Price point. What to charge. Every entrepreneur has experienced a moment of agonizing indecision as they hover over numbers with dollar signs attached.
All business owners think carefully about what they charge. Should you end your figure with a seven or a five? Go top shelf or bargain basement? Have half the customers at double the price or double the customers at half the price?
Pricing is crucial. In fact, what you charge will make or break your business. Higher prices simply work better. Here’s seven psychological reasons why…
1. Higher prices increase customer focus
When you charge more, your customers pay more attention. Trust me – I’m a therapist. I’ve often joked that a Quit Smoking therapist need only charge $7500 a session to guarantee success. When a customer is forking over serious cash for advice, they’re going to listen carefully and act on it. This is known as “Client Compliance” – their fear of wasting money becomes your greatest asset.
Focus isn’t only important for consultants. It matters for physical products too.
I never cleaned the toaster that I inherited from the eighties. Until it broke. Then I bought a space age toasting rocket (with glowing blue lights). It now gets cleaned out at least four times a year. Can you imagine the impact of this on the manufacturer’s guarantee policy?
My old toaster caught fire when the build up of years of crumb-strata finally reached critical mass and short circuited the elements.
Because I spent big money on the replacement, I care for it better.
The same is true for my old cellphones (which I broke every ski season, like clockwork) versus iPhones. My old iPhone 3G is still as good as new – without too many scratches. Why? Because it cost three times as much as any other phone I’ve owned. I once put it in a ziplock bag (snow proof) with a hand warmer (freeze proof) while skiing.
How do you want your customers to treat your product?
It doesn’t matter if you’re selling a service, product or information. Upping your rates creates instant customer-concentration.
2. Big transactions will ignite your motivation
When you’re selling a big ticket item, you’re going to get fired up. When the unconscious mind knows that a single sale could have you in caviar and cigars for months, it flips the motivation switch.
Want to see real world evidence of this? Go compare the attitudes of the sales people at the 2nd-hand Hyundai caryard to the guys selling custom Ferraris.
I deal with astronomically priced corporate contracts and nothing motivates me like the sensation of approaching the close. I might only get a few a year, but the motivation is still miles beyond what it would be if I was, hypothetically, selling $99 widgets door to door.
You know it’s all in your head when you figure out that selling $99 widgets, three a day consistently for a year, is actually a six figure revenue stream. Same end result, but it sounds like a nightmare – not motivating at all!
Pumping up your rates injects the razzle-dazzle back into your deals. Pursuit of a close is invigorating, because the stakes are high.
Increase your rates and give your unconscious mind something to salivate over.
3. Being expensive cultivates an aura of expert and elite status
Want to be known as the Walmart of your vertical? The bargain basement of your industry?
I didn’t think so.
When you have high prices, something magical happens. People assume you’re the bees-knees. You start to become known as the place to go for top-end, elite and awesome <insert product here>.
The thing is, if you’re offering top-end, elite awesomeness and doing so at insanely cheap prices… it won’t matter. You’ll never get the reputation you deserve.
Unless you’re a rev-head, you’ve probably never heard of the Nissan R34 Skyline GTR. It’s a mass produced, low cost rocket ship that can lick a Ferrari 360 Spider around any track. Guaranteed. However, the car retails for less than a quarter of the price of the Ferrari.
That’s why you’ve never heard of it.
When you gain the expert/elite aura, selling becomes infinitely easier. Doors will open, important people will shake your hand. Party invitations will appear. Media mentions will drop from the heavens.
Most importantly, people will start hiring you simply because they can tell you’re the best.
It’s your rates that tell us this.
4. You’ll make more money by doing less (aka “margin is everything”)
I’ll never forget my dad telling me the tale of his photo lab pal. Dad was an avid photographer, back when you had to shell out for development of every picture. I think it was called “Film” or something.
Anyway, he always chuckled about his buddy who owned a photo lab business. One day, his friend spontaneously doubled his rates. The customers were furious.
Fifty percent of them vowed to never return. The other fifty percent shrugged, realized they had been getting photos too cheap for a while… and swallowed the increase.
Overnight, he had cut his workload in half. His revenue was the same but he was making more money because he only required half the inventory. His overheads pretty much halved!
The fact that he then spent the extra profit (and time!) tarting up the shop to attract new, wealthier customers transitions nicely to my next point…
5. Big figures attract big spenders (your customer demographics will get exciting)
There are a certain group of people who will pay more for the little extras. These people will intuitively gravitate towards good customer service, style and speed. In other words, they want the best and they want it now.
