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You don’t want clients who are too small or too big for the work your agency does. You want them just right.
Clients who can just barely afford your services create one set of problems. Those who think your fee is a drop in the bucket will have their own issues.
Chip and Gini discuss why you need to follow the Goldilocks Principle when signing up new clients — and what happens when you don’t.
Transcript
The following is a computer-generated transcript. Please listen to the audio to confirm accuracy.
Chip Griffin
Hello, and welcome to another episode of the Agency Leadership Podcast. I’m Chip Griffin.
Gini Dietrich
I’m Gini Dietrich.
Chip Griffin
Now I’m thinking that you just you just deliberately wait, just to kind of get under my skin.
Gini Dietrich
I did that last week. I did not. But that’s how I did
Chip Griffin
it really. It’s it’s feeling like deliberate sabotage. Now, Jenny, and I don’t know that I’m okay with.
Gini Dietrich
You know, this time it was last week, the first week. I don’t know what the deal was. Last week, I definitely was not on purpose. But this one that was on purpose. You’re welcome.
Chip Griffin
Thanks. I mean, we don’t have enough problems doing this show. So we really ought to create new issues proactively just for fun. Well, so needs money. So I guess the question for our listeners is, was that pause too long, too short, or just write? Nothing? Just just right. Just right. Excellent. Excellent. So and that is indeed a segue into today’s show, because I thought we would actually get into it rather than, you know, taking two minutes of banter time today, trying to be efficient with your time and ours. So hey, all right. So we’re going to talk about the Goldilocks principle when it comes to dealing with prospective clients. And we’re going to look at it in a different way than you typically do. Because oftentimes, people talk about Goldilocks pricing, where you have three different options that you provide to a prospect one low, one high and one just right. And the whole idea is that you steer them towards that middle option that the preferred option that you would like them to take, maybe get them to spend a little more money, you know, take on a little bit more, we’re kind of just really, right, size it for you. But, but I also think that there’s another way to look at the Goldilocks principle when it comes to prospects. And that’s what we’re going to talk about this week. And that is that you should be looking for clients for whom the amount that they’re spending with you is just right. So not just from the pricing standpoint, but what they are, if they’re coming to you, they can comfortably afford to buy your services, but it’s not so insubstantial to them that your agency’s work just doesn’t matter. And so I think this is something that often gets overlooked. And there are some pitfalls for agencies that aren’t thinking this way, particularly when they’re looking at ideal clients.
Gini Dietrich
You know, it’s interesting, I’m a big proponent of the low, medium and high just from a psychology perspective, pricing, because clients, typically humans, not just clients, but human beings in general, typically, typically try to go for, they don’t want to be seen too cheap. And maybe they don’t want the expensive, expensive ends, you put the one in the middle, that is really what they should be doing. And the kinds of work you can’t you should be doing that where you’re where your strengths lie is that piece, because that’s just from humans, psychology perspective, that’s where they go. But I hadn’t really considered it from the client perspective, just in terms of, you know, I, it’s a, you raise a good point, because I have a client who had a client until about two weeks ago, that they were not they were priced way too low. And they were doing the agency services were priced way too, though. And they were doing all sorts of great work. But because the client was didn’t have that much skin in the game, that they didn’t value the work. And this is, I think, a really interesting perspective, when you think about how much how much skin the client has in the game, so that they actually take it seriously and look at it as an investment. Because they do have to spend their time and resources as well to make make it successful.
Chip Griffin
Yeah, and we’ve talked previously about how, you know, agencies and clients are not truly partners, even though you know, you always love to use that language, right. But But there is a partnership element in sharing some of the risk and reward of the relationship. And I think that’s where it comes in. Because as you put skin in the game, if if the amount is so inconsequential, that they don’t really feel like they have skin in the game, they’re not going to be responsive to you, they’re not going to give you the tools and information that you need in order to do your job. Well, you know, if you look at if you were to talk to them, and they said, Well, yes, you know, this is this is 17th on my priority list for your your regular contact, well then, I mean, what are the odds that your engagement is going to be successful? It’s it’s pretty low. But it also rears its head at the lower end of the spectrum, where someone’s you know, pinching pennies scrounging together every little bit they can in order to afford to hire your agency. And I see this particularly with startup agencies who are who tend to skew towards trying to find you know, the, the smaller clients, right that’s just because there’s there’s a natural as well the smaller client is easier to get and you know, Right, and I need a track record before I can go for Walmarts of the world and blah, blah, blah, all those kinds of things. And that’s rubbish, we’ve talked about that on other episodes, we’ll talk about it again, I’m sure. But the problem you have, if someone is, if it’s a huge investment for their business, their organization to hire you, then they’re likely to be a difficult client. First of all, because those pennies mean far more to them than for your other clients. It’s it tend those tend to be the clients that tend to be micromanagers, they tend to be the ones for almost immediate results. And, and at the end of the day, it’s very difficult to produce results for clients like that, because you spend so much time looking over your own shoulder, that you’re not able to get your work done. And so, so I think both ends of the spectrum have some real risk to them.
