Value-based pricing in action
This stuff really works – I know because I’m doing it.
Recently, a client asked if I would develop some content for his design firm. He wanted to know, “How much would that cost?” I answered the question with the question I advise my clients to ask up front: “What is your budget?”
As with most clients, he didn’t know. Not because he was stupid or even a bad businessman. But he hadn’t done much of his own marketing. Although he had heard about “content marketing,” he had no idea what was reasonable to spend. (Sound familiar?)
Of course, it depends. So I asked another question, delving deeper. “What are you trying to accomplish with your content? What are your quantifiable objectives?”
He hadn’t yet thought it through, so together we determined that for the upcoming quarter, his goal was to land 1 project worth $50,000. This project would be one piece of the marketing puzzle to get there.
“So, if that’s your goal,” I proposed, “then an investment of 5-10% to achieve that goal would be reasonable, yes?”
He agreed that it would. Presented as “an investment,” he could justify spending up to $5,000 to achieve that goal. So that’s the price I proposed – which we had come to together. My next step was to make sure I could get the work done and make a profit at that price.
In Breaking the Time Barrier, Mike McDerment writes, “When you tie the price to value, it’s an investment. When clients look at your prices through that lens, they merely want to know that the investment is a wise one. That the return is going to justify the outlay. And if there’s a wide margin between the price and the expected return, the investment is easy to justify.”
It takes confidence to have this type of conversation with a prospect, especially one you don’t know well. But if you learn how to do it (I can teach you), then your business has the potential to be much more profitable. If you shy away from this or any type of conversation, you’ll be stuck with pricing hourly or on “time and materials.”
Have you tried this? If so, how does it work?
Credit: Illustration by Iain Keith