This demographic will pay a premium for “top-shelf”, quite happily, knowing that they’re getting what they want. We all sometimes fit into this group. Sometimes we don’t.
I’ll spend double on lunch to make sure I avoid starchy carbohydrates. I’ll also pay more for a haircut where I’m less in danger of losing an ear. I’m a lousy sock customer though – I wear $1 socks inside $500 shoes. Sock merchants? Do not call here.
Why design a business that caters to bargain hunters? These people have no loyalty – they’ll ditch you for a cheaper competitor faster than you can say “Fire Sale”.
Increase your price and you’ll attract people with money to spare, who value what you do.
6. As prices go up, customer issues and complaints go down
I mentioned physical care of iphones and toasters, but that’s only half the story. Higher prices increase customer commitment.
When I started my therapy practice, I was charging $50 an hour. I had to deal with endless rescheduling of sessions (effectively wasting my time and increasing my overheads). When the clients did turn up, I struggled to get them to pay. I had to become a hardened debt collector, which made me miserable.
These days, my minimum per hour face-to-face rates are $450. My client’s never forget to turn up for sessions and I always get paid in advance. Almost all my email clients renew their per-month retainer fees without me even asking!
The more you charge, the less debt collecting, refunds and general hassles you’ll have to deal with. The customers who make the decision to shell out for your pricier product will take it upon themselves to be better educated about what you offer. They’ll be more decisive, more committed and offer fewer objections.
Would you pay to resolve complaints and hassles? Have you ever hired a debt collector?
If you simply charge more, you’ll get the same (or better!) outcome and you’ll make more money. This is a no-brainer.
7. Big rates motivate you to over-deliver (and customers will thank you for it)
This is really the psychological coup-de-grace. The final evidence that increasing your rates is a must.
When you start charging more, you’ll quickly figure out that you need to deliver more.
Just like the photo lab guy, you’ll start decorating better. You’ll add little extras. You’ll go the extra mile. Presentation will become important. So will speed.
Do you think your clients will notice? Hell yes! They’ll love it.
Increasing your rates overnight will make you sweat with the need to be more awesome. You’ll be petrified that you’re not “worth it” – that you’re somehow not awesome enough to have big prices. This fear is a good thing.
Being awesome is the only secret to business success.
Pumping up price is the psychological permission you need to innovate your product like crazy. Your fear of inadequacy is real. Innovation will allow you to transcend that fear. Innovation will revolutionize your business and dazzle your customers.
Then, they’ll talk about it. Word of mouth will take off and you’ll magically attract more customers than your old, piddly rates would ever have allowed.
Transform your business today. Double your rates and double your success.
Why haven’t you done anything else with the rates? What would you do with the extra profit? Let’s discuss…
Peter, my rate setting difficulty stems from comparing my online work, to my offline. The rate I was charging was comparable to a teacher’s casual rate. A rate I have been happy to receive for the past 15 years.
So my question is, how do I change my mindset that I can ask for more online, and not feel jibbed by the pay I recieve offline.
Ainslie
I’m not cheap. Working with my team is not cheap. We’re an elite boutique. I’ve raised my rates several times – at least four in the past year alone, and I’m not done yet. We’re not talking small increases, either, but substantial jumps.
And each time it has proven beneficial. I get more of the clients I want, more of the projects I enjoy, and… well, more of everything I enjoy. I have NO issues raising my rates, because I know we’re worth it. (So do our clients!)
Question for you, Peter: In the online world, people can pick a number and set their rates anywhere… how do they pick that magical number? And what do they do after they pick a rate and set it? I know what I’d reply to this, but I’d like to hear your answer.
Sometimes I think Peter reads our minds 🙂
BTW James, you did something that nudged me to make some needed changes within my company (the changes should be public in the next few weeks)…I’ll fill you in privately later 😉
Now you have me seriously curious, Jer. Fill me in – you know where to reach me!
I’ll shoot you an email sometime in the next few days James. If you don’t hear from me by the end of the week, just remind me 🙂
James you noob, it looks like you’ve accidentally replied to Ainslie.
Anyway, my answer is: Market research. Figure out what your competitors are charging and see how you can out-do them, value-wise. If you’re better, charge more.
Also, online offers unparalleled opportunities to test and measure. If changes in pricing don’t work out, you’ll be able to SEE it in your stats. Of course, it’s critical that you pay attention to net margins… not mid-funnel conversions. The photo lab guy is a good example of a radical change that would scare the shit out of most entrepreneurs… but actually ended up working out perfectly.
