My wife, Linda, and I attended a baseball game the other night. Despite living here in the Boston area, however, we did not go to see the Red Sox.
Rather, we drove west to nearby Worcester, Massachusetts to watch the Red Sox minor league team: the WooSox.
The truth is, I’m not much of a baseball fan. I enjoy watching for a little while, but as with pregnancy, I find that the whole thing is about three innings too long.
Even so, I was excited to see the WooSox because they are playing in a brand-new stadium, one that I had heard great things about. It did not disappoint.
Granted, it doesn’t offer the same Civil War-era-penitentiary charm of Fenway Park, but in terms of atmosphere and amenities, it’s pretty hard to beat.
… being picked up at a nearby parking garage and given a free ride by a roving, golfcart-driving stadium employee;
… a friendly usher who encouraged us to abandon our ninth-row seats and move up closer since, “the seats in the first four rows have extra padding;”
… a promenade around the stadium that invites you to take a stroll and watch the game from any angle at any time.
Total cost? Twenty-five dollars per ticket.
So here’s my question for you: Is that a “good” price?
I hope you said, “It depends.”
For some people, of course, the answer is no. They wouldn’t attend a baseball game even if the tickets were free.
For others – I count myself among them – $25 is a bargain. I would have happily paid twice that for the experience.
And that, my bobble-headed friend, is one of the problems with having to set a fixed price for a given product or service.
In the case of our WooSox seats, all of the people who place a value on them of $24.99 or less don’t come to the game. Obvious.
What’s not so obvious is that among those who do come, there’s a tremendous range of what they would be willing to pay.
Linda thought $25 seemed about right. I would have paid $50. The guy sitting next to me might have been willing to pay $100 (and judging by the clothes he was wearing, this is not a man who parts with money easily).
All of which means that when you set a price – any price – you are always leaving money on the table: Some of the people who bought would have been willing to pay more.
The same truth applies to selling a professional service: Some of your clients would have paid even more had you set a higher price.
Unfortunately, there is no definitive way to know who they are, how many there are, or how much more they would be willing to pay. But it does raise one very important, somewhat counterintuitive point worth keeping in mind:
Higher prices result in happier clients.
Think about it: Who enjoyed the baseball game the most the other night? It wasn’t me and it certainly wasn’t Linda. It was the guy who would have happily paid $100. To him, $25 was a steal (baseball joke).
The higher the price, of course, the fewer people who remain interested in whatever is being offered. But among those who stick around, you’re looking at the super-fans.
Likewise, as we raise our fees as professional service providers, we are also left with those who, for whatever reason (I like to think it’s my boyish charm), think we are high quality and have few equivalent substitutes.
But wait a second, you’ve no doubt just said out loud to the poorly dressed man in the seat next to you, if fewer people are interested in what I offer, isn’t that a problem?
Not really. You and I are not in the high-capacity business. If I get 15 new clients in a year, it’s a lot. Your number may be 25 or even 50. But it’s not 1,000. Market share is not our objective; we are looking for quality clients.
Higher Fees Are Not Just About Earning More Money
The people who are willing to pay you more are better clients. They are the ones who see something special in you.
They don’t go elsewhere because the lower-priced alternatives don’t compare to working with you. That makes them easier and more enjoyable to work with than those who only show up to your “baseball game” because the ticket is cheap.
High prices weed out the tire-kickers.
Here’s the bottom line.
All prospects, even the ones who hire you, are not created equal. Some see the magic you offer, others don’t.
There’s nothing wrong with the latter group. But if they view you as an easily replaceable commodity, they will be less satisfied with the work you do and always wondering if you’re really worth the price.
Raise your fees and say hello to the super-fans who eagerly show up to watch you play.
- Have you ever been inside a penitentiary? What were you in for?
- Where is your favorite place to promenade?
- What’s your number one piece of pricing advice?
Share your answers below…
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I recently read an excellent book by Andrew Griffiths named, “Someone Has to Be the Most Expensive, Why Not Make it You?” I keep the spine face out so I see it every day, just to remind me how elastic price is. It’s about high value, which can command high price.
Love that, Bob! I will check it out.
Love this, Michael! While I have a good idea of how much to charge for various writing services I provide, this is not set in stone at all. There’s no “price list” on my website. I can usually tell pretty quickly whether a prospect should be on the low or high end of my price. For ex, I’ll charge a small shop or one man financial planner less than a mega financial planning firm because I know they have different budgets. I have a floor below which I won’t do work, but I always want to maximize my income from big, deep-pocket clients who I know can afford it.
Sounds like a good plan, Don.
Thanks Michael! Such great advice, as always.
