Mar 8, 2016
If you aren’t using a pricing strategy that is based on the real value you are providing your client, the answer is yes.
With the onset of the ACA, clients are requiring more of their broker’s time, resources and advice on benefit planning and design…leaving benefits agencies to provide higher levels of service while facing shrinking carrier commissions.
As a result of this shift, the best advisors have begun to differentiate themselves by offering fee-based services such as claims loss control, HR consulting, compliance audit services, and more.
This next generation of benefits consultants have found a way to build long-term, sustainable relationships with clients. They’ve done so by aligning the price of their work to the real value they are delivering to their clients.
Unfortunately, brokers and benefit advisors have essentially given away their expertise for so many years that the industry does not have clear methods and systems for pricing work. For some, it is hard to even consider a world where employers are willing to pay a fee like they do for their lawyer or accountant.
The best consultants know that effective pricing is both a science and an art. Not only are they considering the value they are delivering, but they are able to quantify the impact of their service in hard dollars. Using this approach, they articulate exactly how they’ve arrived at their price point, and even the client’s cost of not taking advantage of these services.
This requires utilizing one of four pricing methodologies:
(1) Time and Materials
(2) Fixed Fee
(4) Gain Share
Each of these pricing strategies has their own advantages and disadvantages, and they must be thoughtfully deployed. What are average hourly rates for time and materials? How much contingency is appropriate for fixed fee? What is a typical retainer cost, based on group size? What percentage share for the agency is appropriate in a gain share?
Moving to fee-based revenues ultimately provides the gateway to building sustainable client relationships. For a more in-depth look at industry pricing benchmarks, contact me to see how Code SixFour can partner with you and your agency.