September 26, 2018

Price Wingspan

Pop quiz:

“What’s the wing span of a 747?”

Let me guess... your answer was some version of:

“I have no idea.”

But you actually DO have an idea.

Let me clarify by asking a related question:

“Would a 747 fit in the Grand Canyon?”

Definitely yes, right?

Okay, here is another one:

Would a 747 fit in a bread box?

Definitely no, right?

So...

Even though you don’t know the exact wingspan of a Boeing 747 or the exact size of the Grand Canyon or the exact dimensions of a bread box, you do know with 100% probability that a 747 would fit in the Grand Canyon and that it would not fit in a bread box.

But humans are funny. They have a tendency to think that the only useful answer is an exact answer. In reality, there are many situations in which a range is a perfectly acceptable data point for making a decision.

For example, setting the price for a custom project.

If your cost to deliver a solution is “the size of a bread box”, and the value to your client is “the size of the Grand Canyon”, then the “wingspan” of your price can be almost anywhere in between the two and still be acceptable to both parties.

Makes you think, don’t it?

Yours,

—J

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