1. No experience there to share. 2. The beach is wins the prize for me. Unfortunately I’m nowhere near one this summer—maybe next year! 3. At the other end of the spectrum, I’ve heard some interesting advice along the lines of never try to squeeze 100% of the value out of a business deal. By leaving a little on the table, your customer feels the satisfaction of getting a good deal and you build a reputation of being generous. Makes me think there may be a sweet spot somewhere. Maybe the 80/20 rule would be a good guideline?
I definitely agree with that. I heard someone say something recently along those same lines that in a fair negotiation, neither side should get all of what they want.
I think in raising prices, you are still not getting the maximum from each person; you are just appealing to a smaller, more interested group.
Penitentiary? No. Jail? Yes. In fact, I’ve been in a few on different occasions.
I worked as a legal assistant and I’m bilingual, so I would sometimes be taken to the various jails to translate for the attorney who needed to talk to his client.
I love to promenade and will happily do so on almost any relatively flat surface.
Number one pricing advice: name your price and shut up. Sure, answer questions, but don’t hem and haw, don’t explain or justify.
your pricing advice is spot on. If the client balks, you can certainly discuss a reduction in scope but never devalue yourself.
Great advice. It’s hard to stop talking at that point. A friend told me that while talking on the phone he literally puts his hand over his mouth after naming a price.
Michael – it all boils down to value pricing. The price a client is willing to pay is related to the value they place on what you deliver. You value attending a WooSox game twice as much as Linda. But, as you say, I have a friend to whom I could not give a Boston-Yankees box seat ticket. To him, attending that game has negative value! (I don’t know how much I’d have to pay him to attend)
And as you say, the clients you want are the ones who value your “product”, not because it strokes our egos but because they make for long-term relationships.
Also, this is another example of why NOT to charge by the hour.
Totally agree that value pricing is preferable to hourly for many reasons. Although value pricing or not, anyone who agrees to a stated fee, unless by some amazing coincidence of naming their absolute highest acceptable price, would have paid more, no?
Not that we have to get every last cent, as Heather pointed out earlier, but even in a public auction, the seller is getting the person who is willing to pay the most, not necessarily the most the ultimate buyer is willing to pay. (This pricing stuff is amazingly interesting!)
Wearing my part-time hat, I am a dog trainer. That is a business based on hourly. Behavior is too fluid and in some cases extremely unpredictable. Guaranteeing that I can teach your dog to sit in 100% of the circumstances 100% of the time is an unethical one. I teach people to train their dogs. I give them the best advice, education, and coaching I can. What they use, and how often they use it is entirely out of my control.
Superb advice, Michael, cheap at half the price. I’ve been to Pentridge Prison in Melbourne to watch a play put on by the inmates, to the Eastern States Penitentiary in Philly, and to Alcatraz.
I used to rub on promenade all the time when I still had hair, but now it stays down by itself.
If any economist asks you what is your price elasticity of demand tell ’em to check in with the Promenade Torture Director for Reeducation, give ’em a couple of shots with a cattle prod, and throw ’em off the roof anyway.
Hair? Hair? Is that still a thing that people keep on their heads? Seems so 20th century to me…
penitentiary- maximum security, yes two but only as an air monitor for asbestos removal projects. working with inmates committed for murder, mayhem and other things was fun and you knew where you stood all the time.. Unlike when negotiating a project cost.
I have a price lis,t but I keep it flexible
No doubt an enlightening experience, Bob.
1. No, but a friend/neighbor spent some time in Leavenworth many years ago charged with bank fraud. IMO may have been a fall guy.
2. Regularly promenade with the mutt around small pond just outside our door.
3. Four pricing rules here:
(a) always set your fees to make a profit — that way you can’t go broke
(b) never cut fees — cut scope instead
(c) don’t be greedy — a happy client will often come back for more
(d) if in doubt, quote the lowest price for which you would do the project — that way there are no regrets if you lose out.
PS – Hair is highly overrated.
Four great guidelines, Daryl!
I like those guidelines, Daryl. Always good to set yourself up for no regrets.
Eastern State Penitentiary in Pennsylvania for a Halloween Tour and scary night. It was pretty freaky.
I like to walk the peninsula in Long Beach, CA.
You don’t have to increase prices across the board.
Mike, thanks for the birthday card. But, the office moved.
Send me your new address or you will be birthday-card-less next year!
I have been in the Walpole State prison when I worked for the American Cancer Society and was trying to get them to host a Great American Smokeout educational program.
Promenade regularly at Progressive Field, the home of the Cleveland Guardians.
Double your prices, even if you lose half your clients, you will be making the same amount of money and working less, with people you enjoy.
Good pricing advice!