Hey Peter, I’ve got some info…sort of a case study that ties directly into this. You’re welcome to use the data/info if you like as long as you strip out any info that identifies the company in the study. If you want to chat about it, shoot me an email.
done!
You know what Ainslie? You probably *can’t*.
Let me give you the hardcore entrepreneurial view on this:
If you figure out a way to increase margin through one sales channel, so that it significantly outperforms all *other* sales channels… then you focus on that one sales channel. To do otherwise would be commercially equivalent to *giving away money*.
In plain terms… If you figure out a way to make more money doing what you do… work hard to do more of that!
Asking for more online is easy. You just put the rates up and tell your market/audience a story about why you’re worth it. S’called copywriting 😛
Love your tough love style Peter.
It is something I know in my head, but not my heart. Have actually printed this reply and stuck on my wall to keep reminding myself.
Cheers
Ainslie
I’m honored to be part of your home decor!
Wish you’d written this half a year ago, Peter. Still, I’ve been experimenting with this for two months now, and while I haven’t exactly doubled my rates it’s uncanny that every time I raise my rates, I get more business.
People, listen to Peter. He’s the dog’s bollocks AND the bee’s knees. But you already knew that, didn’t you?
“it’s uncanny that every time I raise my rates, I get more business.”
… then you’re in a magical place my friend! The question is, how awesome can your offering become that you feel congruent about pumping those rates through the ceiling?
Looking forward to seeing you answer that question through the actions you take.
Well I’ve used up nearly all my excuses, so there should be some happy results soon.
I’ve recently been getting consulting clients without me even having a page up for that, but I’m charging over 3 times what I did a year ago, and I couldn’t be happier.
There’s still a lot more room to grow, and you’re right on with the value excitement. The more I charge, the more I want to give.
Funny how that works 😉
“The more I charge, the more I want to give.”
Yup, that succinctly sums up the magic of my entire message here. High margin products and services (read: expensive) drive innovation. Because higher prices motivate YOU, your customers while also giving you the cashflow you need to take a moment to focus on innovation instead of plain-ol’ delivery.
Good to hear you’re rocking it, Henri.
Excellent post Peter. One of your best and a reminder that price is a HUGE point of differentiation. This biggest issue for folks that are setting their price is keeping a straight face when quoting it…and then keeping their mouth shut after they have given the quote.
Hey Mark, thanks for the feedback.
I think the “straight face” thing is a hugely interesting phenomena from a psychological point of view. When self-worth is tied to price, it really means that the entrepreneur quoting needs to *believe* they’re worth it.
Exactly! Steve Pavlina has a very long post about this topic (as do many others, I’m sure).
The real reason I didn’t raise my rates until after feeling underpaid/under-appreciated/burned out/etc. is that only THEN did I finally *feel* and *believe* my worth!
When you’re feeling underpaid, you clearly believe you’re worth more.
The next step, as Melinda pointed out, is to realize/believe I’m worth more *before* you start to feel resentful and underpaid! But a lot of that is seeing how people react to what I do and how much they value it. So in the end, it all takes a certain amount of time, doesn’t it?
I’ve heard all this before, and I agree to a point. I fall into the camp of your dad’s partner’s customers — the half who left. Here’s why — I *know* a higher price doesn’t necessarily means a better product or service.
I’m leaving my hairdresser, and not because she’s not fabulous — in fact, I’m sad to be leaving her. But the shop where she cuts is deceitful in its practices — and that includes raising the prices without notifying the customers. They’ve done this three times in 2 years — 10% higher each time. Even when I call to make the appointment and ask, “Will you confirm the price?” they tell me one price then charge me another. The last time this happened, I took them to task and informed them of what I was quoted on the phone. “We’ll make a one time exception,” they said.
I don’t appreciate the bait-and-switch.
And in my business, unfortunately, higher prices do not always translate to a higher “ooh, we must hire that person!” perception. Customers know there are consultants who will always do the job cheaper. No, not necessarily better, but cheaper. And in the era of “do more with less,” they’ll take the cheaper consultant.
Sounds like your hairdresser is one to be avoided.
I actually agree with you. If all entrepreneurs pumped their rates through the roof, only the ones who are *worth* it would remain in business. The subtle message here is that you actually have to be “awesome enough” that your offering is valuable.
