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Your Professional Services are great, but you’re not sure how to design your pricing strategy. Sound familiar? Rest assured you are not alone. Many organizations are trying to figure out how to improve professional services price performance and grow professional services revenue.

To address this common service business challenge (SBC), TSIA created the Professional Services Market Rates Study. Representing a decade’s worth of research, the study distills the latest developments in Professional Services pricing and collects detailed data surrounding eight job titles at three levels in roughly 60 countries to deliver the most current market rates benchmarks and data.

But data is only useful if it can be applied to your business. In this post, I want to share a real-world example of how the Professional Services Market Rates Study is being successfully leveraged by one company in the industry. I think this example will illustrate how you too could benefit from this study and other TSIA research.

Case Study: How TSIA’s Professional Services Market Rates Study Data is Being Used in Businesses Worldwide

I recently spoke with Tim Matanovich of Value and Pricing Partners, one of TSIA’s esteemed Consulting Alliance Partners and a specialist in helping companies achieve better price performance. He has seen firsthand what can be achieved when the data from the Professional Services Market Rates Study is applied to actual business scenarios.

“Value and Pricing Partners has been working with TSIA Members on offering design, value, and pricing challenges for nearly a decade now,” Matanovich said. “I can honestly say, for pricing professionals, TSIA’s Professional Services Market Rates Study is a gold mine.”

With the data in the study, Value and Pricing Partners has been able to offer valuable, actionable advice to clients. Specific examples include:

  • One firm received reports from sales directors that their professional services rates were too high. The Professional Services Market Rates Study, however, revealed that the firm’s rates were actually lower than the 19 other software companies in the survey. This surprising information prompted the firm to change direction.
  • Three years later, a second company saw the same result. When they realized they had the lowest rates among their peers, they also decided to make some pricing changes.
  • A hardware firm discovered that their discounting was 3X the average of their peers. Their list rates had no relevance whatsoever in the marketplace.
  • Another firm discovered their rates were much too high, given their brand value. They were losing sales by being overpriced. By lowering their rates, they were able to remove an impediment to growth.
  • When a tech company decided to make the transition from cost to market-based pricing, they used the TSIA Professional Services Market Rates Study as the foundation for their new global pricing model. This transition allowed them to hit their target growth and margin targets, and rationalize global pricing.
  • Analysis of pricing practices across companies using TSIA’s study revealed that value pricing could generate margins 3X as high as cost-based pricing.

For pricing professionals, TSIA's Professional Services Market Rates Study is a gold mine.

In addition, Matanovich also put together a video showcasing three more case studies concerning value and pricing for professional services. This video offers examples of how other companies have benefited from the Professional Services Market Rates Study that you can integrate into your company as well:

“By combining our own analysis of historical transactions, data science methods, and TSIA data, we formulate individualized treatment plans for any combination of region, product, customer, and project lifecycle,” Matanovich said. “This allows our clients (and TSIA members who work with us) to go beyond rate setting and traditional discount control to establish value with their customers and compete more effectively. Just some of the areas we can help with include low profit business models (e.g. SaaS), weak offerings and value props, low value capture, aggressive price competition, and high discounting.”

The message is clear. More intelligent pricing practices, beginning with the use of the TSIA Professional Services Market Rates Study, will allow you to bow out of the race for the lowest pricing rates. Instead you can focus on creating customer journeys that are individualized, long lasting, and value-driven.

Tips on Growing Professional Services Revenue

The Value and Pricing Partners case study highlighted several important points that are applicable to many other firms:

  • Find the sweet spot for pricing. If your services are priced too low, you’re missing out on opportunities to grow revenue. But if your services are priced too high, you’re probably losing customers. The key here is accurate benchmarking to determine how your pricing compares to your peers.
  • Pay attention to your discounting. Just as low pricing can drag down profitability, discounting can have the same effect. There are many benefits to discounting, but you want to be sure your discounts are in line with your peers. Again, benchmarking is key.
  • Consider other pricing strategies. Firms can get stuck with a pricing strategy that no longer supports the company’s business model. As Value and Pricing Partners discovered, firms are succeeding with market-based pricing, value pricing, and other strategies. If your business has changed, your pricing may need to pivot as well.

Discover What TSIA Research Can Do for Your Organization

TSIA’s Professional Services Market Rates Study is free as part of your Professional Services TSIA membership. Using the data from this study, you can put your firm on the path to set rational, profitable pricing levels that are adaptive and outcome-driven. This can be a one-time exercise or a modeled solution with machine learning capability that adapts and adjusts as you grow.

Whether you’re already a TSIA member or have been considering membership, this is a way for you to quickly pay for your entire TSIA membership with the revenue generated from just one of your service lines.

Tim Matanovich, Value and Pricing Partners

Contact TSIA today to learn more about the Professional Services Market Rates Study and the many other great research initiatives TSIA has to offer that can help your organization stay competitive in the market and grow Professional Services revenue.

 
 
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Bo Di Muccio

About Author Bo Di Muccio

Bo Di Muccio, Ph.D., distinguished vice president of Professional Services research and vice president of TSIA advisory delivery. He is also the chairperson of the TSIA Professional Services Advisory Board. Using his nearly 15 years of experience in technology industry research, analysis, and consulting, Di Muccio develops and delivers research and advisory programs that help some of the world’s leading technology companies build and optimize their professional services business.

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