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The Buyer decides what is worth to them

“The price you’re charging for this is ridiculous!”

“Are you trying to rip me off?!”

“What?! Is this made out of gold or something!?”

“How can you live with yourself when you charge ten times it costs you to make this?!”

If you have ever been in a position to sell something, chances are you have heard some or all of the above. If you haven’t, you are on a race to the bottom, competing on who is the cheapest.

Who decides if the price is right for a product or a service? 

What is the correct value?

The answer is that a buyer and a seller decide.

If the buyer feels that she gets more value than the is paying, and the seller feels he is making a profit from the sale, then the price is right! And the price is right for that context only.

For a different buyer or another seller, the price may very well be “ridiculous!”

I have heard many times, and I also used to believe that it is a shady practice to price the client, not the solution, meaning: to change your price depending on the person sitting in front of you. 

Does this feel like a scam to you? Do you want to know the price upfront, and do you want to know how much the other person paid, so you get the same price or better?

If you feel that way, then you are shopping for price, and not for value. And that is OK. I believe everyone is doing that in some areas of their life.

But if you are shopping for value, then the price is not that important.

How can that be?

If the value you are getting out of the product or the service is greater than the price, it is always a good deal for you, regardless of what someone else paid for it. Of course, you can still negotiate and try to maximize the value over price ratio, but ultimately it is the value you are after. If you could spend 75 cents to make a dollar, you would go for it!

To understand this better, let us look at an example from photography.

You went into the jungle and captured some amazing bird photos. You had to pay for the trip, the insurance, the equipment and also pay yourself. So there was a cost incurred by those photos.

How much will you sell them for? How will you decide what the right price is?

Let’s say you decide $200 for each photo. That is your price for everyone.

Now a blogger comes along; they look at the photo and think: “My God! What a ridiculous price for a picture! I can get a free one from Unsplash. This guy is crazy trying to sell for this price!” Maybe you will think: that is OK! They don’t understand the costs of making these pictures. It is still a reasonable price for my work.

Next, National Geographic comes along and purchases one of the images and the right to print it for $2,000. It gets on their cover, and it becomes such a hit that it becomes a “National Geographic Classic.” Does the $2,000 still feel fair to you if sales increased by $200,000 for the magazine because of the cover?

How much would it cost you in time, tools, and resources to draw the Nike logo? Can you put a price on that? How much is the Nike logo worth today? Is that close to the price you came up with?

We all want to be good fellow humans. We want to help out. We want to be seen, appreciated, and valued. And we want to thrive.

When you allow someone else to judge you on your value and make you into a horrible person because of your price, you get into trouble simply because some of the people you will encounter will assign a different value to you and to your product in their eyes

So you may be horribly overpriced to them. And then, they are not your customer. There is no need for you to lower your price or to feel like a bad person, just because someone could not see the value in what you do.

In the same way, you will not be able to serve everyone. Some of the problems are too small for you to handle, and you need to refer those out, or just say “no.” And some of the problems may be too big for you right now, and you also need to say “no” instead of over-promising. But in between those, there is your range: a range that will grow with experience and personal development.

I still believe luxury goods are a scam, or that some people just gave in to the “marketing” and bought a useless product, but I am wrong. The truth is, none of the parties would have agreed to make that transaction if they did not feel the price was the right price. I may not see the value, but that does not mean that value was not there. I simply value other things.

Don’t allow others to push their value onto you. And mirroring that, accept that other people value other things. And all that is OK.

Credit: Thanks, “The Futur” for their inspiring videos.

If you had to charge ten times as much

This is such an interesting question because it asks for ten times, not twice as much. 

Asking for twice as much can trap you into thinking: 

  • I will work twice as hard! 
  • I will double the quantity of whatever I am offering! 
  • I will simply increase my prices, lose a few customers but keep the premium ones. 

None of those strategies really work when you need to charge ten times as much. Something else needs to change.

I have not found the “right answer” to this one, just yet.

But somethings are obvious:

I cannot work ten times more hours or put in ten times the effort. With 24 hours on any given day, that is simple, not possible. 

Ten times the quantity may also not be possible, not to mention that the customer may not be interested in that much more quantity. 

So what can it be? 

On the same airplane, different people pay different prices. And yes, you can find a ten times difference in tickets. The same plane does not fly farther, does not fly faster, and does not land in a luxury airport for those who pay a premium. So what exactly do they pay for? 

In the software industry, given the same project specs, you can hire developers on a wide range of prices. The specs don’t change, so the end result should be the same, so why the different prices? Why is a developer more expensive than the other. And why would a customer choose to pay for someone who charges ten times the lowest price on the offer? 

A possible, but lazy answer is status. If you care that a “Google Developer” worked on your project, you will pay to be able to say that, even though a “less famous” developer may have done the job. Beyond status, this can be a marketing signal as well. When you sell this service, it may be worth it to your customers to know that a “famous” developer worked on it if that signals quality.

Trust may be a better answer. I don’t think you can trust someone “ten times more” than another person. Still, you do have a definite feeling that you can trust person A but not trust person B. 

And if trust is essential to my business, then person A can successfully charge ten times more than person B. What is the value-added to justify this increase? In the moment, probably none. But in an environment of clickbait and shady practices, person A has spent valuable time, resources, and emotional labor to prove trustworthy. Their reputation is their asset that you pay for. 

Going higher on the “better” scale, you may have to change the people you serve. If you are a high precision car mechanic, that will not matter if all your customers want from you is to fix their headlights. You may be fast at it, you may be precise, but it will not matter. You will not be able to ask ten times more for your services in that crowd. You need to find a different crowd, likely a smaller crowd, looking for that particular skill. To them, it will make sense to pay you ten times more, because the value they get out of your work is twenty times more. For them, you will still be a bargain.

On the same level with “change the people you are serving” can be “change your story.” In fact, the two go hand in hand and influence each other. If you sell a commodity, you have no choice but to join the race to the bottom. The alternative is to trade in emotions. To transform fear into belonging. For that, you need a story. You need to stand for something. To serve people at the edge, that everyone else has overlooked. 

For “regular” people, water is free. For someone stranded in the desert, water is priceless. A way to charge ten times more is to find people who are thirsty and then create the product or service that will satisfy their needs. 

Charging ten times as much is scary because it usually means you need to change and sometimes in dramatic ways. Letting go of the old clients is not easy. Letting go of the old product or service feels frightening. What if you are wrong? And we arrive at risk. Those who play it safe always find themselves in a crowded place. Setting out to sell water in the desert does not mean you will also find someone there. 

How about you? What would you change if you had to charge ten times more?