My message here is survival-of-the-fittest at it’s best. Rate increases separate the gap between entrepreneurial innovators and the wannabes.
Ah, the pricing question. For me, rate increases usually only come when I’m fed up with either the work itself, the way I’m treated, or the way I feel doing the work (ie, underpaid!) And then only when I don’t feel desperate for money.
Let me talk about the opposite for a moment: lowering rates. I have a history of offering incredible deals when I’m really “hungry” for work, and I’ve lived to regret it every single time I’ve done this. (Hmmm… This is GREAT lesson topic for my Thriving Artists Project, actually — thanks for that!)
In some areas of my business (ie, custom artwork, custom invitation design), I have gotten pretty good about quoting a price that will leave me feeling well-paid, even if the job takes longer than I expect. AND I base those prices on more than the maximum time I think it will take me.
To this day, whenever a project takes me less time than I thought it would, I have a moment of wondering whether I should bill less on the final invoice. Or perhaps the client will complain that I should — my biggest fear!
But it never happens. Because, as I’ve learned, the client is not interested in how long it takes me. They’ve already put a value on the end product — the price we’ve agreed on — and are happy to pay it.
The lesson: charge according to perceived value, rather than time spent!
I still haven’t managed to get myself to raise my prices for my fine art ketubah prints, though… Since it’s such a competitive market, and getting more so by the hour, I fear that raising my prices — which are already on the higher end for the market — will lose me sales. And doubling feels out of the question!
And yet, if I *were* to raise them, maybe I would still make enough sales to compensate for the lost business…
Hmmmm…. It’s all a gamble, isn’t it? But now you’ve got me thinking maybe it *is* time to raise my print prices!
Melissa, why do you wait until you’re fed up with either the work itself, the way I’m treated, or the way I feel doing the work (ie, underpaid!) why wait until you’re frustrated and in a negative frame of mind? Wouldn’t it be more beneficial to raise you’re rates when you’re in a positive, empowered, strong mental state? Hmmm?
Re the project taking less time than you thought – your quote was for a finished project, not the hours that you worked, yes? If a project takes longer than you expected do you add the extra cost on for the client? This works both ways, remember the saying “what you win on the roundabouts you lose on the swing”.
Why have I waited to raise my rates until I’m fed up? Historically because I didn’t have the confidence to charge more. However, it was precisely the “fed-upness” that led to an increased level of confidence! So you could say that all rate increases have come from a stronger, more empowered, positive state. Just one that evolved out of a burned out and/or fed up one. 😉
And although I’ve often wanted to charge more when a project took longer than expected, I don’t think I ever have, except in cases where the project ends up being larger in scope than the original agreement.
One indicator that I’m climbing my own success ladder is how frequently I feel well-paid for a project, as opposed to underpaid. 🙂
Hey Melissa,
Great comments and I totally agree. Per-hour rates are a terrible “perception of value” for either you or your clients to be focusing on.
I think you’d benefit enormously from working with a marketing expert to figure out the “benefits” of what you do (to a whole new level). There’s obvious value to what you’ve got going on, but if you’re having these thoughts it really indicates that you’re not connecting with that value in your mind.
It’s almost like you… need to sell yourself to yourself better. Then, selling your work for what it’s really worth will get 10x easier.
Peter,
You’re absolutely right that I need to sell myself to myself better! I actually get better at valuing myself whenever I coach someone else to value *themselves*.
Funny how much easier it is with others… But if they’re offering something similar enough to what I offer, it makes me rethink and reprice myself! 🙂
As for a marketing expert, I’d love to work with one, but Catch-22 – will have to wait til I’ve got the income to pay for it! 😉
Or find the expert who is SO good, that paying their exorbitant fees is totally worth going temporarily into debt for.
If Return on Investment is guaranteed to be huge and rapid… it’s not a catch 22.
Just sayin’ 🙂
Yeah, what he said.
Of course, I’ve already done the going-into-debt thing, on marketing plans that I thought would have a lot better ROI than they did, so I’m a bit of a hardsell on that one.
Introduce me to the expert who offers a rock-solid guarantee on huge and rapid ROI, though, and we’ll talk. 😉
hehe you misunderstand – it’s *you* who guarantees the ROI. 😉
Hehe. Touché!
