Snippets on Pricing Our Services brought some great comments from consultants and service providers on how they set and stand by their rates. You Scratch My Back And I’ll Scratch Yours showed the benefits of client incentives, and the comments that followed touched on commissions and the beauty of barter.
With those in mind, let’s chew on a pricing method that’s the flipside of the first post and smells something like the second: letting customers choose what they pay. It’s value-based pricing, but the value is in the eye of the beholder. It’s a reciprocal back scratch, but who scratched first?
Letting customers choose their own price may sound a little crazy (and maybe it is), but crazy or not, folks are giving it a try. Here’s what I’ve seen so far—
Potluck Pricing for Online Content
Science of Getting Rich for Practical Geniuses (SOGR) is an online course and community that Rebecca Fine developed around Wallace Wattles’ public domain work The Science of Getting Rich.
After an 11 page sales letter with testimonials, course features, how much energy Rebecca put into creating it, and what we can get out of it, we’re invited to set our own “tuition” for the course.
Some observations about SOGR pricing:
- Purchase is prefaced by a lengthy value description
- There are no cues as to which price she would prefer
- We can pay less than the default tuition
- Tuition choices increase in $50 increments, but decrease in $10 and $20 increments
- The highest tuition is more than twice the base price
- The lowest tuition is around a tenth of the base price
Potluck Pricing for An Online Tool
Library Thing (LT) is a marvy personal library and social media tool for people who love to read. You can tag and sort your list of books, connect to others who have read them, and more.
It’s free to use, but a paid membership is required to include more than 200 books. Imagine my surprise that:
- I own over 200 books
- I typed in and tagged that many
- I could pay what I wanted (within a range)
Some things to note about Library Thing’s pricing:
- There’s no preface explaining how much the membership is worth
- Captions clue us in on how the folks at LT feel about each price
- We can pay less than the default fee
- Fee options increase and decrease in similar $1 and $2 increments
- The highest fee is twice the base price
- The lowest fee is a little over half the base price
Potluck Pricing for Services
In an earlier comment, Shawn of JV Blogger suggested setting a service base price and allowing the customer to set the amount (if any) of an additional payment after delivery. Here are versions of this I’ve seen/heard in practice:
Google Answers
The now defunct Google Answers was arranged so folks could buy answers from subject matter experts (SMEs). When submitting a question, Askers set their own price for the answer. An SME selected their question (or not, if the price was too low), researched and published the answer, and then Google and the SME shared the fee. Askers were encouraged to give the SME a tip (which wasn’t shared with Google) if they were super-satisfied with the answer.
Designer X
A (currently unnamed because I didn’t bookmark the post!) designer uses this system for his practice. His article was primarily about how hourly work is bad from both sides of the desk. Clients prefer a sure cost for the work, but a fixed project fee that satisfies the client encourages him to forsake quality for speed, in an understandable effort to maximize the value of his time.
As a happy medium, he quotes a project fee that’s the least he’ll accept, and after delivery the client is asked to make a final payment for how much more they feel the work is worth. In this way, he stays focused on client requirements and quality because how much more he makes is riding on them. From the client perspective, he’s a designer so confident in his work that he’s willing to, essentially, bet on it.
He went on to say that only one client has stiffed him since he started letting clients set the amount of that final payment, and many give him more than he would have asked. Most important for his argument, he delivers great work under this arrangement.
My wonderings…
Overall, I think letting the customer set their own price is a neat idea, and each of these examples demonstrates a checkpoint that ensures the vendor/consultant/service provider gets a minimum payment:
- Digital resources are accessed by paying a selected price (not one that’s typed in)
- Services have an initial fee or deposit that’s paid before work begins.
But I’m wondering…
For digital resources:
- Should we adjust the base price based on customer selections?
If there is a trend to select a higher price, should we raise the default price? What if customers regularly select a price lower than the default…what’s the best response for that feedback? - What’s the best way to present our perception of what the product is worth?
Library Thing offered little direction on the payment page, apparently depending on the tool to speak for itself via the user’s experience.
However, for Science of Getting Rich, getting the ideal price is likely dependent on Rebecca’s long and descriptive sell, because access to SOGR content is only available after payment. - What’s the best way to go about setting a default price, the highest and lowest prices, and the increments?
For services:
- What if the client isn’t able to pay more after the work is done?
Is there a way to screen clients to be sure we take on someone who can pay the additional bit?
Et tu? What do you think about letting customers choose their price? Do you have an example to share?
Photo credit: iStockPhoto
