In Blairtopia, time is a thief. Blair Enns, CEO of Win Without Pitching, and author of The Win Without Pitching Manifesto and Pricing Creativity: A Guide to Profit Beyond the Billable Hour, is out to create a more utopian state. One where firms win without pitching, get paid for the value they create and let time go.
The pricing debate—time versus value—can be polarizing. Yes, there’s truth in the notion that experts should be paid more, and creativity is worth more than hours spent. But how do you price value that hasn’t been created yet, and what do you do if that value never materializes, or worse, causes things to go south? Tune in for Blair’s take on mastering the value conversation, three levels of financial success for creative and marketing firms and how agencies can leave time behind to change the very nature of their firms.
Want to master the value conversation in 90 minutes? Join Blair at Owner Summit 2019.
Carl Smith: Hey everybody, swinging by The Briefing today, we have got the author of the Win Without Pitching Manifesto, and Pricing Creativity. The king of Blairtopia himself, and a keynote speaker in Owner Summit 2019, you heard it here first. Mr. Blair Enns, how's it going Blair?
Blair Enns: Really good Carl. It's really nice to be acknowledged as the king of Blairtopia.
Carl Smith: Well yeah, I was going to say there was almost a little bit of a rebellion, you almost got overthrown. But then everybody realized my name's not Blair. It's just not going to work.
Blair Enns: I did a workshop in Austin, Texas a few months ago. We had 40 people in the room. And one of the guys showed up with two gifts for me: two t-shirts that said on the front, Blairtopia, population one. One T-shirt is for me, and one is for my good friend and podcast co-host, David C. Baker.
Carl Smith: Nice. That is so much fun.
Blair Enns: Yeah so he's out there in the world walking around wearing a Blairtopia T-shirt and that warms my heart.
Carl Smith: There you go, and now I'm going to have to get myself one. You know, that was the thing, you were at Owner Summit Atlanta, I think it was 2016. We hadn't met before, had some great conversations ahead of time, and you took the stage and you just said it. You said this is how you do it. Now it wasn't totally that there's only one way, but you definitely made some people go, "This is it. I found Blairtopia, I know how to do things." You had other people go, "Who's this guy?" So talk about that for a second. Just in your career, in your life, just being that polarizing figure. We had to put a Blairtopia channel in the community slack. People wanted it, so what's it like to be Blair?
Blair Enns: Well, I mean, the polarizing nature of it, it's actually where most of the fun is. My business is called Win Without Pitching. My first book is called The Win Without Pitching Manifesto. The point of view of both the business and the book is that this free pitching is a problem. I think most in the creative professions agree it's a problem, but also the point of view is you can actually win without pitching. And I recognized that there are a lot of firms and owners of firms out there that just, A, don't see free pitching as the problem or B, probably more likely it's B, that yeah free pitching is a problem but these things that you talk about, Blair, they're a nice theory but they can't actually work in reality. You don't understand my business or you don't understand the things that I'm dealing with. They're not going to work in my business.
Blair Enns: One of the things that we teach in our training program, in our positioning term, we're primarily a sales training organization, but we do have a term on positioning. And when we look at positioning, I see three aspects of a firm's positioning. The first two are a function of focus, so it's discipline for market. We do X for Y. And if you just narrow your focus a little bit you'll build deeper expertise. You'll reduce the number of direct competitors that you have. Yeah, you'll start to build expertise by narrowing your focus. But that's only the first step.
Blair Enns: The second step that takes into account this third element of positioning is perspective. Your overarching belief on how this discipline for market should be done. I think Simon Sinek said it best, and I'm going to bumble the quote here but it's, "You don't go looking to sell to people who need to buy what you're selling. You go looking to sell to people who believe what you believe." So that second part of a firm's positioning and in my business the positioning win without pitching, that perspective, it's really about ideology.
Blair Enns: So if you follow the first step of narrowing your focus to a discipline and market then you got this kind of small, well defined group of direct competitors. And how you win the battle, how you set yourself apart from those who also do X for Y is you make that final battle one of ideology. You put forward your belief on how x for Y should be done. And you want that belief to be polarizing. It's not mandatory that it be polarizing.
