Thank you. A great response to last week’s post with some really helpful comments and e-mails. Most of them were concerned with what to charge when you’re supplying a service – thoughts on manufacturing widgets were thin on the ground…
I wrote last week about the importance of perception in pricing – and about the power of ‘9.’ Winner of the ‘first to comment’ award was Rory Ryan :
I have sent out fee quotes for €2,300, €4,450 etc. Should I switch to €2,299 and €4,449?
I suspect this might have been a little tongue-in-cheek from Rory, but it illustrates an interesting point. An eight-year-old Fiesta with 60,000 miles on the clock might well be €2,299: a quotation from one of Dublin’s leading architects is – and always should be – €2,300. Perception again. If Rory sent out a quote at €2,299 what does it say? To me it says, ‘We’re desperate for business.’
This leads neatly on to discounting. Dick Jennings made the point that many people quote a high (or very high) hourly rate so that they can then ‘discount’ and make the client/buyer feel good. I have one big objection to this strategy – it takes away a lot of trust. As Dick pointed out, it is exactly like a Middle Eastern bazaar and I’m not sure that haggling over something you’re now mentally comparing to a carpet is the best basis for a professional relationship.
So should you never discount? No, I wouldn’t say that. I will discount my consultancy rates for two reasons:
• To help an established client who’s going through a particularly tough time
• To help a new client who I think will become a very good client in the future
But equally, there are two rules that I’ve learned from long experience:
• The discount has to be for a limited period of time and you need to agree that time at the outset
• And the discount cannot be ridiculous: if you charge £100 an hour discount to £30 an hour at your peril. I’ll tell you here and now that you’ll never get back to £100 an hour with that client.
Doug Adamson wrote about how good advice and great ideas can transform businesses. Spot on, Doug. Somewhere there are the guys who came up with Compare the Meerkat, Red Bull gives you wings and at the dawn of time, A Mars a Day Helps You Work, Rest and Play. Are these gentlemen now relaxing on their private islands in the Caribbean? I doubt it. Because as we’ve repeatedly discussed on this blog, success comes from ideas plus action. The oft-quoted ratio, ‘1% inspiration and 99% perspiration’ is depressingly true. Without the concept, the animation, all the other promotional work and the millions that Dietrich Mateschitz has ploughed back into it, Red Bull gives you wings might well have stayed a nice idea on a copywriter’s notepad.
All of which reinforces the point Dick made: that it’s very difficult to measure – and therefore to charge for – ‘value-added.’ Charging by the hour may not be exciting and may not have the potential to hit the jackpot, but everyone at least knows where they stand at the outset. And there’s probably a lot less potential litigation down the road…
Adding my own experience to your insights and comments, four key pricing principles emerged from last week. I’ll develop them fully in next week’s post and hopefully include some more comments. But in brief they were:
• Perception, positioning and message are vital. If your business is about providing a top-quality product or service, then everything about your business has to say that
• Attractive as discounting and offering a loss-leader might seem, they’re fraught with danger – and in my experience, rarely work in the long run
• You must have faith in yourself: it might be hard when a few people say ‘no’ but hang in there. To quote another ad, You’re worth it.
• And be consistent. You can’t be offering a premium service one week and competing on price the next. Define your message, and stick with it.
Have a great weekend – and let’s hope it’s finally time for the key principles of lighting the barbecue…