Tag: pricing

The Goldilocks Pricing Myth

~ Sasha ~ Leave a comment

We, sellers of new and fabulous things, seem to have this notion that there’s a “just right” price that we can hit in the marketplace.

Imagine this Goldilocks Price (if we could only find it)…. It’s not too high, it’s not too low. It’s just right.

Think again.

For your new customer, there simply is no Goldilocks Price.

Why? Because there are only two situations in which your price is “just right.”

The first is in markets with limited product differentiation and lots of competitors. In these markets, everyone knows the “right” price because you can Google it. If you’re unlucky enough to be selling into this kind of market, you’re in a race to the bottom to squeeze margins enough to survive. No fun (and sooner or later you’ll be Amazon-ed).

There’s also a good scenario with “just right” pricing. This is with your longtime, repeat customers who fully appreciate and understand the value you deliver. The price is “just right” to them because it’s high enough to match the exceptional value-creation bar you uniquely manage to hit. Nice work.

Now, let’s get back to that new customer who thinks your prices seem a bit high.

You’re selling a differentiated product that you’re explaining to them for the first time. They have some idea of what it’s supposed to cost, but that’s just based on what they budgeted or what a friend told them or some number they made up.

It seems high to them not because it’s overpriced but because they don’t yet understand the value that you will create for them.

If you find yourself in this sort of situation, don’t respond to “that sounds expensive” with an offer to do your exceptional work for less.

Instead, recognize that what they’re really saying is “I don’t understand the value, yet.”

Then tell a better story to help them to see what you see, to get a taste of what your best clients get to experience every day.

You could get it for less

~ Sasha ~ Leave a comment

If you’re pricing right for your outstanding work, it will sound expensive to others.

After all, they’re not used to buying outstanding work.

This means that the moment you tell them the price, it will probably feel uncomfortable, both to you and to them.

It helps to remember that yes, it’s true, they could find another way to do this.

Maybe they could get some graduate students to do it for free.

Or find someone who’s just starting who is desperate for the work.

Someone on a website, somewhere, who does piece work at a seemingly-cheap hourly rate.

Or someone who can do just enough to make the problem go away, but who won’t fundamentally move things forward.

All those options are possible.

But for this work, at this standard, delivered in this way, it will cost this.

And it will be a bargain.

Pricing you

~ Sasha ~ Leave a comment

Classical economic theory tells us that the market-clearing price for a product is the one at which the last customer, the one with the lowest willingness to pay, gets exactly the value from the product that she pays for it. Her “consumer surplus” is zero: for a product that will give her $50 worth of value, she pays $50.

But what about pricing for a unique product, one that is the opposite of a commodity – things like tree-house building, editorial services, or the work your social enterprise is doing to change the world? In the broadest sense, there’s a market out there, but only if you let that happen. Really your whole job is to be un-comparable to everyone else, to make people understand that there’s only one you in the world and that you are uniquely worth paying for.

So how do you price you?

A friend once told me that that if I’d never gotten kicked out of a fundraising meeting then I wasn’t asking for enough money. It’s true. We undersell ourselves for two reasons: we don’t have enough market feedback to know what we’re really worth; and we let our fear of not making a sale overcome our desire to sell at the right price.

We can overcome this. The trick is to use each subsequent sale to build out the demand curve for our work. Each time we sell, we push a little further to find out where that ceiling is. By going beyond what feels comfortable, we discover the gap between what we’re asking for and the price the customers we want are willing to pay.

We can be told this time and again, but it often only hits home when we feel the frustration from delivering work we’ve undersold. The pattern is familiar: we make a sale for too little and then set out to do our best work. This best is harder and takes longer and requires more sweat and tears than we ever imagine – because what we do is special and we always do it with love and passion, even when today’s economics would suggest otherwise. We end up proud of the work but exhausted, because we did the work with too few resources and we know that we can’t do it this way forever.

If we can hang on to that sense of frustration, we can use it to discover our own value. This is the key step. It’s only when we truly believe in what we are worth that we can look someone in the eye and says, “Yes, this is the price for this. And what you’ll get in return will blow you away.”

I remember the first time I looked someone in the eye and asked them for a million dollars. I could barely choke out the word and my palms started sweating. I didn’t believe it the first time, but I did believe it eventually.

This happens in fundraising, and this happens whenever it’s up to us to tell the world the value of the work we do. First we must believe ourselves, and then they will too.

Because what we’re saying about what our work is worth is true.