Big Bright Bulb » pricing

Product Funnels, Pricing, and other gifts from the Lift Off Retreat

Crys Williams — Sun, 14 Mar 2010 18:24:12 +0000

Pam Slim’s and Charlie Gilkey’s Lift Off Retreat had some big Eureka! moments for me, and two of the biggest were around products and pricing: the importance of offering both products and services, and a no-fuss, no-muss way of thinking about Free. Nothing theoretical, just practical usable stuff.

This Ain’t Your Grandmama’s Product Funnel

One of the retreat exercises was to draw a product funnel with our products and prices in it. Typical task, right? Except their example wasn’t a typical product funnel (to me), because there were services in it, not just products.

As I expected, free stuff filled the wide top of the funnel and prices increased as it narrowed to the bottom. But services with more and more direct interaction replaced the list of ever larger and costlier products that I was used to. Pam noted that more face-to-face time was required as services progressed down the funnel, and prices increased “…as folks get more you.”

So the funnel was wide with free stuff (blog posts and articles and downloads), and then narrowed to passive stuff (like ebooks and recordings), and then group stuff (like teleseminars and events and membership sites), and finally tapered to one-on-one stuff (like consultation and coaching).

Or at least, some folks’ funnels were full of those things. Mine wasn’t.

My funnel stopped at the top. I had plenty of free stuff planned, with articles and ebooklets and whatnot, and then I had Buying Guides priced under $50, like the one for shopping carts. And that’s all I had. No services, no consulting, no teleseminars, no nuttin’.

That big blank space at the bottom of my product funnel was clearly a problem.

Why We Have to Fill the Funnel

The best thing about products, as you know, is they can bring in money for ages after we’ve published them. Which is a beautiful thing, right? Because otherwise our income is limited by the number of hours we can work.

But!

If we depend solely on products we’ll always always be investing our time first and getting paid way way later. Maybe even weeks later, depending on how long it takes us to pull the product together. Not. Good.

Pam’s brilliant idea for me was to offer a monthly retainer package for folks who’ll need my research services regularly. That way they can depend on a slot in my schedule, while I can depend on the income each month. And of course there’s always doing research for people in an as-needed kind of way. If you don’t offer services, maybe think about how this could work for you…

Because for me, this means doing specific, personal research for a handful of folks while I dig into the general research that benefits us all. I see this as a strong, reasonable balance for both my work flow and my cash flow, and I’m hugely grateful for Pam’s input.

Whether you’re only offering products or only offering services, I think this whole products + services thing is something to chew on. Because I’m coming to see that it’s not sensible or safe to entrust all of our income to one way of working. Hands-on dollar per hour work is limited by the clock and the calendar. And creating a product leaves us hanging in the wind until it’s finished. Best to do both in whatever way that balances well for us.

Nothing We Do Is Free

Somewhere among all the talk about my bottomless product funnel, Desiree Adaway resolved an issue that’s plagued me since I started writing online. She noted my overemphasis on free products and questioned whether they were free at all. She said—

“Nothing you do is for free. Either what you do is making you money or you’re losing money. It’s either profit or loss. So you have to build in cost recovery for the things you’re not getting paid to do.”

Pretty straightforward, right? All the debate over free content vs premium content boiled down to either-this-or-that, with a pleasantly practical bent.

I love people who can do that for me. I love it when I can do that for people. Isn’t it one of life’s shitty little ironies that we can’t often, or easily, do it for ourselves?

Which is why it’s way important to be among people from different industries, who are in different places along the path than you, who are willing to listen to your story and—hallelujah!—offer suggestions and direction.

A Bunch of Good Reads on Pricing

All that product funnel feedback later led to a discussion about how to charge for services. We munched away while debating over whether it was best to bill by the hour, or essentially charge for results by offering a fixed price. Nothing got resolved over dinner, and that was okay. Valuating and pricing services is intense, tricky, and ultimately personal stuff…it was plenty enough to take home everyone’s opinions and preferences.

And so I’ve been revisiting some treasured reads on pricing that I’m listing here with hopes that they’ll spark something new for you, or maybe reinforce what you already know. Some I wrote, some I didn’t. Some are short, some are long. None are new, yet they never get old.