Great ideas! How do you do this when what you can charge is set by contract with insurance companies which is then pinned to what the federal government sets for Medicare? I’d LOVE to charge the insurance companies double! ;D
Damn you Cory, for being the complicated exception 😛
I could talk for AGES about how medicine and capitalism don’t mix (I’m really starting to think that they shouldn’t!) … but this is perhaps not the forum for that discussion.
ah peter, there are plenty of places where medicine and capitalism co-habitate just fine…America just doesn’t appear to be one of them! ;-P
We just don’t seem to be able to manage the intersection between the common good and cowboy consciousness very well.
Thanks for this interesting and, for me, timely perspective, Peter. I agree wholeheartedly with your points 2 and 7, however in my industry (I am a freelance translator) there are problems of ample supply and lack of customer focus. In other words, there are lots of translators out there (in the main language combinations, at any rate) and the customer often doesn’t know whether or not the product is any good (because they can’t speak the language that their text has been translated into, or because they’re an agency and the product is not for their own use), therefore the main thing that many of them focus on is the bit with the dollar sign at the front. What would be your view on how best to proceed?
As someone in your industry (freelance writing), it comes down to talking about results. They won’t care about quality or accuracy or perfection… clients just don’t really pay much attention that, assuming that if someone can do the job, then it’s fine.
Talk about why your translation is different, and what kind of results you get over the other guys. Up your rates and work with people who KNOW that cheap isn’t the best way to go.
Then prove them right 🙂
Oliver, James is right.
I hear you, but I also can *guarantee* that there will be customers in your market who will happily pay a premium for something “better”. Finding out what that opportunity is should be your number one mission.
Faster – translate quicker than the competition.
Easier – become a one stop shop by hiring other translators, if people know they can send ALL their translation work to you, you’ve won.
Luxury – ???
Better – Get all your work proofed by linguistics professors in each language and charge three times as much. Find the clients who will pay for “perfect”.
Just some ideas. Doubtlessly these won’t quite work (I don’t know your industry at all)… but it’s a starting point for innovation.
Oliver, what about your professional qualifications? Tell the customers how good you are, show them your qualifications as a means of communicating value. Having been a paraprofessional level Interpreter I know that the qualifications are the first thing I look for now – I want to make sure that the person knows what they’re doing.
Tell them about your experience, your qualifications and you can use these to stand out from the crowd. Also, put up testimonials from satisfied clients.
You know those jokes that go around with bad Translations? You could even use them as a warning to people and tell them why this will NEVER happen with your translations.
Wow…this is an epic post. I’ve been noodling on this stuff for a while after recently raising my rates for most of my clients, but hearing it here makes me realize I have to rip the Band-Aid off and raise them across the board. Thanks for inspiring me.
Hey Laura! Thanks for stopping by. Inspiration was the point – now go take action 😀
Loved this post. Raising rates not only accomplishes all that you mentioned, it also creates a great deal of FOCUS for us, the provider. Your target market gets very precise.
New territory I’m exploring is pricing for general public (self-study products) verses the pricing I have for my corporate clients. Think there is something to learning the market, the competition and then understanding/setting your value.
Hey Kathi, great comment. It’s awesome to hear that you’re thinking so carefully and cleverly about what you do with your pricing.
“Your target market gets very precise.” <--- BINGO!
Thanks for a great article. Really enjoyed it.
No worries Nick. Thanks for the comment 🙂
Hey Pete, another awesome post! That’s definitely given me something to think about when setting our prices in the upcoming months.
I’m interested to see how you think digital products fit into the debate. Especially when the product you’re selling has no apparent competition to base pricing off?
Every product has a pricing comparison in the mind of your prospect customer. There are no exceptions.
If your selling to a market that isn’t likely to be actively comparing you to direct competitors, you need to work hard to contextualize your prices against things they ARE buying.
Example: You’re are selling products to help parents help their kids rock at school. By making sure that the parents *know* that “for half the price of an annual dental check, they can guarantee their child’s academic success” … you’ll make them quickly realize that this is one expense they can’t afford NOT to have.
Make sense?
Or, for the price of a single textbook (= HEAPS), parents can buy the ebook that’ll make sure their kids actually LEARN from those textbooks they already have.
It’s a no brainer.
Nice copy Peter!
I might steal it for the Study Skills Course I just wrote.
I call dibbs Chris.
Ainslie
It’s not about the delivery method Chris, it’s about the results and ROI.
Look at how expensive tutoring is – why not spend $100 (or whatever) to get the most out of it? We looked at tutoring for our daughter and it was going to cost us more than her private school fees – how much do you think we would have shelled out for an ebook that would make that tutoring worth it and quite probably reduced the amount of tutoring she needed?
