Judith: It’s interesting, because you just ended on saying how much you were enjoying paying money to somebody. My client challenge of the week is pricing, how much to charge for one’s self and one’s services. I’ve written here in my notes, I don’t want cheap, I’m one of those people that doesn’t want cheap, and the assumption when I’m working with my clients about how to charge for themselves, and their time, and their products, is that because some of us have been through hard times in the last few years, that everybody wants cheap, and not everybody wants cheap. It’s not obvious to be able to buy, but you just said, it’s really interesting, you just said you were enjoying paying the money. People enjoy paying money for things.
Nicola: Obviously Photodune photos are cheap than iStock photo, but it’s not even about that. It’s about the fact that their photos are better; their search engine is more efficient. The photos are funky when I find them. I would pay two or three times more just as gladly but they actually are rather inexpensive. It’s interesting you say that because when we closed the Money Gym, and I decided to run a digital marketing agency, I went off and joined my local chamber, and I got involved with a peer-to-peer mentoring group there. We were all working on our businesses, and there were really nice people there, and wanted to become a real friend – on-going – but I couldn’t give it away in those days. I was offering to do Internet marketing mentoring for members of my peer-mentoring group just to get some experience and get assistance, and get some testimonials. Not one of them took me up on it. It’s so interesting.
Judith: I think we forget how far ahead of the beat we are.
Nicola: Yes, you are always saying give them two years to catch up, aren’t you?
Judith: Yeah, yeah, at least.
Nicola: The fact that I was willing to do it for nothing I think made them not value it, and think it couldn’t be any good.
Judith: I agree. We like luxury things. We like expensive things. Some people… If we divided the world into a pie chart, there are very definitely people who like bargains. There will be people who will be buying next year’s Christmas presents, and next year’s Christmas cards, in the sales that begin on 26th of December, and good on them – but I don’t want cheap. I want something that’s reassuringly expensive, and if I can’t afford what I want, I don’t want the cheap version. Now, that doesn’t mean that at the moment I’m not offering myself at very keen prices, because I have an eye on the world economy. I see people charging hundreds, tens and hundreds times more than I do – so, I know that whatever my clients choose to charge for themselves, there’ll be a market. And I’m thinking of a couple of people this week who’ve said to me things like… I’ve said to them, “What are you worth?” And they go, “I love it so much, I give myself away for free.”
I know that’s great, that’s lovely, but what are you worth, and eventually we get to a sum, which is more than they are charging but it’s in their bodies, and they know the answer to that question. They just don’t want it to come out of their mouths, and I say, “I promise I won’t hold you to it,” – all sorts of disclaimers. I started with a lady who said – well, you know, she charges £150 for a consultation, and she goes around, and she tells them it’ll be an hour but she often takes two because she’s enjoying herself and traveling around.
I said, by the time you get in the car, and you deal with various hassles on the way, and you find some legal parking, and you come home, and you type up your notes, and you send it through, and you receive a query from them, why are you charging 150 quid? What’s it really worth, and after a lot of poking about. She said 500, and I went, “Yeah, that’s right.”
Nicola: That’s what I’d have said as well – 500.
Judith: Yes, exactly. That’s it because she lavishes care and attention on them, and she gives them something incredibly powerful. She says, “I love it so much, I do it for free.” Yes, but, the right sort of clients you are trying to get on the end of your fishing pole with your 500 initial consultation are people who will value your time, and therefore when they go on to be proper clients, will treat you with respect, and you’ll be able to charge properly. Everybody knows this. I have to talk them all up from giving it away, although we both know there’re times when we might want to do that. Giving it away – to undercharging – to charging what you are worth. We even had a conversation where somebody said, “I give mates rates”.
“Marvellous, what do you do?”
“Fifty percent off.”
“Fifty percent off? Surely 20% off is enough for a mates rate!”
We are all so weird. That’s my point I think.
Nicola: It puts people off too. Let’s talk in a minute about your “pay what you want” thing, because I’ve experimented with that as well. I know you are having more success with it than I did, I think, but it actually makes me feel uncomfortable if they want to hire you, and you either don’t let them hire you, or you make it so difficult for them to actually do that, or that you make it impossible for them to pay you. They might uncomfortably take advantage of you the first time as they would feel… but they won’t come back. It really is better to start charging something, even if you are not massively comfortable with it, and then work up gradually. There’s a thing in itself, isn’t it?
We both know someone who’s done an amazing offer to get her business going, and she’s now putting her rates up quite dramatically… Doubling in fact. Doubling her rates from first of January, and I feel that it would have been perhaps better to ease them up gradually month by month, or for new clients. How do you think is a good way to handle that? If you start off really low, you get the business, how do you then edge it up?
