Art of Earning
I love pricing for value. In other words, the value I provide you is so much greater than the value of the money you have to shell out to get it.
Pricing for value works because it leaves both parties feeling richer. I sell my service and receive the money I want. You receive my service and receive the information/ideas/action items you want. The “pain” it causes me to deliver the service is much less than the money I receive. The “pain” it causes you to pay the invoice is much less than the information you receive.
We both receive what’s valuable to us. And we’re both extremely happy people at the end of it all. And we’re likely to do business again.
But value is only half the equation. When pricing, you also have to consider how to get results.
A fresh life coach sets her rates at $50 per hour. That’s more than she’s ever made in her life per hour so she feels pretty good about it. She also knows that she can deliver loads of value for that $50. And, she’ll be $50 richer every time she sees a client.
That all sounds good, right?
But, “You’d be a fool not to buy this at this price” pricing can work against you. If your product or service requires some work from your clients or customers – and really, who’s doesn’t? – your pricing might be enabling complacency & inaction.
So that life coach might get some clients at that rate. But do those clients feel invested – both literally & figuratively – in the work? Or are they patting themselves on the back for just taking a step in the right direction?
On the flip side, the people who are most ready to do the work, the people who are the best clients for this coach, will look at the number and believe that this coach isn’t well-equipped to help them take the actions they need to take.
Fair? Nope, not at all. But just like I remind my toddler on a daily basis, “Reality isn’t fair.”
Whenever I price a new offer, for instance, my new Insight Intensives, I’m not only considering the value I’m offering, the time it takes me to prepare, my position in the market, or the benefit of my experience, but I’m also considering what price will create allow my clients to create the best results.
- What price will allow you to take this seriously?
- What price will ensure that you’re a success story?
- What price will push you past “comfortable” and into the discomfort of action?
If you’re a painter, what price will put your piece of art over the sofa? Or even get it hung at all?
If you’re a copywriter, what price will force your client out of cliche language & into what’s true to them?
If you’re a jewelry designer, what price will ensure your pieces get paired with fabulous outfits?
Sure, there’s quite a bit more that goes into those decisions. But don’t fool yourself that price isn’t a big factor in personal investment on all levels.
Start by pricing for value and then check yourself by pricing for results.
Art of Earning, Business Brainstorm
Earlier this week, I wrote about pricing. Specifically, that most business owners are selling themselves short when they price their work.
Why? They consider “the market” when they determine prices. Smart move.
If you consider the right market.
Most often, they consider a market that’s not pricing properly to begin with. They’re considering “affordability” (that’s a code word for low priority). They’re thinking about volume instead of quality.
They’re playing small because that’s the only game around. Or is it?
The Myth of Volume
What kind of businesses succeed on a volume model? What kind of businesses operate on a razor thin margin? Huge corporations: Walmart, Target, McDonald’s… They have supply chains, human resource policies, and manufacturing systems that support this business model.
You don’t. Don’t pretend volume will make your profitable. Build your business model around delivering exceptional value.
“I used to act on the principle of higher production rate equals greater return. Now I operate on higher value equaling greater return. …
“The idea is that you as an independent are the only one responsible for everything – marketing, selling, creating, building, growing – and as a result you must be very conscious of the advantages this brings to your ability to become self-sufficient within your work.”
— Adam King, How Do You Define Meaningful Work?
Run the numbers. Unless you can – or want to – create 60 of what you make every day, don’t bet on volume.
The best market to consider when pricing your work is the market you want to be in, not the market you’ve ended up in by default.
Businesses don’t thrive “by default.” Businesses thrive when they take the lead on creating something truly worthwhile, something innovative, something that goes beyond a new take on what’s already unnecessary. Businesses thrive when a product or service is the result of a hundred or more careful calculations, when every decision is derived from a distinct perspective.
So what market do you want to be in? When you dream about your successful business, who are your peers? Who is making the waves you want to make? What products or services are unrivaled in your eyes?
Why not price yourself into that market?