Hope you enjoy the reads! Let me know what you think, k?

Photo credit: Tony Crider

Price vs Value: The PowerPoint presentation, Koi Pond, & Kindle

Crys Williams — Fri, 27 Mar 2009 20:25:18 +0000

The PowerPoint Presentation

I’ve been reading over the comments from last week’s post on that $25,000 PowerPoint presentation and the votes cast out on whether the price was justifiable.

They came in at: one person couldn’t justify it; one person thought it was worth paying (if getting your message understood is that important, go ahead and pay it); and a couple of people wanted to add it to their service bin if they could get $25,000 for it :)

And six people said it was a good price, $25,000 for a PowerPoint presentation…a bargain compared to other things you might have to do to get all that information compiled. They pretty much thought it was a good value as long as the return was good.

As a matter of fact, all of their comments can be summed in one person’s comment, which was, “The ROI is worth it. You should undertake any project if the expected return is greater than one.”

What surprises me about that is over half the people justified the price based on its value in the end. They compared it to the return/results, instead of thinking about the fact that it came out to $500 per slide, or attacking a line item, like that $3,500 to make the PowerPoint template.

That’s sneaking up on $100-an-hour, even if you took a whole week to do it. And that wasn’t something that anybody really approached.

For me, depending on how you frame it, it’s looking like $200-an-hour work, which I would expect to pay for a licensed, certified specialist—like a doctor or a lawyer or something—but not really for researchers who are just regurgitating customer-supplied content into a PowerPoint presentation.

But anyway, this is a small sample. This isn’t real research or anything. But it’s worth noting that just over half the people who left comments justified an admittedly steep price.

I mean, everybody said it was high, but they justified the price based on the value – not the market rate, not tasks or service provided, not the skills or experience needed to do the work. So long as they got back more than they put out, the price didn’t matter at all.

The Koi Pond & The Kindle

And this goes for relatively small stuff, too, right? Like my mom had this Koi Pond application on her iPhone, something like you touch the water…the fish scurry…something weird.

But it didn’t work like it did on my sister’s telephone. Come to find, my mom had the free version, and to get all the extra Koi Pond features, you had to pay 99¢. And she said, “Oh, shoot. It’s not worth that.” And she didn’t buy it.

And so we turned back to the computer, and I was reading to her about the new Kindle, all the features and all that good stuff, all the benefits. And after all her oohing and ahhing, her first words were, “Can I order it now? Can it get here by Friday?”

What’s the Kindle cost, right? Like 350 bucks? 400 bucks with overnight shipping? And she didn’t care. She didn’t care at all. The 99¢ Koi Pond app was too expensive for her, or to her, right? Because it wasn’t that important. She didn’t like it enough.

But the $350 Kindle, that price tag was incidental…pretty much irrelevant, and so was the hefty price tag for overnight shipping, because to her it meant everything to be able to get a week’s worth of books to the beach without filling up her carry-on, and to have it here in time.

So, next time you let your brain simmer on pricing your services or products (or somebody else’s services or products) remember the justifiable $25,000 PowerPoint presentation, the ultimately desirable $350 Kindle, and the entirely dismissible 99¢ Koi Pond.

Potluck Pricing: Letting Customers Choose What They Pay

Crys Williams — Wed, 04 Jun 2008 11:54:00 +0000

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?

Snippets On Pricing Our Services

Crys Williams — Mon, 26 May 2008 12:12:13 +0000

When I introduced my strategic collaboration consulting idea earlier this week, anything could have happened in the comments area. Thankfully, I got the same encouraging and helpful feedback BBB commenters give all the business bits that get posted here. And as always, I appreciate every word of it!

We had a good giggle about the alleged cleverness of my 140-character microconsulting service—which inspired yesterday’s Super Genius post—but the larger discussion ignored the nature of my services, and even the technology I’ll use to deliver them. Instead, we bantered about how much I wasn’t charging for it.

Both Chris Guillebeau and Shawn Christenson commented that my proposed $65 per one-hour session was too low. Their li’l duet harmonized with a chorus of offline voices including, and especially, my cheerleading whip-cracking business coach Christine.