Judith: I think two thoughts have come to mind immediately. The person who shall not be named that we are talking about started off so cheaply, I think doubling is fine. But – if it were my own clients, I think that over the initial period, say three years while they are getting used to charging what they are really worth, I would nudge it up as often as I dared – because until you reach a platform, a ceiling where you feel most people buy most of the time and you’re comfortable with that – and that takes quite a long time when you are starting a business; and then after that, once you’ve reached that point where you know it’s right, then I would encourage them, depending on what they’re selling, to have an annual, or a biannual, price increase. So everybody knows your prices go up on the first of January, or the first September, or your birthday; or whatever it is.
I think there’s a lot of experimentation. In fact, I was explaining to a client this week how when I started my accountancy business I was quite a young woman. I was only 22 in the 1980s. About three years in, we were full up, but potential clients would still phone, and that gave me the opportunity to experiment with doubling and quadrupling my prices over the phone, and what I discovered, when I couldn’t take on anymore, or I didn’t want to take on a person on the phone, it was no scarcity at all. If I doubled my prices, and quadrupled my prices, they still bought. And so that gave me a barometer by which I could measure whether or not we were charging enough.
Nicola: I am a client of this person, and when I got the email that that was happening on the first January, I felt it physically like a slap. There’s a whole set for discussion here as well because I’ve got an agency, and I’m going to… A client’s going to hire me for X amount a month, and I’m going to have to make up my mind when I raise my rates. I’ve got a bit of a cushion built in. In fact, it is 25% of Ad spend, or X amount minimum. If he does end up spending more, I will end up earning more, which is great.
I feel like when you raise your prices, and my hairdresser resists this as well, I say to her, “If you want to raise it 10% a year, isn’t it better to do it quarterly, and it’s 2.5% a quarter, which nobody will even notice, rather than doing 10% once a year?” And as I say, perhaps I felt that this person should have raised, doubled her rates for new clients, but then perhaps eased existing clients up to that new rate over the next year. I don’t know how you think about that…
Judith: I think because you are a big user of this supplier, it would have a bigger impact on you than it would have on me. I would be more happy paying – well, there you go, I rest my case. What did I say? I don’t want cheap. I’d be happier paying her a new rate, because I think that’s closer to what she should be charging, and even you and I know that doubling it isn’t close to what she’s worth.
Nicola: For certain things, and there is the argument that I could go and find a Filipino VA, and train to do the work.
Judith: This argument comes up all of the time, and that’s what you want, if you are that price sensitive to that purchase, then go and find a Filipino VA.
Nicola: Then I’d have to train them, wouldn’t I, and supervise them…
Nicola: … whilst I don’t have to do any of that.
Judith: Exactly, you get what you pay for.
Nicola: Good point. You feel that when someone’s charging, and they’ve got a bunch of existing clients, they should be able to say, “On the first of January, I’m putting my price up and this is what it’s going to be.”
Judith: In my case, I put it up this year on the first of August after having held it for I think… First of September, I beg your pardon, which is the go back to school day after having held it for 20 months. In that particular, that’s my middle group, the Club 100. I think I could review it every first September, but actually now I’m charging the right sum of money for it. It only needs to go up by the retail price index factor.
Nicola: What about your existing clients in that club?
Judith: The existing clients I kept the same, because the offering there is whatever price you get in at is your price for life.
Nicola: Yes, yes. You grandfathered it, as they call it.
Judith: Exactly. Nice expression, yes. If they drop out and come back, they pay the prevailing rate.
Nicola: Which is a good thing for encouraging stickiness, isn’t it?
Judith: Also, I feel it’s fair. I have a relationship with them. You can’t move… I don’t think you can move the terms on the existing. In that case, it’s members really. If they were clients, one-to-one clients, I would put it up because you are putting up your general rate, but if you’ve got a membership – I’ve always thought this about memberships – you don’t want to embroil yourself in the changing of everybody’s standing order.
Nicola: No, absolutely. The grief is not worth it.
Judith: Yeah, exactly.
Nicola: You don’t feel that about service, and your one-to-ones.
Judith: No, I don’t, no, because it’s a bit like if I go back to my own accountancy business for instance. We have different rates of staff. We were charging £25.50 and £100 an hour or something. Once a year you put those up, otherwise inflation erodes the value of that. They can’t buy as much. We can’t buy as much with what we’re – £100 erodes, doesn’t it, in value. You’ve got to put that up to 105 or 110 once a year, and then whatever the retail price index is, I don’t know – it’s three percent or something like that – £103 an hour is a silly sum of money so you put it up to 105 or 110, and money is just specific to every single person. We don’t have much common ground, even you and I, not me and my clients. How I spend my money is unique.
