Have you been putting yourself on sale just to get the business lately? How many of you feel that twinge of guilt when you discuss fees with a new client? Feel as if you should apologize for your rate card?
In this economy, you’re probably not alone. There is a natural tendency to want to reduce fees in order to accommodate tight budgets. The truth is however, that when you dramatically reduce your rate (below 10-20%) you are diminishing your brand. You are teaching clients ‘bad tricks’ that they will use in future negotiations with you and setting yourself up for failure.
Pricing is always a tricky proposition. Customer psychology and market knowledge must be in balance in order for your pricing to work for you, instead of against you. Contrary to what you may believe, the lowest price is not always the most attractive to customers.
Some years ago, I owned a health newsletter company built solely on direct-mail marketing. We typically mailed 350,000 pieces each month. The postage cost then was nothing compared to what it is today, but nevertheless, when you’re dropping that many pieces every penny counts. Price was something we tested…and tested… and tested again, before we got it right. The experience taught me a lot about perceived value and pricing. I always assumed that if we lowered the price we would generate more response, after all…cheaper is better, right? What I learned was just the opposite. More times than not, the higher price lifted the response rate…and did so by a substantial percentage. I know you’re thinking this is crazy, but any marketer can tell you there are subtle nuances to getting the price right. And, perceived value is oftentimes greater with a higher price.
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