For years, I stressed over how much I should charge for my services, as if there was a right answer.
There is no perfect answer. There is no one magic formula to use. There is no right answer, and there are no wrong answers.
But some answers are better than others.
Should you charge what clients are willing to pay you?
If you were to demand a one-sentence answer to the pricing question, I would say that you should charge whatever a client is willing to pay you.
I would tell you that you should throw out a number in a proposal and see if the prospective client says “yes.”
And I would immediately regret that answer. Because it’s more nuanced than that. Hearing yes too often means you are leaving money on the table. Hearing no too often means you can’t put food on the table.
If the prospect says yes immediately, then you are probably under-charging. If they have to think a little before signing the contract, then you’re appropriately priced. If you never hear back from them again? Then you probably got greedy. Or they don’t deserve your high-end solution.
Think of this as a fairytale pricing scenario, where you are goldilocks, your clients are bears, and your pricing is the porridge.
Variable pricing feels slimy
But in your reality, it’s not that easy to test your pricing. Why?
You may have only one opportunity to make a good first impression. You may need the money, any money, for your business to survive.
Or you may defer to market-based pricing, treating your business like a commodity.
Or your demand-generation program may only draw in one quality lead a month.
It’s hard to have confidence with a small sample size. It’s easy to make the wrong decision based on a few data points.
And then there is the ethical question. Testing different prices on different customers might make you feel a little weird inside.
Let’s get scientific
Whenever I raise the issue of pricing with my peers and business advisors, I am often told “you should do a pricing survey.”
The logic is to simply ask people what they want, how much they would be willing to pay, and they will magically give away this information. It’s hard to argue with that logic.
There is even a best-selling book called “Ask” that advocates this approach (you should pick it up, since it’s free).
Yet most surveys receive less than a 5% response rate. And those that take the time to respond offer up a mixed bag of responses. You’re still stuck with a small sample size, and limited data for making a decision.
Increase your survey response rates
Bring this new set of struggles up with those same peers, and they will say “you need to enter them into a drawing to win a $100 Amazon gift card to get more responses.”
This logic is also sound. People expect to be rewarded for their responses. Sending out digital surveys is cheap, so you can spend a little money to get quality responses.
And you see this method everywhere. Heck, I was invited to three surveys this week. Each of them offered to enter me into a $100 gift card drawing for 20-30 minutes of my time.
Of course, all these years, and I have never been the lucky winner of that gift card. I’m sure that as a collective we are well below the Mendoza line of survey-reward drawings.
Offer me a chance to win $100 and I will hit delete faster than you can say “your opinion is importa…”
With every uninspiring survey invite, a baby kitten dies.
Then there are surveys that are so lucrative that even Jeff Bezos would see a positive ROI.
You could ask someone to spend a 10 minutes to get a $100 gift card. Pretty much everyone will jump at that opportunity. Even the owner of Amazon would find that one tough to pass up.
It takes time to find the exact value equation.
But this is the agency business… the relationship business
You probably don’t need to send a survey to understand how much your business should charge. You don’t need a large sample size to see an impact.
Make your prospects an offer that they can’t refuse. Offer them the one thing that is in limited supply for everyone: your time.
Take them to dinner. While you’re there, ask candid questions about their price sensitivity, budgeting process, and what they value most in their vendors.
Give them a free consultation. Take away all of their risk, evaluate their opportunities for success, and provide a proposal that demonstrates the ROI you can deliver.
Price your proposal based on value delivered, not the time you spent.
Give. Then get.
Now is when I ask you for a big favor
Your opinion is important to me. My business would benefit tremendously from your response.
I provide weekly sage insights to help you grow; to prevent you from making the same mistakes I did along the way. And I want to keep on delivering value for years to come.
But in order to continue to fulfill on my end of the bargain, I need to learn more about you. What makes you tick. What are your challenges? Where do you want to take things next?
And that’s why I am running a survey. It would be fantastic for your response to be included. It will only take 3-5 minutes of your time.
Here is a link to the survey. Your response will save countless kittens!
This survey has ended, view the results here.