Actually, I’m sure you can think of plenty of reasons not to price yourself into that market. And I have plenty of ideas on that (they’re coming in my next post). For now, I want you to consider some specific examples as objectively as possible.
Ask yourself: what’s so different between these businesses & yours?
You wanna run with the big dogs?
John T Unger: an artist with perspective
John T Unger has a unique perspective:
My creative mandate is “sustainable design with an edge.” Just because we’re good doesn’t mean we have to be boring, right? I think there’s a place for rock n’ roll to dance with environmental responsibility in a house shakin’ way. If green products are to compete in the market, they need to be sexy, sleek and chic— cooler than new.
Unger creates unmistakable “firebowls” from recycled materials. He has a large & loyal following that covets his work and supports his vision.
But Unger knows the value of his work to his customers. He knows the statement — the WOW factor — it makes on the front lawn or back porch. His firebowls range from $1500 to $3000 for the readily available models.
Danielle LaPorte: an artist with strategy
Danielle LaPorte retired her $1000 business strategy sessions, Fire Starter Sessions, almost a year ago. And certainly not for lack of clients.
In addition to undying passion, unceasing discipline, and fierce spirituality, LaPorte lives & breathes strategy. Those who committed to a Fire Starter Session with her had complete faith in her ability to give them a $10k, $20k, or $50k idea. Would you be willing to trade $1,000 for $50,000? Thought so.
Decide to rise because you want to expand — your being, your life, your possibilities.
Decide to rise because super powers are meant to be activated and applied in everyday life.
Decide to rise to explore your place in the universe.
LaPorte urges her clients, readers, and fans to rise. Rise to meet her.
Natalie Chanin: an artist with a community
Natalie Chanin‘s collection of handcrafted clothing exists at once in both days gone by & the present. Texture, layers, and tone-on-tone pattern are the hallmarks of this vision-driven brand.
Chanin employs an arsenal of artisans in Alabama to create pieces that range from $3-5,000. Her customers value the unique designs, the attention to detail, and the sustainable lifestyle her clothing represents.
…early in my journey I realized that sewing traditions (and I would go so far as to say survival traditions – everything around food, clothing and shelter) were dying in my community – and communities all over. Very soon after coming home to begin my work with hand sewing, it became clear that it was important to begin to collect stories and techniques about these traditions and to work towards not only incorporating them in my work but using my work as a means towards cultural preservation.
— Natalie Chanin, interview on EcoSalon
For Chanin, who also has a line of DIY kits & books, it’s not enough to stop at good enough, or even great enough. She finds value, as do her clients, in the fullest expression of her vision & values.
Peter Shallard: an artist who fast tracks
Peter Shallard is the shrink for entrepreneurs. He caters to a specific type of clientele, tells it like it is, and is confident of the results he delivers.
But, perhaps most importantly, Shallard understands that the true value he provides to this motivated bunch of clients is an express train to greater success. These are people who are already accomplishing quite a bit. Shallard gets them to bigger & better, faster.
My approach focuses on actionable psychological insight that creates practical, measurable results, making me an ideal choice for the busy entrepreneur who wants to fast-forward success – the kind of person who wants to rapidly leave roadblocks behind and make big things happen quickly.
What’s the express train to success worth to his clients? It’s certainly worth more than the $750 per month for email consultation that is the lowest entrance price to his services.
Shallard believes in enabling enterpreneurs to achieve wealth, freedom, and social impact with as few barriers as possible. Now that’s convenience.
Who is your role model?
Your particular role model probably isn’t on this list. Maybe you dream of being the next Jonathan Adler, Rachel Zoe, Jonathan Fields, Martha Beck, or Kris Carr.
And maybe, just maybe, you’re closer than you think.
Does your business — and the way you & your customers view it — represent your proximity to this dream?
What would you need to change to bring it closer?
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Want to run with the big dogs but don’t know where to start? Know where to start but it scares the %*&@ out of you? It’s time for an Insight Intensive. Let’s spend some quality time breaking it down, making plans, and gather information. Let’s run together – click here for more info.
