Even though Gary David, PhD of Bentley University wrote this article for his friends and associates in the Sociology profession, I believe that the information he presents is important for all of us to understand. This is because it deals with the relationship between customer value creation and selling price of our products and services. Enjoy.
There are many things they don’t teach you in graduate school to prepare you for doing applied work. Hang around a bunch of applied sociologist, and they’ll be more than happy to tell you the education they didn’t get. While getting access to potential clients might be challenging, and the process of pitching a project arduous, few things can cause palpitations like wondering, “How much should I charge?”
Such a question strikes at many elements of our identities as sociologists. No one ever said, “I’m going to become a sociologist to get rich.” If they did, it was either part of a joke, or part of a delusion. In fact, the prospect of making a lot of money (whatever that means) can cause many a sociologist to become apologetic, as if their sociological conference cred has been diminished by their income. Thus, we often don’t like to think about charging others money for our services, being more than happy to do our part for society gratis. Charging can feel like taking advantage, or working for other than altruistic reasons.
Determining pricing is always a challenge, no matter the business or the product or service being sold. It is exceptionally hard when you’ve had no direction in doing it, and doing so runs counter to our whole professional self-concept.
One of the benefits of working at a business school is that you gain a lot through osmosis, conversations with business colleagues, and attending business-related events on campus. Recently, I had the opportunity to attend an event sponsored by the Customer Value Creation International. At this event, there was a lot of discussion regarding (not surprisingly) what it means to create value for customers. As part of this event, the question kept being raised of how do you determine value, as well as increase value.
Traditional economics might position value and price as a matter of supply and demand, where price exists at an equilibrium point where supply and demand intersect. This assumes a type of rational actor model, where a person make decisions based on their own self-interest, and thus economic actors function in a way that evens out in a manner in which equilibrium is achieved.
Ultimately however, price is the amount that a person is willing to pay, irrespective of rational acting and supply and demand. The field of behavioral economics sees that people act on the basis of a variety of social and psychological forces. Life is much more complicated that linear models that assume predictable actors.
On the other hand, we know that people are predictable in that they often act on perception, and that perception can be constructed. This is the great challenge for the sociologist: how do we construct the perception that what we do has value? In business, we might start with the valuation of a company, usually determined by an analyst who looks at a lot of data that indicate what a company is worth. The approach attempts to base a determination on those material indicators relied upon to establish worth. Value, at its essence, is a lot more subjective. This raises the question, what is something’s value to you? As part of that is the process of creating the perception of value, establishing that something is worth buying beyond what any metrics might say.
In the current state of things, there is not much data that indicates a sociologist has much intrinsic monetary value. We might point to professors and what they make, but unless you are looking to be in that market, this is of little use. No client is going to value the work of a sociologist on the basis of what an Assistant Professor makes (thank goodness). Furthermore, you cannot find “sociologist” in the Want Ads (I’ve checked). Without the data to provide valuation, we must do more to establish value.
I recently had the chance to have a long conversation with a consultant named Sam Klaidman from Middlesex Consulting. Sam has a long career’s worth of experience on these matters. He described various points of pricing and value to me. I tried to distill his description into a graph of perceived value and price. The chart indicates that if you price yourself too low, you will be perceived to have little value. Offer to do work for a person for free, they may assume it isn’t worth much since it costs them nothing (versus seeing it as a great deal). Price too high, and it will be seen as too expensive and thus of little value to price. Or, the cost outweighs whatever value that can be delivered.
There is the viable price range, where you have a price that is concomitant with perceived value (and drives perceived value). Within that range there are many potential price points that you could settle on based on a variety of pricing factors. The bottom line is this gets you in the game as a serious offer, a person who is priced at a level that is worth it by virtue of the value you can claim to provide. The key point here is the construction of perceived value.
For applied sociologists, who cannot rely on pre-existing market knowledge to define our value, we need to believe in our own value, and be able to articulate that. As my friend Sam told me, “You define your value proposition; the customer defines the value. And each person will look at the same outcome and value it differently.” How do we establish a differentiated value proposition in a crowded market? This relies upon what differentiates what you are offering from others in the same space? What is it that makes an applied sociologist different from others, and what can we do that they cannot? In my own work on internationally distributed work teams, my basic understanding of identity, intergroup relations, culture, and bureaucracy all aided in providing unique offerings distinct from non-sociologists. Additionally, I have been able to use conversation analysis and ethnomethodological insights to investigate the mechanisms of police interrogations. There are other examples provided through the Journal of Applied Social Sciences, as well as the AACS annual meeting. These will fuel the sociological (consultant) imagination in terms of new directions that make for unique products.
Pricing requires knowledge of the market in which you intend to operate, a clear message to deliver that product or service which makes you unique, and the ability to articulate a price point that puts you in line with others in that space. Dr. Michael Fleischer (next President-Elect of AACS) related the number of factors that he considers in determining pricing. This including whether the work project-based or solution-based. Are there regular engagements, bonuses for outcomes and/or performance, post-engagement follow-up? Is the client new or existing? Is the client a for-profit or non-profit entity? Are you competing against other consultants for the project? What do they charge for their work, and how do you price yourself to be competitive without undervaluing your work? Are there ancillary costs such as travel, lodging, per diems? Is that part of your pay, or extra reimbursement?
There are many good resources out there, like your local SCORE organization, professional groups of consultants, and other types of associations from which these questions can be answered. Dr. Fleischer recommends a quick web search under “Professional consulting rates” can provide good sources on how to set consulting fees. Ultimately, it is up to the sociologist to define for prospective clients who it is you are and what it is you can do. The good news (if it is good news) is that it is likely the clients have no idea what sociology is or what a sociologist can do. This mean that we are free to construct our value in any ways we like, if we can only learn to value what it is we know, and what we know what we can do.