Just between you and me, how do you feel about pricing your work?
If you're like many accidental entrepreneurs, pricing is not your favorite topic. Charge too much, and you lose clients. Charge too little, and you can't earn a living.
It doesn't have to be this way. Charging enough to make a good living is, in fact, one of the keys to getting and keeping committed clients and customers.
How does charging enough relate to getting clients to commit?
Like this.
The splurge that wasn't a splurge.
A few years ago I treated myself to a pair of Bose noise-canceling headphones. For me, this was a significant investment, and I questioned my choice more than a few times both before and after I made the purchase.
When the headphones were less than two years old, I stepped on them, cracking the casing. I felt awful. Wasn't this a sure indication that I shouldn't have spent so much money? I'm hard on things, and I should have known better. I duct-taped the headphones together and used them that way for several months until the tape wouldn't hold.
Finally, I phoned Bose to arrange for a repair. The representative explained that I was eligible for a free upgrade to a newer model if I returned the old set.
"Wait a minute," I said. ‚"You mean I can get this upgrade for returning my beat-up and cracked headphones?"
"Yes."
I shipped off the broken headphones and a week or so later, I received a sweet new and improved replacement. Instead of feeling bad about spending so much, I feel very wise.
Pricing for commitment.
When I paid Bose a premium price, I was making a commitment to myself to make that choice worthwhile. I held myself accountable for getting value from the headphones even to the point of paying for a repair, something I would not have considered with a lower-priced model.
And, as it turned out, I didn't have to pay for the repair. Because when Bose set the price, the company was making a similar commitment to my satisfaction.
It costs money for a business to deliver on commitments. Money for developing improved products and services. Money for customer service. For tech support. For education and training. And on and on.
When you charge less than you need to in order to thrive, you may deprive yourself and your customer of full commitment. Your commitment is partial because you can't afford to do what you would like to do for your clients and customers. Their commitment is casual because what they are buying doesn't require serious reflection.
When to price for commitment.
Pricing for commitment is important when you are selling anything that is not a necessity or a commodity.
People buy necessities because they need to, not because they have a commitment. And they buy commodities based on price. (The definition of a commodity is something that has become generic. When all brands of flour are equal, why wouldn't you buy the lowest priced?)
But when we invest in something specialized, we expect the price to reflect the level of commitment of both parties. It's not something we are necessarily aware of, but when you look back at your buying decisions, I think you will find that there was a strong correlation between the price you paid and the commitment you made.
3 keys to successful pricing for commitment.
Before you run off and raise your prices willy-nilly, let's look at three essential elements of successful commitment pricing.
Value
The price you charge has to be matched or exceeded by the value your customers or clients get from buying. This is necessary not only from the customer's point of view, but also from yours. How persistent and passionate are you likely to be about promoting something that isn't worth what you charge? Not very!
Price-plus
Successful commitment pricing depends on getting your clients and customers to invest more than money. There has to be an investment of time and attention in order for your customer to realize the full value of what they buy.
In the case of the Bose headphones, I had to invest the time to learn how to set them up (simple, and there are a couple of non-obvious things) as well as the time to look into repairs.
Bose cultivates a presumptive relationship with its customers by writing their ads and support materials from the buyer's perspective. They make it clear that they are committed to providing an excellent audio experience, and they make it easy for the customer to make requests and ask questions.
All of that supports a "price-plus" response from the customer.
Support
We're all familiar with the phenomena of biting off more than we can chew. Customers frequently underestimate (or don't even think about) what it will take in order for them to fully realize the value of their purchases. So we have to help them. We help customers to realize full value when we stay in touch with them not to sell, but to support.
And support does not need to be elaborate or expensive. Think about what is going on in your customer's life after they make a purchase. What else is competing for their attention?
It doesn't take a psychic to infer that the buyer has family, friends, work, health, and dozens of other things from their cats to their gardens to their taxes competing for attention.
It's up to us to keep our products and services on their radar and to help them make use of what they bought.
These three elements of successful commitment pricing work together. The degree to which you involve your customer in realizing value (price-plus) is directly related to the value they will receive. The degree to which you support your customers to realize value affects their degree of involvement. It's all connected.
Take a moment now and reflect on your pricing strategy.
Are you setting prices that encourage customers to commit? Do your prices reflect your own commitment to them?
Pricing does not have to be anxiety producing‚ instead, it can be a core aspect of creating enduring relationships with your customers.
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