Blair Enns: The need for polarizing is effectively a function of competition density. So the more competitors there are in a small space or the more competitors relative to the number of total clients out there, the more polarizing you need to be. And if you're the only firm out there that does X for Y then you don't need to have a polarizing point of view. But if you'd still have lots of competitors that second battle where the client is thinking, ”Well, it's either you or this other firm,” you want it to be a battle of ideology. You want them to listen to what you have to say, or read your thought leadership or watch your video or be sitting in the audience in the speech, as you're speaking and thinking, "Oh my God, you think about these things, X for Y, the same way I do." Or you want the opposite reaction which is, "Oh, I've never thought of it that way before." So if you're not getting the opposite point of view, I don't believe it, I don't see it that way, then I would suggest that you're not doing it right and it is essentially positioning your organization well.
Carl Smith: But no matter what, you want to get that reaction. You don't want people to just sit there and go, oh okay.
Blair Enns: Yeah like the last thing I think a conference like yours needs is somebody to stand up and say, "Well you could do it this way or you could do it this way or you could do it this way." There's a way I believe it should be done, so I get up there and I say quite forthrightly, "This is how you should do it." And I recognize it's not for everybody. Some people aren't you know ... A psychologist once said to me, "Blair, it's a bridge too far. It's too far for so many of these people. It's so far from the way they are currently doing new business now. They'll never cross that bridge." Not in one talk, some not even in a day-long seminar. I can get ... and if you sit with me for a day, I'll convert you.
Carl Smith: But people did. In that talk, earlier this year we had our first Biz Dev camp. And we had some people who were saying that after that Owner Summit they went to pitching more of a good, better, best. More of a one-page proposal, and that it was working for them. When other people pushed back on it, they just said we just didn't give ourselves a choice. This was the way we were going to do it. And when we took away any other way of doing it, it was like we figured out how to make it work. But that would-
Blair Enns: They played the laws of Blairtopia where there's the laws of physics, and they had no choice. And they succeeded.
Carl Smith: They had no choice and they succeeded. You know it's funny, it reminds me of ... I can't remember what it was, but when Dylan went electric for the first time and pissed off the audience. I mean all the folk people were like, "We've been abandoned." And he admittedly was laughing backstage saying-
Blair Enns: He turned around and said-
Carl Smith: Got them all.
Blair Enns: ... turn it up loud.
Carl Smith: Yeah. I got them all. I got them all mad, but I got the reaction. And that was kind of thing. Not that that's what you're doing, but it is that kind of “I'm going to make you think.” Sorry, Steve Croog, but I'm going to make you think. And it's going to be about how you approach things.
Carl Smith: You know it's funny, I never realized this until you started just kind of laying that out, but one of the things I would always do when I was pitching for nGen, we were in a situation. I wasn't winning without pitching, we did pitch. But I would always know who the other groups were and just destroy their process. I would just, like, just make sure that you don't go somewhere where there's going to be somebody that's got five projects on their desk because you're just going to be one of five and they want to go home. And then they would ask, "Well, will this person be dedicated to my project?" Or if we had where you only show ... Well if you're going to show three ideas they obviously haven't thought through what's the right one. But then if we were on the other side it would be, would you really want just one person's best idea?
Blair Enns: Well, I love that you're saying this because this should be fun. And I wrote an article called This Should Be Fun, Selling Should Be Fun, or new business whatever term you want to use for it. It really should be fun, and what you're talking about is being disruptive in the buying process. And you're disrupting your competitors. You're planting these seeds. Because you know ... you know but I wonder how many agency principals out there really know how similar they all sound to the client. I know what the high degree of accuracy, the things that people are going to say when they come in, the buttons they're going to push, where they're going to go too long, where they're going to fall in love with their stories. Everybody does it, I've sat through dozens and dozens of new business presentations and, man, they all sound the same. So you know what the people coming in behind you are going to say, and use that opportunity to just come and plant these seeds of doubt, and question them on certain things. So yeah, that's fun, that's when selling is fun.
