Robin Neidorf Consultative pricing: It's all about expertise
Jinfo Blog

Thursday, 5th April 2012

By Robin Neidorf

Abstract

"Consultative" pricing reflects the high-level expertise of the vendor staff directly involved with implementing and maximising the performance of the content within the purchasing organisation. Pricing negotiations for consultative products and services are the most variable, and generally the least transparent. Still, there are ways a buyer can understand what the vendor is investing in and build safeguards into the contract to ensure appropriate value for money.

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This is the fourth in a four-part series of FreePint Features on how vendors of content products invest in product development. If you influence or negotiate contracts, you may find this approach to understanding the various levers you can pull to be useful.

With the consultative pricing philosophy, the vendor trades on its in-depth expertise in the buyer’s or user’s industry, business needs and/or workflow. Sales executives and account managers may have user-side industry experience. Products and services provided through this pricing philosophy may be highly customised and integrated into workflow and the buyer’s internal systems.

The investment the vendor makes is in expertise, as well as in content and features. This is a vendor that needs to lead the industry, not be a follower. This is a potentially risky position, and yet a very rewarding one for a vendor that makes it work.

Pricing for these offerings vary enormously from buyer to buyer, and it is often difficult to make useful comparisons between implementations, depending on the degree of customisation. Still, some comparisons are possible based on specific variables: underlying content included; most commonly selected features; buyer industry; length of contract; and overall scale.

Negotiations for consultative offerings can be highly variable, but they still require an understanding of what the vendor has invested in: Professional expertise is an expensive investment, as is industry leadership. Sometimes commitment to longer contract periods can be effective in these negotiations, as the vendor can reduce the risks of expert staffing with committed contracts.

Table: Summary of pricing philosophies

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Four-part series:

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