
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.
For some reason, your process doesn’t surprise me. I, too, learned early on to quote high and outrageous (to me) prices on those projects I didn’t want to work on (or for those people I didn’t want to work for). Nine times out of ten, they said yes to those prices and then I had to learn how to deal with *that* conundrum.
That can be a conundrum! But then if you’re getting paid gallons of money it helps mitigate the aggravation. Or at least you have enough left over for a good, stiff drink afterwards.
You had me from the get-go, Carol Lynn, but you REALLY had me at “Pain management is expensive.” And damage control is even more expensive!!
Sheesh. I dunno what the final answer is in the “price” department. But you’ve done a stellar job of telling your personal pricing story! I like it. Your approach works for me. However, since I’m somewhat of an ornery cantankerous type, I’m inclined to not work with anyone I can’t warm up to. Know what I mean? Relationships are my thing. I know, I know. We all need to keep a roof over our heads. I just can’t imagine that ANY amount of dough could be incentive enough to work with, let’s say, a demanding and arrogant client. Maybe I’m being selfish or unreasonable. Or maybe not. If nothing else … I know my breaking points and my doggone limits! I guess I just don’t want to find myself at a crossroads point one day having to determine which is worth more — a roof over my head or my sanity.
I love it when you give us a behind-the-scenes peek at how you and Ralph manage your biz. Your experience and insights are SO helpful! Thank you. 🙂
I agree that there are some people that are simply not worth working with. I suppose in certain desperate situations you do what you have to do but overall, there is definitely a line to draw between “making money” and “going crazy”. The older I get the less inclined I am to waste my precious minutes on people and projects that are draining.
With age, brings wisdom. 😉
Well stated Carol Lynn. I’m of a similar mind. Additionally, we post pricing on our website for all to see. Prospects who have done their due diligence already have a sense of budget when they initially reach out to us. It helps when the conversation begins at relationship rather than price.
Interesting, we actually removed our pricing from our site because we find that people looking at pricing are generally price shopping. But we’re in two different spaces and what we do in marketing can vary tremendously in pricing from small startup freelancers to big Madison Ave agencies. In the end it becomes very confusing for the consumer. So we take the “relationships and value first” approach and put a price tag on at the end. And go from there 🙂
For us, transparency rules. Those looking for a deal will tend to eliminate themselves. Fewer tire-kickers may mean fewer leads, but it also means more qualified prospects. 🙂
Agreed on that! And it’s never profitable – or much fun – to work with (or try to?) tire kickers.
Curious about the 2 markets. Do you see budgeting variations based on market or scope?
I think I probably wasn’t clear in what I said so let me see if I can explain…
First, I meant to convey that for consumers shopping for our services, it can be confusing because there is so much variation in pricing among vendors. They can get a price for $100 from the freelancer, $1000 from me and $10,000 from a big New York agency. Consumers look at the price tag without context and wonder why they are getting charged so much/so little. So having pricing without the context of who we are, what we’re worth and why we price a certain way is not helpful to them or us.
So to the second part, we do have different service lines. There are services we can commoditize and price so when someone says, “How much?” We give them a price. Then to your point about scope, some projects are too custom for that. Some projects, especially when you get into the consulting or development areas, depend entirely on scope. Of course, nobody likes to go to a website and see a price list with a big asterisk that says “It depends.”
So we have found it better for us to engage someone before we talk price. After some practice you get to know who the people are who are serious and who are just looking for the next best quote.
I hope that makes more sense!
Perfectly.
Well put, Carol Lynn. That middle ground between what clients can afford and what you can live with can be a pretty lucrative space. One of my friends charges a PITA tax – the harder the client is to work with, the higher the price. And it’s always good to do a feel-good project – as long as that’s not ALL you’re doing.
Yes, an important point… we certainly can’t be doing the bargain-basement projects all the time! That would be called charity. Not so good for business 🙂
Carol Lynn, thank you! This is such a refreshing post!
I agree with you: At the end of the day, it’s about finding a middle ground where everyone respects one another. And this often leads to a lot more than a paycheck!
It’s all about the relationship.