Carl Smith: Yeah, I read your book. I read Pricing Creativity. And I have to say there were some things that really jumped out to me. And one of them was pricing the client, not the job. And I don't think a lot of people, especially in digital services get that. Everybody's so focused on what's it going to take to get the work done. They kind of ignore who their client is. So dig into that just a little bit. What do you mean by price the client, not the job?
Blair Enns: Yeah so I have six rules of pricing creativity in the book. I have a bunch of principles that perceive the rules, and a bunch of tips that follow the rules. But the six rules are the things that you do every time. And price the client, not the job is rule number one. What that's doing is it's I'm asking you to leverage the subjective theory of value. The idea that the value ... you don't measure the value of something by the amount of labor that goes into it.
Blair Enns: In fact, in 1776, that was Adam Smith's Labor Theory of Value. He put that forward and it reined into about 1905 when three different economists, about the same time, arrived at the subjective theory of value. So Smith was saying, "Yeah you measure the value of something by the time and materials that go into it, but Smith's Labor Theory of Value could never account for profits and losses. Karl Marx came long and said, "I'll tell you what profits are. Profits are excess value stolen from the worker."
Blair Enns: And then these primarily Austrian economists come along and go, "You know what? No, value is like beauty. It's in the eye of the beholders." Different people value different things differently even at different times. So you need to take that into account and you need to price based on the value to the client. Now ...
Blair Enns: Based on the value to the client. Now, recognizing that client A is not going to value your standard service the same that client B is ... I say to graphic designers, you wouldn't charge the owner of Joe's Chevrolet dealership for a logo the same price you would charge for the Chevrolet division of General Motors, and everybody agrees, "No, no, no, you would charge General Motors more," well, why would you charge them more? Some people say, "Well, because it's going to take you long," or "there's going to be more meetings," but it's not really about the cost, it's really about the impact on the logo, the impact the logo is going to have on a business. It's ironic because it's really hard to measure the impact of a logo on a business. It's so much easier to measure the impact of digital marketing of almost any kind, the tools of measurement are so good.
Blair Enns: So if ever there's a space where you should be pricing the client, not the job, it's in the digital space. So what that means is when the client comes to you and says, "Do you do websites?" or "Do you do certain campaigns?" whatever it is, and the answer is yes, when they follow up with what do you charge for that, you shouldn't have an answer. The answer is that depends, and it does not depend on how much time goes into it. It really should depend on the value of that service to the client.
Carl Smith: So, a question, as somebody who ... In case you didn't know it was coming I thought I would say, so question. As somebody who spent most of my life, time and materials, because I was the worst at what I thought was value-based pricing, I was probably doing fixed bid plus plus plus or something-
Blair Enns: It's hard, though. Yeah.
Carl Smith: But when I did time and materials my life got better. I suddenly got nice hardwood floors whereas before I had concrete floors, not because it was hip but because we couldn't afford the carpet-
Blair Enns: It wasn't polished concrete it was just industrial concrete.
Carl Smith: It was. The cats messed things up, we tore it out. But the thing was that I found, people have different hourly rates because there is value in the hour as well and people sell sprints, so that's a two week timeframe for most, and two weeks is a measure of time, so how do you think that any reference to time is a negative?
Blair Enns: I don't think that any reference to time is a negative. I see three levels of financial success in creative and marketing firms, including digital, and that is the first level is what you consider the efficient firm, where your utilization rate is at whatever threshold that you believe to be the benchmark of success, 60, 65, 70, maybe 75. That's the first level of success. I have seen the pursuit of efficiencies take a lot of struggling firms and make them profitable, I've seen a lot of hardwood floors going over concrete based on people [crosstalk 00:14:10]. That's the first level of success, and I don't mean to demonize that because there is a successful business to be built there.
Blair Enns: The second level of success would be when you start to apply a small number of the rules that are in my book that aren't specific to value-based pricing, like use auctions and anchor highs, so rule two and three. I call that progressive pricing practices. You're still billing cost-plus, you're still selling time largely, maybe you're selling, based on the "market value" of the deliverables or the outputs, so you're selling inputs or you're selling outputs, which is really a function of inputs for the most part, but you're using options, you're using anchors, you're using some other tools of behavioral economics or psychology to increase the prices that your clients pay. That would be the second level of success.
