I bought a new car the other day. A Ford Focus.
I love it.
Fun to drive (5-speed), seamless connection to my phone (I don’t even have to take it out of my pocket), great gas mileage (35 highway).
It cost me $16,000.
Not a lot, I’m sure you’d agree, for a new car.
$16,000, in fact, is more or less the price of an option package on a high-end vehicle, something like the Audi R8 Spyder which starts at $128,400 (it’s so expensive, they don’t even feel obligated to spell “spider” correctly).
So let me ask you a question: Who do you think loves his new car more – me, or the guy who plunks down $128k on a Spyder?
I mean, I’m quite satisfied with my car. I even told you a minute ago that I loved it.
But Spyder-Man? He LOOOOOOVES it. Polishes it on the weekend. Buys clothing accessories to match the interior. Gives his children oddly-spelled names containing the letter “Y,” when an “I” would suffice.
It’s all a bit counterintuitive, isn’t it?
After all, Spyder-Man is paying eight times as much as I am for a machine that pretty much does the same thing. And yet not only is he thrilled, he’s telling everyone he knows.
- Do you think he isn’t aware that you can get a car for $16,000?
- Do you think he feels ripped off?
- Do you think he’s annoyed that “cars cost so much?”
I’m no Jimmy the Greek (look it up, youngster), but I’m willing to lay down odds that the answer is No, No and No.
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Rather, here’s why I think he’s so happy. Reasons which, by the way, have everything to do with you and the way you (under) price your services:
He’s a “car guy.”
He knows and cares about things like speed, handling, horsepower and torque (whatever that is). Me? I am literally a “tire kicker.” The differences – the things that make his car well worth $128,000 – are valuable to him, but lost on me.
Clients are the same way. The people who are willing to pay more for you – significantly more – are the ones who totally understand and want the things (your knowledge, personality, approach) that only you can provide. As far as they’re concerned, there are no reasonable alternatives.
If you price yourself like a Ford Focus, however, you don’t get those great clients. Instead, you attract people like me. Those who, while they have the potential to be quite satisfied, aren’t emotionally attached and who would frankly be just as happy with any number of similar vehicles (or consultants, or coaches, or writers, or whatever it is you do).
Higher prices attract the fans and filter out the price shoppers.
He uses price as a shortcut.
As Robert Cialdini explains in his book, The Psychology of Influence, price is a “trigger feature,” something we all habitually use as a way of assigning value. The much higher price of the Spyder suggests that it’s also much more valuable. In some sense, the more he pays, the better he believes his car to be.
Here as well, this applies to you and me. If one graphic designer charges $75 an hour, and another charges $200, don’t you assume – knowing nothing else about either one of them – that the $200 an hour person is better?
Higher prices increase client satisfaction.
He gets better service.
When you buy a Ford Focus, and if you’re really lucky, they give you a hearty handshake and a coupon for a free oil change.
When you buy a Spyder, they deliver it to your house, give you a bunch of “free” Spyder clothing and gear, and loan you a $50,000 “regular” Audi whenever your car needs work.
It makes sense. When you clear $300 on a car, you can’t give away much. When you clear thousands, there’s a lot more headroom.
Same with us and the services we sell. If your margin is razor-thin, you have to watch your time and other costs carefully. Too many changes or hours or anything else that uses up your resources, and you’ve got a problem.
If you price high, on the other hand, you can afford to be generous. You’re not living on the edge of your profit margin, which means you can spend more time, more attention and even more out-of-pocket dollars on your wonderful, higher paying clients.
Higher prices allow you to serve your clients better.
Here’s the bottom line. Many solo professionals assume that clients and prospects view us the way they do a gallon of gas – it’s all the same, so cheaper is better. As a result, they’re afraid to charge more, out of fear of losing business.
In my experience, it doesn’t work that way. There are all kinds of prospects and clients out there, some of whom would be thrilled to pay (way) more for you. But you’re not going to find them among the Ford Focus buyers.
Instead, spend time figuring out what you’re really good at and what truly, truly makes you unique. Then, raise your fees (try doubling them) and seek out the people who understand, value and appreciate your differences.
Michael Katz is Founder and Chief Penguin of Blue Penguin Development. He specializes in developing email newsletters for professional service firms. Sign up for his free newsletter, The Likeable Expert Gazette, here.