It’s Word Carnival time, that once-a-month gathering of my colleagues and some pretty smart business folks when we all write on the same topic.
This month’s topic is “selling based on VALUE and not based on PRICE”.
And I’m on board. For fifteen years Ralph and I have worked to define, own and sell our value. But as I sat down to write this post and I contemplated first, how I could make this helpful to you and second, what I could say about value that hasn’t been said a million times before, I hit a wall.
And the wall has a name.
In this case, the wall’s name is Hypocrisy.
The thing about selling based on value is that it’s a really nice, lofty, awesome and very Pollyanna-ish ideal.
Do I want to sell my services based on value? Of course! Don’t we all? But we don’t all have the name recognition of Bill Gates or Seth Godin so sometimes we don’t get to make those rules.
Sometimes, dear customer, we have to sell on price.
So I couldn’t find it in my heart to sit down and write about how important it is to pay for value when I know darn well that sometimes it just comes down to price.
So this post is for you – the person who may one day hire me or even hire a marketing company that isn’t me. It’s to help you think about your approach to budgeting, hiring, and ultimately working with someone.
And it’s not about my value. It’s not even about my pricing. It’s about how those things work together – and sometimes don’t play nicely together – and what that means for your business.
Competing On Price Is Not The Same As Undercutting The Competition
I want to make something clear up front: we have never been in the business of learning a competitor’s quote and simply “charging less”.
In fact, I don’t want to know what the competition is charging so please don’t tell me!
I firmly believe that if my business model is based on “do it cheaper” then that’s a quick slide into cutting corners, undermining relationships and diminishing value.
So if you’re in the market to hire a marketing company, web developer, social media manager or some variation and all they want to know is what the last guy asked for, that’s a sign that they probably aren’t thinking in terms of value at all.
On the other end of the spectrum from the undercutters there are people who won’t compromise on their price because “that’s what they’re worth”.
Nice. Good for them. But in the real world, “your worth” doesn’t always pay “your mortgage”.
And so in the middle lies a compromise.
We have a standard set of pricing for our services and when people ask, we give them our standard pricing. We have hourly rates and fixed project rates. Those rates are based in part on unsexy things like “profit and loss statements” and “covering our overhead”.
They’re also based in part on what we know we can deliver (value) and how we know we can help people in a way that contributes to their bottom lines.
But it doesn’t matter what I’m worth if you can’t afford it. And so we compromise. We find that middle ground between what you can pay and what I’ll work for.
There’s a limit on both sides – you can only go so high and I can only go so low before we start to strain our budgets, our expectations, our performance and even our relationship.
So is there wiggle room on price?
Well, it depends….
How Well Do The Pieces Fit?
A couple of years ago I met with a prospect who wanted to start a business focused on healthy cooking. It was a great concept. I love healthy. I love cooking. More importantly, I love food. I loved her passion and her premise and her plans.
What I didn’t love was her budget.
But everything else was so right. The project sounded like great fun and by the time we had met two or three times to discuss things, I was ready to let her name her own price.
Fast forward a year and I had a couple of conversations with another prospect about building a website. He was brash. And unfriendly. He was mad at me because by the Transitive Property Of Crummy Developers, he distrusted me because his last developer had left him high and dry.
I had no particular passion for his business and though I could have helped him if things had gone better, I opted for the hard line. There was no compromise.
So what’s the lesson?
The quick lesson: you can be a pain, but that comes at a premium. The more ornery you are and the more hand-holding I have to do then the less likely I am to consider a price reduction.
Pain management is expensive.
The longer and more important lesson is that we qualify people before we jump into a working relationship with them. Hey, you’re not the only one doing the vetting! We’re also checking you out, cataloging whether or not you like cupcakes (a plus) or hate cats (stay out of our office).
We’re assessing our ability to get along and your emotional investment not only in your business but in the marketing of your business.
We want to know that even if you can’t afford value, that you understand it.
Sometimes we meet people with big budgets but no concept of the value of marketing and what we bring to the table. Most times we meet people who get it but who, like most small businesses, are operating on a tight budget.
It’s that second group of people I’d much rather work with.
There’s Always Wiggle Room. Sometimes.
The conundrum of writing this post goes right back to my initial wall: how do I sell my services based on the value I provide without sounding like a hypocrite for cutting my prices?
And the answer, it turns out, is pretty simple.
I base my pricing on the value of the relationship. I qualify you by asking, “Do I want to work with this person?” and “Can I help this person market their business successfully?”
If the answers are yes and yes then I come up with a price that works – within reason – for both of us.
Notice the qualifier “within reason”. As I said earlier, there’s only so far either of us can go.
And at the end of the day, if I can be of value to you and help you grow your business profitably then you’ll be able to afford what I’m worth!
So as I wrap up this post I wonder if I shouldn’t have been so obvious about how quickly I can sometimes cave on value and go right for price. I wonder if I should have written the Pollyanna post about how important it is to pay for value and how “you get what you pay for”. I wonder if I just shot myself in the foot on my next prospecting meeting when someone says, “So what can you do on the price?”
But that’s ok because business is a lot sloppier and more uncertain than we’d like to believe. So if you ask me that question, I may just say, “Nothing.”
Or if you buy me a cupcake, maybe we can talk.
This post is part of the monthly Word Carnival series of posts. This month, our carnies talk about the difference between value and cost. Read the rest of the Word Carnival posts here for more great advice and insight from some of the smartest business owners and entrepreneurs you’ll meet.