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What Money Is For

Many people feel service professionals should start out charging at the low end of the scale and gradually, as they gather experience, raise their rates. The assumption is that as time goes on, expertise increases, and isn’t that what the client is paying for? That reasoning falters where it seems that the buyer is paying for an item, like a painting or for a result, such as successful publicity placements. An anecdote from Caroll Michels’ book How to Survive and Prosper as an Artist offers an eye-opening example of this.

One woman had worked full-time as an artist for 20 years, had exhibited in well-known museums, received prestigious fellowships and grants. She sold her work for $5,000 to $7,500 per painting. The second woman had never had an exhibition or sold her work and was leaving a successful career as a real estate agent to paint full-time. She arranged an exhibition at a suburban library near her, and in one afternoon took in $18,000 for her paintings, with the highest priced at $6,000.

Now your reaction to this might be, either admiringly or somewhat disapprovingly, that the second woman really had the nerve to charge the same prices as someone with 20 years more experience. And indeed she did. But note also that those shopping for art at their suburban library probably didn’t much care about the painter’s artistic pedigree or how long she’d been painting. They liked what they saw, felt the prices were reasonable, and that was that.

Over the years, I have trained, one on one, more than a hundred smart people with little or no business writing experience to become copywriters - that is, to get paid for writing sales letters, web pages, press releases, brochures, and other marketing copy. When they are about to graduate from the training, they always want to know how much they should charge. I point them toward several industry surveys of current going rates and suggest they set their fees in that range or slightly below it. Even when they feel they’re still apprentices, I tell them they won’t have credibility if they price themselves too cheaply. It’s also a good idea for them to quote project rates rather than charge per hour because at their early stage of mastery they typically are working quite slowly compared with veterans of the craft. Clients wouldn’t be happy if my novices charged them 20 hours for something that, let’s say, I would have completed in four.

A friend who made part of her living as a freelance proofreader once told me that she had stopped accepting projects where she was supposed to bill by the hour because that system of pay penalized her for being experienced. Because she had done proofreading for so many years, she was faster and better than beginners. Therefore, she would finish proofreading 400-page book hours sooner than someone with less experience. And she should accordingly make less money for proofreading that book? Nope. Per-page fees made much more sense for her.

Besides the issue of what you’d like to be compensated is the customer’s perception of value. Not only do you need to feel right about what you’re being paid, but you also want the person paying you to feel grateful for the help, rather than cheating. In his book, The $100 Startup, Chris Guillebeau tells of an incident where he locked his keys in the car, called a locksmith who arrived in three minutes flat and unlocked the car in about 10 seconds. Although Guillebeau was happy to get back into the car so quickly, he was disconcerted when the locksmith told him the charge would be $50.

“As I drove away,” Guillebeau reflected, “I realized that I secretly wanted him to take longer in getting to me, even though that would have delayed me further. I wanted him to struggle with unlocking my car as part of a major effort, even though that made no sense whatsoever. The locksmith met my need and provided a quick, comprehensive solution to my problem. I was unhappy about our exchange for no good reason.”

If you’re in a position like a locksmith’s, you may need to trot out your version of the proverbial retort the plumber gives when a customer says, “What, $200 for just turning your wrench?” That retort, of course, is: “It’s $1 for turning the wrench and $199 for knowing where to turn it.”

Together, these examples demonstrate the flexibility in our concept of what someone is paying for and show how vital it is, therefore, to set customer perceptions to your benefit in your marketing. Guillebeau’s locksmith could have headed off customers’ unease by telling them, “I know how valuable your time is, so I get you on your way in no time using the latest technology.” Likewise, a yoga teacher who has a distinguished pedigree should emphasize who they studied with, while one who doesn’t should instead highlight quotes showing customer satisfaction. An app based on decades of research should play that up, while one that isn’t based on any research should underscore how simple and useful it is.

You have the power to help buyers feel comfortable with what you’re asking them to spend. Use that power so that both sides feel at peace with the amount of money exchanged.

In the next lesson, besides prices, you’ll hear about behavioral factors that influence an individual’s or company’s total income.

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Written by

Marcia Yudkin