Gini Dietrich
You know, it’s interesting, you say that, because I have found that on both ends of the spectrum where it the they’re not spending that much money, but they’re there, they the budget is a Datsun and they want the Porsche services. And they micromanage and they are squeaky wheels. And then you see that on the other end of the spectrum to like what you just described. So if you can figure out what that middle piece is where they have just enough investment or skin in the game, and can give and, and treat you like a true, you know, you don’t like partner, but a true value valuable asset to the business to their business, your that’s where you’re going to find the real success.
Chip Griffin
Yeah, and I think that’s why it’s so important for agencies to clearly define who their ideal clients are. Because Because that’s, that’s where you don’t get yourself into trouble. That’s where you’re in a position where you you know, exactly who you’re looking for, and importantly, who you’re not looking for. And so, so you can very easily weed out a lot of the bad Goldilocks clients by, you know, by specifying size, or revenue, or number of employees or lifecycle stage or whatever, there’s a lot of different ways, and it’s not going to be the same for every industry, it sort of depends on what your actual specialties are. But there’s a lot of things that you can do so that at a glance, you can tell whether this is more likely than not to be someone who is falling at one end of the spectrum.
Gini Dietrich
And I like the I like that you call it the Goldilocks philosophy, because I think that’s really interesting. I mean, just write down the word Goldilocks, stick it on a post it note and put it on your computer. And that will remind you every time you have a conversation to remember that it’s not too little, it’s not too hot, not too cold. It’s just right.
Chip Griffin
Yeah, and, you know, I think I’m one of those people I like to come up with, you know, acronyms or analogies or those kinds of things, because I think it helps people remember the principles more and it Yeah, it does make it easier for you to sort of just to sit there and say to yourself, you’re having a conversation with a prospect and say, Ah, you know, Goldilocks principle? Right. And, and so it, I think it does improve the recall, it’s completely unscientific, I am not a researcher, I don’t have a PhD, blah, blah, blah. But, but I do think it’s helpful. And I think that the, you know, the The other thing that this can be helpful with is it gives you the ability to hold more firm on your pricing as well. Because you can run into a lot of problems. If you are adjusting your pricing dramatically for individual clients, it generally happens at the lower end where you try to do everything you can to find something so that, that that client can afford to use you and so you, you sit there and you’re like okay, well, if I take this out, and I take that out, I can get this in so that it’s just above, you know, where they where they can afford it. And so you know that that that sounds good, it feels good, maybe even closes the business, but then you you’re in a position where you’ve just barely crept in within the budget of the prospect. And that is not helpful. And, and we now have, we have an additional guest on the show for those of you who are in audio land.
Gini Dietrich
I just looked over and there is a hamster on my shoulder, which I was not expecting.
Chip Griffin
Nobody really I think is ever expected to have a hamster on their shoulder.
Yeah.
Chip Griffin
Yeah, that’s not just right. That is that is too hot, too cold and everything else. Yeah. Yeah. Well,
Gini Dietrich
taken seriously when this stuff happens. So right.
Chip Griffin
But so but but so having those pricing parameters, you know, helps you not just at the low end also helps you at the high end too, because there’s also the tendency, if all of a sudden you’re in talks with a client that’s much bigger than anyone you’ve ever dealt with before. And so you start figuring out, okay, well, how can I price it higher? You know, because I know they’ve got the deep pockets, but that higher price may still be inconsequential to them. If you’ve dealt primarily with with SMEs and all of a sudden, you know, you’re dealing with, you know, a Walmart or an Exxon or something like that. their budgets are wildly different. And so what seems big to your normal clients is going to be a drop in the bucket for those guys. And so you know, you want to be careful that you’re not, you know, adjusting your pricing in there. So this is where you need to have a set idea for what your prices are. And it’s why I love being transparent with prospects, because it allows them to make their own Goldilocks determination before they’re even wasting your time with detailed conversations. Right?
Gini Dietrich
Right. I totally agree with that. And I would also add to that, that, especially if you’re going out, if you’re accustomed to working with SMEs, and then you start to build your as your agency, and you start to work with larger clients, you may meet, you may think, Oh, my gosh, you know, I’m accustomed to being paid five grand a month or three grand a month. And now I’m going to make $20,000 a month, which for you, that’s huge. But for the larger clients, when they’re they have other agencies that are charging 50 or 60, that are going to charge 50 or $60,000 a month. They wonder what’s wrong with you? Well, what’s wrong with these guys? Why are they so much cheaper, and so there’s that that psychology piece of it too, which I keep coming back to the psychology piece of it, but you have to really understand buying patterns on how human beings make decisions as you’re going into a different type of prospect.