Blair Enns: But the third level, it's almost ... I want to say exponent. It's not exponentially higher, but it's such a different world. The third level is, I call it the value conversation masters where you are pricing, not based on inputs, not based on outputs, you have let go of time for the most part and you are charging your client based on the value that you create for your client, so you have to become the value conversation master. That's the big reason why we all default to cost-plus selling inputs is it's just easier, you have something to measure. If you want to succeed in value-based pricing in a digital firm, you don't need a whole bunch of science, you don't need a whole bunch of data, you don't need sophisticated segmentation strategies, you need to be a good conversationalist. You need to learn to master the value of conversation.
Blair Enns: When you see somebody master the value of conversation, when you witness it, when you witness the transition, you're witnessing somebody going from thinking about the firm all of the time and what it is that we will sell and how many hours do we have logged and etc., etc., etc., so completely focused on the firm, pushing all the risk onto the client to somebody who has reversed their perspective completely, they're completely focused on you, madam client, what is it that you want, what are the metrics of success that we'll measure to determine if you've achieved what you want, how much value will we create for you if we help you get what you want and then, what would you be willing to pay if we could help you create all of this value. Those are the four steps of the value conversation. It's easy for me to explain it, but there's a bunch of mental blocks around conducting it, becoming good at it. But as soon as you become good at, as soon as you master it, you will leave time behind altogether and you will change the very nature of your firm because the goal of value-based pricing is not to charge more, it's to create an organization that is laser-focused on client value creation.
Blair Enns: That's the goal of value-based pricing where your focus is not on how many sprints you're going to sell, how much time you're going to sell, what your utilization rate is, your focus is on what do you want, how can I help you, how much value can I create, if I could do all this would you pay this much, okay, let me go away and find, get creative, get entrepreneurial and come up with a bunch of different ways that we could help you create this value and I'm going to propose that you pay me based on the value that I help create. Or, at least one of the options that I put forward is that I get paid based on the value that I help you create. That's an entirely different company, entirely different. That's the third level of success. Hardwood floors are great, I have them in my home too, I want to make a joke about diamond encrusted hardwood floors, but I'll just stop there. I'm just saying that is the first level of financial success, there are two levels of-
Carl Smith: I want a photo of your floors now. I totally want the photo of your floors. This could be because my base of belief is being challenged, so I push back, but so many digital service companies, digital agencies, web shops, whatever, they don't know how to get the client to share the value, if the client themselves knows the value. If you have what I would call a checklist client, like their boss told them to get this project done, that person is never going to be able to help, you're plugged in at the wrong level. But if you're working with somebody who's, what we would call a must-win, if this project doesn't work out they're in a lot of trouble, they should be in a better position to tell you the value. But even then, how you figure out the value and what happens if you don't achieve that value for them.
Blair Enns: Yeah. There's so many questions that I've just begged that are unanswered, and I'll try to answer as many of them as I can. [crosstalk 00:19:18] these are all legitimate questions that come up. One of the first things you were speaking about was the person that you're dealing with, one of the reasons why it can be difficult to have a value conversation is you need to be dealing with somebody whose remit includes future value creation. There's a saying, employees are worried about the past, managers are focused on the present and only executives are concerned about the future, have their focus on the future, so it's quite easy to have a value conversation with somebody who's in charge of future value creation.
Blair Enns: But when you have somebody who's managing people, processes and a budget, they might open up a little bit in a value conversation, but it might not be the best example of one of the better conversations you had. But when you get in front of a meaningful decision-maker, an economic buyer or somebody who's in the C suite who doesn't really ... They're not married to the process, they're not saying, "Oh, we've got to do this to keep it fair to everybody in the process." Executives don't give a shit about keeping the selection process fair, their career, their business might be on the line here, they want to work with a partner. I use that word loosely because it gets thrown around a lot. They want to work with a partner who's actually coming at this with an entrepreneurial mindset, and when you're selling sprints ... I don't care how successful your firm is, if you are selling sprints, you are not entrepreneurial. I know I have a history of polarizing the audience [crosstalk 00:20:53], but anybody who disagrees with me is flat out wrong. You cannot have an entrepreneurial organization where you pass all of the risk onto the client. Drucker said, in business all profit comes from risk, and as your prices go higher and higher, and sometimes multiples of what you've previously been paid. One of the reasons you're able to charge so much is you've got some skin in the game.
