary of a brain surgeon is $413k. 

In contrast, the average salary of a general practitioner is $155k.

Specialization breeds mastery and mastery breeds reliability.

Not only does specialization typically warrant higher prices, it also generally leads to greater operation efficiency due to straightforward streamlining (leading to maximum profits). 

The effects of specialization also contribute to 3 other variables that increase the perceived value of a service.

These variables include:

– Perceived Probability Of Success
– Speed Of Success
– Additional Costs Required For Success (Money, Emotions, Effort & Sacrifice)

– Perceived Probability Of Success

– Speed Of Success
– Additional Costs Required For Success (Money, Emotions, Effort & Sacrifice)

Probability Of Success

Anyone can make bold claims about the service they can deliver. However, not everyone has the same probability of success in being able to deliver. The way to increase perceived probability of success is through social proof (eg. testimonials), stories (eg. case studies), track record (eg. # or % of successful clients) and specialization (eg. being a master of one thing instead of a generalist of many things). It also helps to descriptively vocalize the pains, feelings and circumstances of your target market as people tend to trust those who seem to understand their current situation intimately. 

Example:

A surgeon who completed 1000 successful surgical operations has a significantly higher perceived probability of success than a surgeon on his first operation.

Speed Of Success

People are happy to pay for speed because the alternative is to endure and prolong pain. This is the reason people are willing to pay hundreds of dollars for a flight even though walking is free. The service you offer is not just a vehicle to help people get a desired outcome, it is also a vehicle to help people get there faster. 

Example:
An investment firm that can reliably deliver a 10% return-on-investment within 1 month has significantly higher perceived value than an investment firsm that needs 1 year to achieve the same result.

Additional Costs Required For Success (Money, Emotions, Effort & Sacrifice)

Every service has an additional cost beyond its price. This includes money (eg. admin, transportation, miscellaneous expenses, etc.), emotions (eg. stress, confusion, depression, etc.), effort (eg. work, management, talking to customer support, etc.) and sacrifice (eg. opportunity costs, lifestyle compromises, attention taken away from other important things, etc.). The less additional costs a service involves, the greater the perceived value will be.

Example:

A nutritionist that can get a client optimal health results by consuming one supplement a day has significantly higher perceived value than a nutritionist that requires a strict diet plan of organic salad with wild-caught fish for every meal. 

Defining the outcome you deliver will help set direction and clarity for who your business serves and why your business exists.

The extent you can increase your service’s perceived Probability and Speed Of Success while decreasing the Additional Costs Required For Success will be the measure of your reliability (which increases value).

3. Absorbing The Value Chain

Specialization is essential for service businesses to differentiate and grow profitably, especially in the beginning. 

Complexity is the enemy of scale.

As a company stabilizes with more cash and bandwidth on-hand, there are ways to expand service/product offers without deviating from the initial specialization.

Delivering any desirable outcome is the result of delivering many micro-outcomes (the “Value Chain”).

For example, achieving peak wellness does not just involve gym workouts.

It also involves nutrition, mindset, detoxification and performance-tracking among other things.

While entire industries exist within every component of a value chain, clients are actually less likely to achieve their ultimate desired outcomes if they miss out on any one of these components.

One way to exponentially increase the value of your service is to transcend from delivering lower tier micro-outcomes to delivering higher tier macro-outcomes. 

Consolidating the value chain stack into your own service delivery will not only increase your profit, it also absorbs and simplifies the complexity clients typically experience from navigating the different value chain components on their own. 

This method may require extensive capital and research, but the increase in value can be worth it if clients get to achieve their desired outcomes more reliably and cost-effectively.

In our case, the agency business evolved from selling “brand image” via web design, to selling views/clicks via search engine optimization, to selling leads via call/contact forms, to selling sales appointments via automated scheduling, to selling an ROI on marketing spend via revenue generated, to selling an increase in enterprise valuation via scaling with systems.

While the cost of delivering each micro-outcome involves investing in consultants, outside talent, training programs, softwares and experimentation, the payoff in our profit and results per client has been worth it.

To absorb the value within the context of your own service, write out in reverse order the exact micro-outcomes and steps a client needs to take to achieve their desired outcome successfully. 

