(Listen to this post, here.)

I’m not a huge coffee drinker: two 12-ounce cups a day. One in the morning; one mid-afternoon.

My wife, Linda, doesn’t drink coffee, so I rely on a Black + Decker Brew ‘n Go Personal Coffeemaker (with travel mug) I drink about half a mug with breakfast and the rest on the drive to my office.

Recently, however, I’ve encountered a slight problem: the coffee seems reluctant to come out of the mug.

I mean, it kind of still works. But lately it requires a bit of an aggressive slurp, something you don’t want to be doing much of while trying to consume a boiling hot liquid in the midst of your morning commute.

Frankly, this glitch had me perplexed for several days. After all, there’s an inch-wide hole in the lid (that’s eight hectares for those of you on the metric system) and it’s just coffee. So what’s the problem?

Finally, just as I was about to give up and toss the mug in the trash, I had a brainstorm…

You see, there’s another, teeny-tiny hole in the opposite side of the lid. A hole whose purpose, I realized, is to allow air to flow in, so liquid can flow freely out the other side. (Science!!)

Sure enough, immediately after pushing a toothpick through that little hole to unblock whatever was stuck there, my coffee once again flowed like hyperbole at an AI conference.

Pricing is Marketing

Here in the world of professional services, there are likewise instances where the solution to a problem is counterintuitive, if not hidden entirely. One such example is pricing.

If you want to make more money, year after year, it seems obvious that the fix is to keep raising your fees. And in an “all things being equal” world, that would certainly be true.

But all things are not equal.

The amount you charge – and the way in which you charge it – does not exist in isolation. Your pricing approach is inextricably (SAT word!) tied to your marketing, selling, servicing, and client retention.

That’s why I made the decision long ago that I would never raise fees on existing clients for a given type of work. In my case, that tends to be email newsletters. Once someone begins working with me, the fee on that (usually monthly) newsletter never goes up.

This doesn’t mean my fees don’t rise over time. They do – just not on existing clients.

The benefits are many…

• Easier selling. I tell prospective clients right up front that the price will never go up. Not only that, but I charge on a flat fee, all-you-can-eat basis.
  
  Small firms in particular (my target audience) are especially concerned about cost unpredictability. Knowing the price is fixed removes a primary concern, meaning they are more likely to move forward and do so quickly (before the fee rises).
   
• Higher value. If you raise the price of an existing service for an existing client, you get more money. Obvious. But all they get is the same thing they got yesterday – except now it costs more.
  
  I do the opposite. Since I raise the price on the next client, my existing clients get the same service for less money than if they had shown up today. Higher value to them.
   
• Better retention. My clients know that the longer they stay, the more they save. I’ve got one newsletter client, for example, who has been with me more than 20 years. She is literally paying one-third as much as she would pay if she arrived today.
  
  Every time I raise my fee on a new client I am rewarding current clients who stick around, increasing their incentive to stay.

Isn’t There a Downside?

That’s all fine, you’ve no doubt thought in between aggressive slurps, but how does any of that add up to more money for you?

Good question. Most of the financial benefit comes in the form of increasing my work capacity.

First, because I don’t have to spend as much time chasing new clients.

For the reasons above, my clients tend to stick around for a long, long time. The time I might otherwise spend marketing and selling is instead spent doing work for which I get paid.

Second, because the longer you work with someone, the more efficient the process becomes.

Think about it: It’s the new clients who require the most attention and handholding. Not because there is anything wrong with them. It’s just that you don’t yet know how best to communicate with each other, let alone work together.

Compare that to people you’ve been working with for five, or ten, or 20+ years. It’s a well-oiled machine. Expectations are clear, rework is minimal, surprises are rare. Everybody wins and everybody is happy.

Taken together, the reduced marketing/selling and increased efficiency of maintaining ongoing relationships mean I can handle half again as much additional work (maybe more) as I otherwise could.

Besides, it’s not like I don’t lose clients. People retire, firms change direction, etc. So there’s always an opportunity to raise prices on those new people. But I prefer an approach that heavily favors the people with whom I am already working.

Here’s the bottom line.

“Fixed forever” pricing isn’t the only way to do it; your business or inclination may not lend themselves to the same approach.

Just keep in mind that if the money isn’t flowing fast enough out of the obvious “hole,” you may be overlooking better, more creative solutions.

Enjoy your coffee.

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Discussion Questions:

1. How much coffee do you drink per day?
2. Is your machine well-oiled? Explain.
3. What’s your pricing strategy?

Share your answers below…

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