Hi Peter,
Good article. I always loved that Stella Artois advertisement tagline “Reassuringly expensive” 🙂
Coming from a consulting background in a top firm where fee rates are very high, I came into business with a different mindset to some other people I talked to. For me it’s quite easy to charge what I know I’m worth and what I know the market will bear – especially on a fees for hours basis. I lose some business to “cheaper” competitors but I’ve learned that clients who select on that basis are often clients that end up being difficult to work for anyway.
That said, I;m finding the online world a different beast. There is just so much free stuff out there that the market has been eroded somewhat – a bit like a new entrant coming in an undercutting rates just to win business. Of course pricing is different for a mass market, semi-automated, product sale versus personal 1:1 time but I’m struggling a bit to find the right pricepoint. One that clients will pay and that I feel is worth my time and effort.
Would love to hear from you or any of your subscribers, your experience online vs offline pricing.
Hey Suellen, great to have you here.
“I’ve learned that clients who select on that basis are often clients that end up being difficult to work for anyway.” <--- Spot on. I've also had this experienced confirmed too many times to count. I think the online world is fantastic because it destroys the natural boundaries between competitors. It DOES make it harder to price high when there's someone willing to do it cheaper. The solution lies in innovation. The internet is forcing businesses to up their game or lose out to those who already have. This is good news for consumers and the entrepreneurs who have got what it takes.
I think it’s a mind set. You have to believe you’re worth your rates. You have to believe in your abilities. If you can’t justify raising your rates to yourself, how will you convince your client to pay you more?
Keep telling yourself: ‘I provide an excellent service/product/whatever to my clients. I *deserve* these high rates’
Most of the time, we’re the only ones who think our rates are high. Low paying clients automatically take themselves out of the running when they see rates they can’t or are unwilling to pay. Which only leaves clients who don’t think our rates are high.
“If you can’t justify raising your rates to yourself, how will you convince your client to pay you more?”
Yep, and the best way to justify that increase is by improving the product. That’s why it’s such a win-win strategy to pump up price!
I did double rates, only a week ago, and already I have more business than before, and it’s twice as profitable.
Perfect! That takes balls Michael… but the payoff is rapid and massive, clearly. Awesome stuff!
Wow, Peter, what a great post! I’m not yet an entrepreneur (although heading in that direction!), but it relates to the business world as well. I’ve been making plans to ask my boss for a pay increase… well I think I’ll up my asking price now! 😉
Hey Juliet! Good luck! Don’t wait around for yourself to “become ready”… just dive in 🙂
This has been my problem with the commonly accepted ‘start low on eLance and work your way into a business’ approach I see mentioned on the internet.
By making that choice you lock yourself into cheap work for years. You define your market.
Why not start as a business offering a premium product?
Of course, you need the real world experience before you do so. Most everyone successful online I know has real world experience backing them before they came to the internet, and these people seem to be successful in part because they can just step in and go running, rather than grind away on bidding sites.
Hey Patrick,
I sort of agree with you. Real world experience is definitely a good thing. However, starting on bidding sites is something that is limited to only a very tiny (in the grand scheme) set of vertical markets… design, copy etc.
There are a vast number of niches where there IS no bidding site available.
Also, I don’t necessarily think that a “offline” background is necessary to be successful online. I have noticed, though, that a lot of successful people don’t distinguish a difference between offline and online worlds. It’s all people …. and it’s all business.
It’s just been my impression. You were a consulting psychologist. James worked in various roles. Brian Clark did real estate marketing. That’s just naming people who most around here would recognize.
It’s not necessarily the case that it has to be direct transference from offline to online – e.g. from advertising firm to online marketing or whatever. But there usually is some kind of offline hook.
Relating back to the topic – if everything you’ve done in your life can be seen in some way of adding to what you do right now, then it becomes much easier to position a unique service and charge what you’re worth. If you’re only charging for value based on a very limited history, then it’s harder to justify prices.
Yep. What I’m saying is that it’s not offline experience creating online success… it’s just experience creating success. An 18 year old starting a blogging biz is just as likely to experience a painful learning curve as an 18year old starting a ice cream stand/travel agency in the real world.
Yes, experience is the secret to success. The best part? Experience is available to everyone and the opportunity is now.
Society places a huge emotional attachment to those products and services that are seen to be “quality”. Price denotes the quality and increasing conversions.