Chip Griffin
Right. And I think we’ve also, you know, we’ve talked about the importance in the past of understanding what the right sized projects for your agency to work on, anyway, right, because if they’re too small, you’re not interested, right. So if you’ve got, if you’ve got a really low dollar client is compared to all your others, the chances are, they’re not getting your brain power in the same way. And they will always lose out when there is a larger client asking you to do something at the same time. So it, it tends to lead to bad things. At the same time, when you overreach, and you promise that you can do these giant projects that you’ve never undertaken before, you may not be staffed effectively for it, you may not have the tools and the resources that you need to do it easily. So you may be, you know, building the scaffolding around you, as you’re servicing the clients which, at some point, when you’re an agency and you’re looking to grow, that happens, but you don’t want to be doing that on a regular basis, because that’s where you start to run into problems. And you have to do it consciously, you have to know I’m going to be building the scaffolding. And so maybe I adjust the clients expectations going in.
Gini Dietrich
Interesting, I actually just had a conversation that was similar to this talk with a client. And he said, I feel like in some cases, you’ve reduced your fee. And I said I have. And the reason that I’ve done that is because what we’re what we’re doing with this particular client is we’re building the scaffolding that I can use then again and again and again with other clients, right. So while I still have to do the work specific to them, I am building a process that can be replicated. And so he and I had the conversation that I’m charging, not a lot less, but a little bit less, because I’m going to be able to replicate that and use it over and over and over again. And he was like, That’s awesome, because he feels like he’s getting something that’s totally customized to his business. And he’s not paying as much as he would if he were the second or third in line.
Chip Griffin
Right. Right. And I think that’s that’s where transparency is really helpful. Because, you know, you’ve helped adjust the expectations. And if there’s, if there’s trouble with that scaffolding to sort of continue to torture, that analogy, you know, things aren’t going to fall off, you can still figure out how to, you know, to continue moving forward. So absolutely. So I think it’s important, and it’s and I’m I’m fan of, you know, strategically using pricing in those ways. So, you know, I don’t like discounts generally, as we’ve talked about before, you always need to be producing service, or as we also say, get some other kind of value. In your case, it’s the the learnings to build the process to make this something that you can scale out to others and and and get the learnings that you need to do it effectively. You know, I do the same thing with the agency business checkup that I do with clients, I tend to underprice that because that’s, that’s most of those clients become coaching clients. And frankly, I want them to take that option because it makes the coaching experience better, which means they’re going to get more out of it, which means they’re going to stay longer with me. So I’m increasing the lifetime value. So I’m willing to take a little bit of a hit on my margin on that upfront project, because it’s giving me the foundation of knowledge that will help me build a better coaching relationship over time. And so I think as long as you’re using these things strategically, and you understand what trade offs you’re making, and why it pays off for you at the end of the day, you can do that.
Gini Dietrich
Yeah, that’s a that’s an interesting point. I know some other agency owners that will charge for a project was just you know, a strategy session or workshop or whatever it happens to be at the beginning and then they’ll deduct that cost. If the client if the profit the client becomes a longer term client or they sign a 12 or 18 month contract or whatever happens to be so I think there’s some some real value in that kind of strategic pricing for sure.
Chip Griffin
Right. Yeah, there’s there’s a lot of creative options and I Think, you know ultimately the key is as as we talked about earlier is just to make sure that they’re the right fit for the prospect first and foremost, but also your agency and if you get it so that you know your part just just right in the airport, just just right. But those are the kinds of of ongoing relationships that we’ll be filling and tastes great.
Gini Dietrich
On that note,
Chip Griffin
yeah, I i think i think we’ve we’ve tortured ourselves, we torture the analogies and we certainly probably tortured you the listener. quite enough at this point. So
Gini Dietrich
me, you’ve tortured me.
Chip Griffin
I had to look at a hamster for this episode. So you know, the
Gini Dietrich
whole time? No, two minutes,
Chip Griffin
right. Well, I don’t want to see a hamster at all. I don’t like animals, any of them.
Gini Dietrich
I know. You don’t like anything. You don’t like people. Animals. See now
Chip Griffin
you just make me sound just we’re gonna we’re This episode is over. I’m done with this. I’m done with you. I’m done with the listeners. This episode is over. I’m Chip Griffin. Yeah, she’s Gini Dietrich, and it depends.