Art of Earning, New Economy
Yep, that headline is not at all based on scientific analysis. But it is based on the day I spent at the Etsy Success Symposium on Friday.
I had the distinct privilege of talking business with 17 business owners. I did one after another, 20-minute quick-fire consultations.
Yes, yes I was extremely exhausted at the end of the day. Thank you for asking.
All 17 consultations were with makers or designers. I gave 15 of the 17 business owners the same advice:
Double your prices.
Of course, that’s not easy advice to give. And it doesn’t help that it’s most often met with jaws being dropped or a “but… but… but…” kind of answer.
I don’t give the “double your prices” advice lightly.
There’s lots of other information I want to know first. I want to know what kind of problems and pain points are perceived. I want to know what goals my client has.
I ask a few questions. I listen for key words. And then I make my diagnosis:
It all comes back to your pricing.
Instead of making this a post on proper pricing, I want to concentrate on how this problem is felt within a business and how it manifests itself on the outside of a business.
1) You create goals & expectations based on the market you think you’re in instead of the market you want to be in.
While Etsy sellers find themselves in a very distinct market based on the marketplace they’ve chosen, this problem can be seen in any industry.
I know you’re judging yourself & your work against others you see as competition. But who really is your competition — those who are at the same level as you now or those who are at the level you want to be at?
I would argue the latter. When I ask you to read my next book, I’m not asking you to weigh it against my peers similar work or offers. I’m asking you to compare it to Dan Pink’s or Malcolm Gladwell’s latest bestseller. That’s the bar I’m setting for myself. I want you to think of my work in line with theirs.
So are you going to create a competitive pricing strategy as compared to rookies and hobbyists? Or one compared to Jonathan Adler, Dwell Studio, or Kelly Rae Roberts?
Your pricing is one indication of quality to your customers. Your customers will use your prices to understand “how good” what you offer is. If your price means your product appears lacking in quality, you won’t get the kind or quantity of customers you want — regardless of how “affordable” your work is.
2) You wonder if you can’t earn anymore because you physically can’t produce any more work than you do now.
This is perhaps the easiest scenario in which to see the necessity of a price increase. But most often, business owners choose an incremental increase instead of a drastic price increase (like doubling).
Sure, an incremental increase might solve the problem for now. But what about 6 months from now or a year from now?
If you double your prices, you only need to generate half the sales to create the same amount of income for your business. You might cut your current workload in half!
Or, as I’ve seen over & over again, you might sell more. But that’s what we call a “quality problem.” In other words, it’s pretty great problem to have. In that case, doubling your prices means you can afford to invest in better tools, experienced labor, or more efficient processes to streamline your work. You’re not trying to grow your business on razor thin margins anymore!
But let’s say you start selling a good bit less. My advice is to take that extra time and use it to create a product that is leveraged. Something that can be replicated over & over again quickly. Something that has a very high profit margin. Something that gets you a lot of attention in all the right ways.
You need time & energy to create something like that with your business. You can create it by doubling your prices.
3) You choose to create things that you know will sell instead of what stretches your ambition.
All over Etsy, all over the blogosphere, all over main street, you see businesses spring up that are based on proven business models or popular trends. Their products are a guaranteed sell. Their customer base is easy to spot.
They will make sales. And those businesses will measure those sales as success.
But there’s a lot more to success than number of sales. Profit margin is one. You can make a bunch of sales but if you’re operating at a loss, you won’t last long.
Customer loyalty is another. When everyone is doing the same thing and offering the same kind of product, it’s very difficult to generate customer loyalty. It’s near impossible to gain business from word of mouth.
Longevity is yet another. How long can the same old thing last? The first few might stand the test of time. But copies of copies of copies are not long for this world. You don’t see many xeroxes in the Louvre.
Push yourself to the edge. Create something you never thought you could. Don’t do what you know you could do to make sales. Do what you dream of doing to make sales. And then dream a little harder.
Sure, the edge is an equally difficult place to survive. There is quite a bit of uncertainty. But its rewards far outreach the rewards of doing what’s certain.