This is amazing and it works. When I opened my first online retail gift shop, I priced way low – my thinking was that no one knew me and therefore keeping prices low would be more competitive. I realized quickly how wrong I was and increased my prices to reflect the amount of my time it took to create the products. Within days, my conversions increased as well as my personal branding. It was a huge win!
When in doubt – try it out! You’d be amazed.
Thanks for these insights. Really eye-opening.
No worries Paris! Thanks for making time to comment – I appreciate it 🙂
Great read Peter. Timely too!
Thanks for stopping by Adam 🙂 … it’s always awesome when a post hits you the moment you *need* it.
Thanks Peter, great food for thought as I start my own company here. Be da bomb and tell em to show me da money!
Hey Rachel! Good luck launching your venture – *starting* with the right price will make things easier down the road.
What a brilliant way to look at pricing. Apple has mastered this concept. The hardware inside a typical (i.e.) iMac is priced at least double to that of a typical PC but… people will literally line up for the privilege of buying new Apple products. The elegant design and easy of use justify the higher prices to a large segment of the population. Again, brilliant post!
Hey Marti, right on man. Apple are a fantastic example of this… they’re a fantastic example of pretty much everything to do with business success these days. I’m a huge fan, but I have to hold myself back from posting about them all day 😛
Question: How might this apply to fine art? I’m an artist, a painter. I think my work is great, and I’d like to charge more for it. But when I’ve tried to raise my rates, my work stopped selling. And I’m talking prices in the hundreds, not even in the thousands. A lot of your examples are actually quite similar — involving the perception of value. Your thoughts?
Hey Jennifer,
I’d be curious to find out what kind of demographic your prospects are coming from. If you’re only really connecting with an isolated group of people, a rate rise won’t work without a simultaneous rise in your sales skills (with art, these are often non existent)…. the alternative is to work hard to connect with a new audience (wealthier demographic).
Selling paintings is a tricky one – the principal is still valid (raise your rates)… but it does require a new sale angle too.
Thanks for answering, Peter! I was selling my work directly to buyers (art fairs, open studios), which tend to attract people who are there for the fun of the event but willing to spend a little. Then, because I had a proven track record of sales, I was able to find representation at a couple of galleries. Galleries tend to attract people who know and collect art, thus are willing to spend more. I thought I would be able to attract a higher price, but it’s tough to know where to set my prices. It seems that with other products or services (whether it’s cars or therapy), there is some kind of data or at least anecdotal evidence of the relative value of the product or service. But with art, it just seems kind of random and subjective.
Hey Jennifer, you make a good point – I’ll be the first to admit that the world of art (and art valuation) is mystifying.
However, it sounds like you’re onto a good thing with the galleries. I think some testing and measuring is in order! Set a rate 30% higher than your regular ones and see if the gallery sells it.
You’re right about cars but wrong about therapy – therapy is one of those intangible products that can have any kind of price tag slapped on it. It’s all about the MEANING you (the seller) communicate across to the prospective customer. People are happy to pay me upwards of $400 per hour because they have a superb understanding of what an hour with me will mean to them and their business.
With art, you need to tell stories. How can you increase the value of the meaning of your work?
I am so excited to have been forwarded to this article. A while back, I went to my mastermind group and told them I wanted to raise my rates from $150 to $200 per hour.
They told me that I should go to $300. I was honest with them and told them that I am struggling with the thought of going to $300, that I felt comfortable with $200.
One person told me that if I only feel comfortable with $200, then I should only charge $200. If I charge $300 and don’t feel comfortable about it, it could end up hurting me. Said that people would sense it when communicating with me.
Well… I did go to $200 per hour and a few weeks later, I decided to focus more time and attention on Group Coaching rather than one on one. Each month I do one of these group coaching courses, I end up making $14,000 to $16,000 for the month.
I decided I wanted to do these group sessions every other month and I wanted to use my off months to work on digital training products that would generate passive income and work more on my podcast production efforts of my podcasting network at https://gspn.tv.
Now I still love working with people one on one. However, at $200 per hour. I started to realize that I’m actually losing money when I could be spending that time, creating a product, marketing my next group coaching course, or simply doing what I love most by creating the content for my podcast network.
With that, I knew I still wanted to work with people one on one. However, I wanted to raise my rates to $300 per hour. Again, the fear started to creep back in again. I shared this with one of my group coaching students and she told me about this blog post.