The purpose of writing these steps in reverse order is to distill the entire process as simply as possible without involving “nice-to-have” processes based on unquestioned or unproductive assumptions. 

Example Desired Outcome: 1000 App User Signups Per Month

Micro-outcomes In Reverse Order:

4. People signing up by creating a username and password (user acquisition)
3. People seeing and clicking a link to the signup page (call-to-action)
2. People interested in what app is about (compelling content)
1. People seeing information about an app (website or ad impressions)

Action Steps:

4. Build app signup page
3. Link a call-to-action button on ad to for sign ups
2. Write compelling content (copywriting)
1. Deploy ad campaign to target market

While this example is over-simplified, this is the information you can use to help absorb the value chain into your own service delivery of macro-outcomes. The more descriptive and accurate you execute this process, the more valuable and effective your service has the potential to be. 

In the beginning where your access to capital and bandwidth may be limited, it can be more productive to focus on parts of the value chain that produce the most value to clients at the lowest cost to you. You can ignore the other parts until you are in a better position to absorb them as well, or you can capitalize on them by referring clients to other reliable service providers for a backend commission.

4. Targeting Higher Quality Clients

One of the greatest factors that determine the value of your service is the quality of your client.

Saving 1 hour of time for a person who makes $1,000/hr delivers more value than doing so for a person who makes $20/hr.

Improving the basketball performance of an NBA player delivers more value than doing so for a high school student.

Streamlining the workflow for a team of one thousand employees delivers more value than doing so for a team of two employees.

Increasing revenue by 10% for a corporation with $100M/yr in revenue delivers more value than doing so for a startup with $100k/yr in revenue.

Working with “higher quality” clients can exponentially increase the value of your service, even if the service itself remains the same.

While higher quality clients may seem intimidating at first, many of them are often easier to sell and easier to work for than expected.

They usually have greater purchasing power and they usually have enough “value-chain” foundations where minimal improvements with minimal effort can still produce significant results.

For instance, helping Lebron James increase his shot percentage by 5% delivers immense value even if the effort to enable that improvement may be “easy”. On the other hand, coaching a beginner in basketball may require long training sessions on dribbling, shooting, cardio, strength and court-awareness just to play a decent recreational game (less overall “value” in relative terms). 

Everyone is simply a person who is willing to pay for what they truly want. If you can develop the confidence and reliability to work with “higher quality” clients, doing that alone will increase the value of your service even if the scope of work becomes simpler, easier or unchanged.

5. Maximizing Backend Profit

The greater your upfront service price, the greater the barrier of acquiring a new client.

While charging higher prices can benefit both buyers and businesses (higher profits can contribute to higher quality), there is still a point of diminishing return.

Not everyone has the purchasing power and the risk tolerance to pay a hefty price without 100% certainty that they will get the outcome they want.

Given the limitations of frontend pricing, some of the best performing businesses tend to generate the majority of their profits on the backend from repeat business.

These repeat purchases can be in the form of upsells, downsells, cross-sells, subscriptions, retainers, referrals and performance fees – monetization models to capitalize on every “micro-outcome” in the value chain.

A client that buys once is far likelier to buy again or buy something more expensive if they are happy with the initial experience.

One of our agency’s favorite revenue streams comes from performance fees. 

By including ROI-based performance bonuses in some of our projects, we are able to increase our average profit per client without introducing additional risk or upfront costs.

In the meantime, clients are happy to pay more because every dollar we generate from this revenue stream are from dollars we make for them first.

Backend profit can be one of the most lucrative and fulfilling aspects of running a service business because it truly aligns your success with client success.

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Each of these methods have helped our clients and businesses to increase our profit in proportion to our impact.

We hope it will be of profitable use to you too.

If you’re looking to achieve exponential growth in your business, make sure to schedule a free consultation with us to see if we might be in a position to help.

We specialize in helping service businesses become $20M+ enterprises by building marketing machines (that pay for itself) and productizing outcome-driven service solutions. 

The more effectively you are able to integrate these methods into your own service business, the faster and more profitable we are able to help scale your growth.