Blair Enns: Now, I'm not suggesting that value-based pricing always means that you have a whole bunch of skin in the game, you're taking a whole bunch of risk, but profit in your business comes from risk. These sprint-based models, and I don't mean to despair sprints completely, we need to get out of this little in Steeler world where we think it's the only way. I'm sorry, what was I ranting about?
Carl Smith: So many things. You were just like I threw so many questions at you [crosstalk 00:21:53].
Blair Enns: I got a little heated there.
Carl Smith: It was like a symphonic ranting. It was amazing. No, but you were going on about how you can't be entrepreneurial if you are selling sprints-
Carl Smith: You were going on about how you can't be entrepreneurial, if you are selling [inaudible 00:22:04].
Blair Enns: You can't.
Carl Smith: You don't have any [inaudible 00:22:06].
Blair Enns: You're not focused on the client. And I think ... I don't remember if we've talked about how much time I have with the audience in owner summit next year, but if I have 90 minutes, I'll get people to see. I can have the transition happen in most people. I can get them to see how entrepreneurial they're not through a couple of key exercises.
Carl Smith: Well Blair, I'm going to give you 90 minutes. It's official. You'll have 90 minutes at owner summit in Austin next year, February 10th through 12th.
Blair Enns: I was banking on that. Thank you very much. Otherwise, you'd have to edit that out.
Carl Smith: Which I still might do. But, more than likely I won't.
Carl Smith: So I want to wrap up with one thing. And this was the most powerful part of the book to me, was you end it by just letting people know, they're the roadblock.
Blair Enns: Yeah.
Carl Smith: Right. It's like, if you can't get your head around this, if you can't get out of your own way, then it's just not going to happen.
Blair Enns: Yeah. And that's not, that last chapter, it's titled “The Last Obstacle is You”, it's not there for everybody. But it is there for a lot of people, especially if you come out of the creative side of the business. I think a lot of artists and other types of creatives, they open a business and the business side of the business doesn't come easily to them. And I think some of those people, a lot of them actually, struggle with the financial part, with asking for what they feel their work is worth or what they're worth. And I'm just, in that last chapter, I'm just trying to set people free to empower them and let them know that, I kind of take a swipe at those who think capitalism is wrong or broken.
Blair Enns: And I don't think capitalism is the solution or even markets are the solution to every problem. But I think we all, if we're in business, we need to recognize that the way wealth is created in the world is through trade, through these double thank-you moments, where you hand the work over to the client, they say thank you, they hand a check over to you and you say thank you. And you're both better off. That's how wealth is created in the world, that's how people are lifted out of poverty. It has all kinds of effects on other social issues around the world, just create more wealth and a lot of these others like education for women, et cetera, all these things go up when you create wealth.
Blair Enns: So, you shouldn't be shy about being paid well or ashamed to be paid well for what you do. You're creating, so many of my clients, they're just, they're creating so much value in the world for these businesses that they're working for, they should, they deserve to be paid more.
Carl Smith: I just, you know what, I just want to get a little bottle of Blair thoughts, because I want to take that with me everywhere I go. I have so many people that I've worked with. And it is something that comes out of the creative side. The web industry is created out of the software side and then the creative services advertising stuff. And those that came out of advertising, boy, they do not believe that they are worth it. And I don't know where that originally came from. We used to make all of our artists and creative directors, we'd make they read Selling the Invisible. And just ... do you know that book?
Blair Enns: Yeah, Harry Beckwith. Yeah. Great book.
Carl Smith: Yeah. And, I figured you had to know that book. And it just basically explaining to them that they're not selling the time it took them to create something. It's all of the experiences that got them to that point. And when they would do that, they would start to snap out of it a little bit, but it was so easy for them to slip back into the, "Well, this didn't take me very long."
Carl Smith: I think Aaron Draplin is probably the best example of value-based pricing for a logo I've ever seen.
Blair Enns: I don't know that story. What is it?