YOU CONVINCED ME! I made the decision to go to $300 and I quoted three people this past week at that new rate and ALL THREE OF THEM are booked on my schedule. No questions, no me trying to sell my value, etc…
Why do we get in our own way?
So I have effectively DOUBLED MY RATES from what I was changing three months ago and I am already wondering how I can DELIVER MORE VALUE to those who hire me.
I’m thinking of offering HD video recordings with High Quality Audio of my GoToMeeting sessions with my clients. 🙂
Oh, and I just did a proposal for a one day, on site, consulting call in California (I live in Kentucky) for $3,500 for the day.
Thank you SO MUCH for this blog post Peter!
Very Sincerely,
Cliff Ravenscraft
I am working as a hypnotist and when i rise my price for the non smoker hypnosis the successrate goes up too. this a very interessting point for me and you are pointing it out in your article too. 🙂
Love it!
First time here on this blog but really enjoyed this.
I noticed that for some of my services in another niche we just attracted so much nicer customers. People who really respected our opinions and let us do what we were being paid to do.
Nothing to add – great post!
Tyrant
Peter,
Love the article! It all makes perfect sense, you get what you pay for.
I’m a corporate entertainer and in the past year I’ve raised my rate significantly and i’t amazing. The more they pay you the better they treat you!
I’m forwarding this article, so expect more feedback.
Fred Moore
The Informational Entertainer
how can i charge more to first time customers and get them to pay more for longer? increasing their long term value to me is my number one concern!
Very good comments. Very insightful, I’m glad I found this page via wordpress. I will use some of the tools in this blog to improve my price strategy. Thanks for writing it.
Thank you for the clarity on pricing. I have had some people say to me why do I charge what I charge, I simply refer them right back to the page on my website that explains all the things the price includes. I then let them know that they can’t get my service anywhere else, especially for what I charge. I tell them that my price is actually a little on the low side, while I build credibility. It really does weed out the businesses that are not serious about their business, so it allows me more free time to work with businesses that truly want to get their products and services into a customers hands.
Peter,
Thanks for this insight. I will definitely be working this into my business as I start up. Thank you.
Im lepsza współpraca między tymi działami, tym lepiej
i dla agencji reklamowej, i dla korzystających z jej usług klientów.
Such a great article. I’m in the process of starting my own consulting business and I’ve been struggling with the whole rate pricing strategy but I agree having higher rates attracts better clients and customers.
Einen puristischen Loft-Charakter zaubern hingegen Möbel
in Weiss, die gerne eine Oberfläche in Hochglanz oder z.B.
betonfarbige Absetzungen haben.
Spółka rozwijaÅ‚a siÄ™ dynamicznie tak, że ze wzglÄ™du na obroty i uzyskiwane dochody musiaÅ‚a przeksztaÅ‚cić siÄ™ – zgodnie z artwork.
In den nächsten Tagen wird es Stück für Stück erweitert und es werden Ihnen hier tolle neue Angebote präsentiert.
Why visitors still make use of to read news papers when in this technological globe all is accessible on net?
There’s certainly a great deal to find out about this subject.
I love all the points you made.
Great post! Someone who are actually teach this in my cycle is Victor Ekpo Bassey of “The Highly Paid Expert Network” on Facebook. Seriously, this puts me more on DEEP THINKING TRAIL and right now, working on increasing my fee. Thanks Peter.
I couldn’t agree with this article more! When I first started out in my career I didn’t charge a lot, and as I increased my rates I definitely experience a lot of what you mention here. You are treated better by the clients, they have fewer complaints, they offer your more support. There is definitely a psychological edge to charging more and how those buying your services will treat you.
When someone writes an article he/she maintains the thought of a user in his/her mind that how a
user can know it. Thus that’s why this post is outstdanding.
Thanks!
This centralization from the application makes it less difficult to find and compare private health insurance rates.
It is not uncommon to find out a personal development book title or two in reputable bestseller lists including
the one regularly posted with the New York Times.
The negative affects of without having health
care insurance are incredibly straight forward.
Peter, thanks for the great article. It is the first one I’ve read. My dad gave me similar advice after I expressed guilt/insecurity over charging as much as I do. He laughed after I told him how much I charge and told me it wasn’t enough, and that people are “shitting out money” and have “more than they know what to do with”. What gets in my head is my age. The opportunity to start a business actually did fall into my lap last year and I am 25. How can I not let my age get in my head? The truth is that I am half the age of most people in my field. I’m good, but I don’t have nearly as much experience in a field that is unpredictable (think Hoarders).