Thank you! No doubt we need the cash flow to make a business work but we also need the emotional investment, which comes when we care about what we’re doing and the people we’re doing it for.
I will buy you a cupcake:) Cheers! Kaarina
Yum! 🙂
I love the honesty of this post. Sometimes it really does come down to price! But that price reflects the value you bring to a work relationship, and the value you see in starting a relationship with a new client. The relationship is the most important factor in this decision, for both you and the potential client—basically, what value can you bring to each other? From there, the price can represent a natural, fair midpoint for both of you.
Exactly! After all, if you want a long term working relationship it has to start off in the right place.
Applause for the refreshing honesty of your post Carol Lynn. I’m bookmarking this page to share with my clients. Even though you don’t militantly hold the line for price, you aren’t out racing to the bottom. And I too have a PITA charge – it always amazes me when someone pays it.
With my clients I show them their total project, then break it out by key deliverables (no more than 3), with a price attached. If they need a lower price I can take out pieces, such as a written report or less one-on-one time to get it down.
If we ever get to meet in person I’ll bring the cupcakes.
And for the record things like “profit and loss statements” and “covering our overhead” CAN be sexy. You’ve inspired me to do a #ProfitDiva fashion show for financial terms 🙂
I thought of you when I wrote that… I thought OOOOO Nicole would totally find that sexy! 🙂
I agree on what you said about taking pieces out. I do that too. Lower budget, fewer bells n whistles.
I love this!!! I have what I like to think of as a “PIB” charge – if I think a client is going to be a headache, I’ll raise the rate enough that if they do accept, it will still be worth it for me. If not, then headache saved!
So true that the value of the relationship absolutely is part of the equation. I would rather do ten hours a week of work I love than 5 I hate, so I might charge the first person the same as the second. 🙂 Great honest take on this. Appreciated the mention of the limits on the compromise, too. At some point, it just doesn’t make sense.
I always look forward to reading your posts, Carol Lynn!
Thank you, Alisa. So far everyone seems to have one of those charges! You’re absolutely right, sometimes it’s worth pricing yourself out of a job if it’s not going to be enjoyable, and if the client accepts the cost at least you are well compensated.
“Pain management is expensive.” Oh my god yes.
Want my help? Cool. Want to bully me into a lower rate? Hmm. Want to try to negotiate a premium because “It’s just a little project?” Nah.
I’m pretty firmly entrenched in the, “I know my value and I’m happy to charge it” crowd, because I believe that value and price are built out of habit. But even I love the premise of bending the rules just a little to make sure a good client (or a potential dream client) doesn’t slip through the cracks.
There’s definitely a pain-in-the-ass charge put in place for folks that cause me headaches. And I have it built into my contract that PITA tasks will incur a premium that’s discussed in advance.
Any time I personally have to intervene in a client’s business, to correct something they should be dealing with or to make sure they’ve got processes and systems in place, there’s a huge PITA charge.
I’m also a ruthless documenter of good and bad, so if the balance isn’t in your favor, I don’t feel bad not compromising on my rate when it comes time for renewal. Clients that take me further away from my goals get a difficulty multiplier, too.
All of these are internal metrics, and I haven’t gone broke yet in 5 years. Doing the right kind of work is important when you own your own business, anything that adds psychic weight is just not worth it in the long run, because psychic weight comes back to your family in the form of complaining about what so-and-so did, or why so-and-so didn’t take your advice and now it’s cost them big time, or whatever. In the stress you “take home” with you, in the absentminded fiddling with your vegetables at the dinner table, at the despair of finding one more gray hair that you just KNOW was caused by them…
You can’t do it. Psychic weight is the killer of passion and productivity alike. It should be ruthlessly smited.
Running a business is ALL about the psychic weight. I would work for a hundred low paying jobs before I would do that one really, really, really annoying, crappy “expensive” one. That’s not to say I’m just hammering my rates down all over the place but in a world where you have a choice between a good project and a draining project, I’ll take the good one! I don’t want to count another single gray hair. And yeah, the bullying thing doesn’t work. I’m too old for that now and cranky people don’t scare me.