This week has seen a lot of asking, listening, and reminiscing on the Consulting Rate Tango, which is sorta like the Annual Salary Boogie ;) . The conversations were spun with anecdotes and recollections…some funny, some not-so-funny.

In no particular order, here are some snippets on the hazards of assigning a monetary value to precious intangibles: our skills and our time. Names have been changed to protect privacy, of course:

Anecdotes

Shena was referred to an organization by a friend who had been invited to bid on their project, but was unable to schedule it in. The organization welcomed Shena’s bid, and she offered her well-qualified self at the hourly rate she knew her friend would have charged. The organization balked at the price and offered her 25% less than what she asked. She accepted their reduction with good grace, suppressing a victorious cheer. What they were willing to pay was three times the hourly rate she’d charged her most recent client!

A short email from Stephanie: “Thought you’d be interested to hear that after laboring for 3 days over what I should charge that client, I finally, about 15 minutes ago, emailed my numbers to her (which were higher than what my head was saying and slightly lower than what my gut was saying) and literally within one minute, she’d written back to say, ‘Sounds good. We don’t need a new contract. Let me know when you want more money.’ Guess I coulda asked for more! All’s good.”

Darlene found the online job board that listed the new position at her small company. She was stunned by its $75,000 starting salary. The job description was a match to hers, except for an additional year of experience and a premiere IT certification. She’s studying like a woman-on-fire for those exams, because a $750 investment in testing fees has a potential ROI of $20,000 per year. Of course, she printed the job notice to hand to her boss with her exam results, just to make sure they’re on the same page.

Robin’s consulting rate sheet has two columns: a New York market price column for the North Atlantic states, and a much discounted rate column for the South. Clients in both regions are content with her rates, and so is she.

Recollections

Many years ago, Andrea and I argued bitterly on pricing ethics. The story: Her non-mutual friend charged a company $10,000 for an employee survey database consisting of one table, one form, and a handful of reports—it took the guy less than two days to assemble it. The client was delighted with their overpriced deliverable, Andrea was amused at her friend’s cleverness (and the company’s ignorance), and I was appalled by the whole damned thing.

I once undervalued (and underbid) a database/website project so badly that by the end, I made far less than the US minimum hourly wage. That was an awful feeling. But what soured me on future project work, maybe for all time, was overhearing the contractor billed the client for at least three times my foolishly low subcontractor’s bid…and thereby got a big fat lion’s share of the cash. It was my own doing, there’s no one else to blame. But of course, I was appalled by the whole damned thing! :D

Having shared those, here a quote from the Greek historian, Herodotus—
It is better to be envied, than to be pitied.

I called a freelance writer for a quote on some copy. He offered me a reasonable price with a 25% discount if I promised not to be a pain in the ass. I paid him full price, saying there was no way I’d forfeit my PITA rights for $30. Sure, I could’ve taken the discount, but I value his time and help more than that.

Back when I regularly visited a salon, the posted price to tame my mop was $45, but I always paid my stylist $60. The shampoo staff expected a $2 tip, but I always gave them $5. Then, like now, I didn’t have money to throw away…but my hair works my nerves, y’all. What those professionals can do in 3 hours with a smile takes me 8 hours of pained sighs. I’m exhausted and snarky when I’m finally done. Their help is worth more than they ask for, so I give them what it’s worth to me.

Jonah said it’s impossible for me to value my own knowledge effectively. He says what I think my knowledge is worth is irrelevant. He says to consider two things only: 1) How valuable is my knowledge/expertise to someone who doesn’t have it and needs it?, and 2) How much are they willing and able to pay for it? He says it’s too easy to take my skills for granted and undervalue them, simply and specifically because they’re mine.

Takeaways

These stories have bits worth simmering on when considering the true monetary value of our time. Here’s a summary:

Price your value by the market, not your rate/salary history.
Price your value by your client’s locale, not your own.
Get feedback on your value from people that you trust. You may not know best…or most.
Words are feedback. Body language is feedback. Facial expressions are feedback. And so is silence.
Choose a fee/rate you can live with, even if it means losing the gig as the highest bidder.
Set your rates a bit higher than you think you should. Smarter to offer discounted rates to your budget clients than try to raise your rates for those with deep pockets.

Et tu? Have you got your own stories and rememories? Different takeaways, too? Lemme know down below!