To be sure, creating at your edge doesn’t always require doubling prices. But thinking about doubling your prices (or 10x-ing your prices) will certainly push you to your edge — and that’s a nice place to start.
Does this apply to me?
This is not simply a lesson for makers & designers. This is a lesson for all business owners. It’s an opportunity to challenge your assumptions about what you create, who you sell it to, and how you exchange value within the system.
While not everyone should double their prices, and yes, maybe not even 88.2% of business owners, it’s a worthy experiment in understanding yours & others perception of your business.
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Does the thought of doubling your prices put your money mojo in a tail spin? Then you, my friend, need to understand that making money is beautiful. Intrigued? Check out my acclaimed digital guide, The Art of Earning.
Art of Earning, Business Brainstorm
If it works for William Shatner, surely, it will for me.
Right?
About halfway through the development phase of my last digital guide, The Art of Earning, I was in an all-out mind battle about what to charge (or to charge at all) for it. This wasn’t a “pick a high number and stick a 7 on the end” kind of deal.
This was a deeply personal book but one I knew could help a lot of people.
And I wanted it to help a lot of people.
In the shower – where else? – it hit me. Name your own price.
Here’s why:
Free is great but investing in yourself is better.
I love free content. And I produce a hell of a lot of it. But at some point, free content becomes something you consume mindlessly. You might find an idea or two “nice” but act on the main principles? Honestly answer the questions contained therein? Nope. No way.
It’s too easy to think the answer is in the next piece of free content.
Investing in a product – even as little as $5 – helps you pay attention to the ideas at hand and take concrete action based on those ideas. Investing in a product is very much about investing in you & your business.
Ben Bernanke isn’t the only guy concerned about inflation.
You don’t have to be chief of the Fed to be concerned about price inflation. While there are many stellar digital programs that deserve to be priced in the top-tier of information, there are many which do not. There are some 50 page pdfs that deserve to be priced at $50, $100, or ever $200. That’s the kind of value they provide. That’s the exception, not the rule.
The Art of Earning is not those books. Yes, I believe that if you apply the principles to an active reevaluation of your relationship with money, you’ll have the capacity to make tens of thousands of more dollars per year quickly. But you’re going to have to do a heckuva lot more work to build your business than I did to write that book.
I could have made the price much higher. Maybe I still will. But I’m happy with the price as it is.
Everyone needs an exercise in gratitude.
Especially me. Had my money workout not been so total & complete, it would be easy for me to look at the smaller payments that come in as proof that people just want things cheap, that a steal is even better than a deal.
But honestly? That’s not my reaction. It’s been one of gratitude. Seeing $5, $7, or $8.44 payments roll in has left me feeling warm – not cold. I haven’t been focused on the difference between the “real price” and the price paid, I’ve accepted the enormous gift of trust & hard-earned coin those customers have been willing to part with.
I’m sure the next question is: will “name your own price” work for me?
Answer: It might.
For name-your-own-price to work for you, you need:
- A product you can afford to have lower profit margins on. A digital book is a great way to experiment with this model because it’s almost all profit. How could you incorporate a high profit margin product into your business?
- A reputation of high value. Generally, I would not recommend this pricing structure for those just beginning in business. I have a collection of ebooks and a reputation as a coach & blogger that allows me to trust my customers with pricing a valuable product. Are you building a product/services line that represents high value?
- A way to capture the leads. I won’t kid you, The Art of Earning has been a great lead generator. Traffic to the blog, sales of other products, speaking gigs, and coaching clients are all up up up since the release of this book. I had a wide & strong platform to support the buzz that I generated through this book and knew how I was going to channel that buzz. If 500 new sales came through your business in a month, how would you continue the customer relationship?
I’m planning interviews with some other entrepreneurs – both product makers & service providers – who have tried this model of pricing. What questions should I ask them? What questions do you still have for me about the name-your-own-price model?
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By the way, if you haven’t yet, you can pick up The Art of Earning – and name your own price – right here.
