December 17, 2017

Pricing guilt

There is a particular sort of comment that I get fairly often from folks who are just getting started with value pricing.

It goes something like this:

I feel guilty charging Bob 500% more than I charged Alice for the same amount of work.

If you have felt this way, you’re not alone.

However, it’s based on fundamentally flawed logic and something that you need to get past if you ever hope to do big things with those you seek to serve.

Think of it like this:

Clients don’t pay professionals for work (ie labor) they pay professionals for results (ie outcomes).

Setting prices based on labor instead of outcomes only makes sense to professionals who are self-centered.

Professionals who are client-centered would never presume to pass their costs on to the client because this creates the possibility of clients paying more for services than the services are worth.

Client-centered professionals price their engagements based on the value provided. Since the value provided to different clients will almost always be different, it makes perfect sense for the prices to be different.

And if two prices are different, by definition, one must be higher than the other.

If it makes you feel better, think of it as giving the “lower priced client” a discount instead of charging the “higher priced client” a premium.

Here’s another thought:

If you feel bad about charging different clients different amounts for the same amount of work, how will you ever raise your prices? Wouldn’t that be unfair to the new clients? If you ever lower your prices, wouldn’t that be unfair to the older clients?

Here’s another thought:

If you’re providing services, there’s no such thing as “the same amount of work”. Every client relationship is different.

Here’s another thought:

Don’t focus 100% on the work (ie time and activities) involved with a particular client engagement. You have to also consider stress, risk, fit, urgency, capacity and a dozen other important factors that can and should affect pricing.

Does any of this click?