Nicola: Yes, you’ve blogged about this on many occasions, haven’t you? My thing is you know, I’m very happy to spend on software, and training, and mentoring, but I’ve been looking at my kettle for the last three years thinking I really should buy a new one, but I just can’t bring myself to spend 50 quid on a new kettle!
Judith: Does it boil water?
Nicola: It does, yes.
Judith: I don’t need to hear anymore about this.
Nicola: It looks ugly. This is where my aesthetic sense comes in!
Judith: I understand but the world is full of junk already, Nicola. Where does your old kettle go that works perfectly well? It goes up the civic tip, and just creates landfill problems.
Judith: Have we covered pricing fairly thoroughly, or was there something else?
Nicola: I think we have, but I think it’s a topic that we’ll return to over the months, don’t you? Probably.
Let’s just finish on the “pay what you want” model, because I think we should just cover that before we do. I tried that, and I was paid anything for a product that I’d previously been selling for $500. I was paid anything from $10.00 to $50.00 which was the most I got for it even though I made very clear that it had been selling for $500 previously, and I gave up in disgust really, but you said something that was really interesting, and I was listening to you on Natural Born Coaches the other day, and you said something very interesting on that, which was that if you are going to go with the “pay what you want” model, you have to have not a shred of scarcity around it.
Judith: I said you have to be 100% aligned that whatever anybody gives you is wonderful.
Nicola: I think perhaps I should have tried it with a new product that I hadn’t actually priced at all, because then you’d be able to use it to test your pricing, wouldn’t you?
Judith: I think there’re two ways of looking at this actually. In my own example – I haven’t had time to do this in the last two or three weeks, I’ve been so busy – but, when I put every morning on my Facebook page that I have a spare slot later in the day, and people may take it on the “pay what you want basis”, what I’m doing is selling something, which would normally be an hour, where I would sit here and make no money at all. I don’t use the online drive for the “pay what you want”, so when I wake up in the morning, if there’s a spare slot, I advertise it on my Facebook. I say, “There’s a spare slot today at 14:00 GMT, anybody want it, PM me,” – private message me on Facebook. Then what happens then is anything I receive for that is a bonus.
Nicola: People PM, and then you send them a link to pay what you want after or before.
Judith: Either. All I need is their Skype name. They know what the rules are because I’ve publicised what the rules are, and the rules give them a guideline of what people typically pay for those sessions. Anything between 40 and 150 quid. Sorry, 30 and 150 quid. Forty, 50, and 75 is quite common, and it always comes with a note saying, “I know you are worth more than this but…” which is very nice. But the point of this is that I’m selling something that would sit on the shelf because nobody else can buy it.
Nicola: You said something really interesting, which was also on the interview, which was that you have to spell out for people what other people typically pay, because if left to themselves, they wouldn’t book it because they’d be paralysed on making the decision.
Judith: Well, for the moment, because the “pay what you want” model is relatively unknown. You and I both know. In fact, it was your sister that pointed to us at the first ever resource, and it was a website designed in the States. You have to guide people initially, because what you and I both know is that if we give people infinite choice they don’t make a decision at all. It’s too overwhelming. You have to give people a bracket between a guideline so that they know how to pay you. But ultimately my goal with “pay what you want”, and my experience certainly with my e-books, is that people pay more.
Typically, following the Ryan Deiss Model, one would sell one’s e-book on Kindle for $2.99. If I offer it for my own website for a “pay what you want,” the average payment is £6.00.
Nicola: OK, Cool. That’s interesting.
Judith: The thing is that you taught me, of course, and depending how much personal involvement is involved in your product is that you give people… You can test it, can’t you? You can test. The thing about the “pay what you want” is it’s completely surprising. It’s a bit like a nice surprise. After you finish the call, I point them at the donate button on my website, and something comes in, and you go, “Oh, that’s nice.”
Nicola: Have you ever had anyone not send anything?
Judith: Yes, when I offered one of my e-books on this basis on Selz. I don’t know if you know Selz, a platform for digital products. Several people bought it for nothing and you have to go, “Ho-hum. They probably need it for nothing.” But you can’t bitch, excuse my language, about what you receive, because you’ve offered it on a “pay what you want” basis. It’s a real test for us because you’ve got to be totally flat line, aligned. You can’t have peak or trough reaction to the sum of money that comes in, because that’s against the whole point of it.
The other thing that Guy Levine taught me way back is that even if somebody has bought my e-book for nothing, it’s got my URL all over it. They might share it with a friend. It’s doing marketing for you as it goes around the world for free.
Nicola: It’s a pebble in the pond, and you don’t know what ripple is going to happen but the ripple will happen.