We live in a money-driven world, and when you set the price for your product or service, it can really feel like the whole weight of that world is on your shoulders. Why? Because no matter how much you charge, you will get push-back from people who say they can find it for less.
We Love to GET a Discount or a Deal
And why not? People love to get a good deal. We watch for sales, we use the internet to compare prices, we use coupons and discount codes. And men–you lo
ve to haggle and negotiate. It’s like a game, isn’t it? If you can get the seller to knock a few bucks ( or a lotta bucks) off what he said was his rock-bottom price, there’s a thrill in that. You won!
And that’s fine when you’re selling a used car. Right now my neighbor is selling his truck for $4500 OBO. But he’ll only part with the truck if the best offer is AT LEAST the number he has in his head for rock-bottom. He has built negotiating into the price. And he also knows what he believes the truck is worth and he won’t accept a penny less.
Business owners often build some padding into the price of a product or service so that when a prime client comes along, they can offer a discount without taking a major hit.
In fact, many services seem to have arbitrary prices attached to them.
Attorneys: The Poster Children for Overcharging…or Are They?
Take attorneys, for example. They seem to take the brunt of the jokes when it comes to charging high hourly rates. In fact, in 2014, the largest law firm partners billed at an average of $727/hour. Why do attorneys charge so much? One simple answer is this: Because They Can. And when we really need the expertise of an attorney, we will pay one, because we have to. “Because they can” seems, at first blush, to be another knock at the legal profession. But it really isn’t. Lawyers charge a premium because their services are in demand, and they’re the only ones who can provide them. There’s a limit to what we can do for ourselves when it comes to legal services, and certainly, if you were wrongfully accused of murder, you would turn to a lawyer for help. And you’d probably turn to a GREAT lawyer for help. Which means you’re going to pay more. So how much should a GREAT lawyer charge? Maybe $150 an hour, or $600 an hour, or $2,000 an hour? Somewhere in between? Well, it depends on a great number of things, including expertise, track record, competence, availability, specialty, and more. What is their TIME worth? NOTHING. But what are their RESULTS worth? Often, they’re priceless.
Why Your Time is Worth Zero Dollars
I often use myself as an example of how we should stop billing for our time. Why? Because our time isn’t worth anything to another person. If I were run over by a herd of stampeding elephants and died right now, you might be sad, but you wouldn’t lose any money. Arguably, I should have at least another 306,600 hours left in my life based on average life expectancies (24 hours X 365 days X 35 years). What is the monetary value of those hours TO YOU? Zero.
BUT…if I have been helping you with a project and my expertise has been needed to get you to the next step over and over again, now can you place a monetary value on my absence? Much more likely. That’s why we should always charge for RESULTS rather than TIME.
You Set Your Price Based on Results and Value
I remember about 5 years ago having a one-to-one meeting with a business owner in my network. He said to me (without the slightest hesitation or apology), “I don’t understand why you and [another coach] charge so much money. If you charged less, I’m sure you’d have a lot more clients.”
He may have been right, but I didn’t care. I’d done my homework and knew what I was worth. The funniest part of this exchange is that I charge much more NOW than I used to (I’m more efficient and effective than I was as a new coach), and just a few months ago this same person begged me to work with him at my CURRENT rates. He knows the results he wants and he has decided I’m the person to help him achieve them. He sees the value now, so there’s no haggling over price!
What to Do When You Want the Business and They Want the Discount
There will always be someone who says, “I can get what you offer for cheaper.” And 9 times out of 10, you should probably encourage the person to do just that: go get it elsewhere.
But when you want the business, don’t offer discounts. A discount tells the buyer that your price is artificially inflated. Instead, offer them something ADDITIONAL that is of HIGH PERCEIVED VALUE TO THEM and of LOW COST TO YOU.
They’ll feel like they won, and you won’t have to take less money than you’re worth.
This concept is an easy one to execute—once you know what that additional offer will be. I recommend talking to your coach, mastermind group, or accountability partner to come up with ideas. You could also ask current and former clients what they would recommend. You might even come up with a few ideas and run them past someone who ultimately went elsewhere for a lower price.
Never, Ever Give a Discount…Even if You LOVE the Person
A final word on discounts: don’t give them to friends or people in your network. Give them something additional, but don’t change your price. If you do, you unintentionally communicate that you’re not worth what you really charge, and that makes it tough for people to send you referrals who won’t try to haggle!
If you have a great example of something you offer to people who fight about price, I’d love to hear it in the comments!
Photo credit: photo is circulating on Facebook, origin unknown