Carl Smith: Aaron Draplin is basically a logo designer. And he's got a coffee table book that is just amazing. If you ever get a chance to see him speak, he speaks all over the place. But Draplin, basically he will do a logo in 15 minutes. He's got, on one of the educational systems, he's got a 15 minute logo tutorial. And then he will put it in an envelope and wait a week and a half before he sends it to the client, because they can't handle it. They can't handle that they paid him $20,000 for what's going to end up being like an hour and a half, two hours worth of work.
Blair Enns: I think a lot of creatives identify with that. Any expert, expertises that are benefiting from, you narrow your focus, you deepen your expertise, you start to see the patterns. So, the patterns jump out at you right away. Oh yeah, I've seen this before. Oh yeah, I know what your problem is. Oh yeah, I know what you should do.
Carl Smith: Yeah, right.
Blair Enns: So, as you deepen your expertise, you should get to solutions quicker. But at the same time, we all recognize that experts should be able to charge more. So you have to reconcile that paradox. Well, if your charging based on time, then that's in violation that the principle that experts should charge more.
Blair Enns: There a story of Paula Share at ...
Carl Smith: It's understood. It's fine.
Blair Enns: Pentagram. Designing the Citi logo on a napkin in front of the client. And then her colleague, and I don't know if it was Michael Berry or somebody who reached over and just covered it up. So when Travelers and Citi Bank merged, she just sketched the little Citi with the umbrella logo. And you can find it online, it's a great story. And somebody, a colleague just reached over and said, "No, no. They can't think it's that easy." And it doesn't matter. It's not about how easy it is, because you're not charging based on your labor.
Carl Smith: Right. It should be how fast you can fix their problem. Right.
Blair Enns: Yeah.
Carl Smith: There's a lot of value-
Blair Enns: I don't think, it's about the value. So in the book, I talk about the story of two logos. Nike, in today's dollars, Caroline Davidson, a design student at the time in 1971 was paid $35, like then $200 in today's dollars, to create the Nike logo. And in 2008, Pepsi paid another design firm now, a million dollars to redo or update the Pepsi logo. So, what's a logo worth. It's worth somewhere between $200 and one million dollars. That's a multiple of 5,000 times.
Blair Enns: And so, is the Pepsi logo 5,000 times better? No. Did it take 5,000 times longer? No. Could they have ... it just begs all these questions. Did anybody get ripped off in either of those exchanges? No. There were probably two double thank-you moments. And I actually think that Arnell, if they'd change the way they priced it, if they read my book, maybe they could have got $20 million for the Pepsi logo, because the impact, both up and down, in sales increase or sales reduction, could have been significant. And about the same time, Pepsi learned the same lesson by rebranding the Tropicana Pure Orange Juice and put the new packaging on the shelf. Sales plummeted by $37 million in two months.
Blair Enns: So if that had happened to Pepsi, it's hard to get the actual numbers for the Pepsi brand, but it would have been a $200 million mistake, maybe something approaching half a billion dollars. So what is the Pepsi logo worth? A million dollars is more than fair to the client. And I think, if that design firm had read my book, maybe they could have got $20 million.
Carl Smith: Was your book out?
Blair Enns: No, it wasn't.
Carl Smith: Okay. So we're going to have to get the time machine. We're going to go back ... and if we can find that time machine, there's so many things I can tell you I would do different.
Blair Enns: Amen brother.
Carl Smith: Having read the Win without Pitching manifesto. Not to mention the relationships in my life.
Blair Enns: Go ahead ...
Carl Smith: And so, what I told her was ... no. But Blair, thank you so much for swinging by The Briefing today. It has been awesome. And I just, I wish everybody could have moments like this to hang out with you. And they can, right, if they show up at Owner Summit.
Blair Enns: Yeah.
Carl Smith: And you're going to have 90 minutes on stage.
Blair Enns: Fantastic.
Carl Smith: So we're all going to have that amazing on-ramp to Blair-topia.
Blair Enns: I'm going to teach people how to master the value conversation in 90 minutes.
Carl Smith: I will be there to watch.
Carl Smith: Everybody listening, thank you so much. And we'll be back next week.