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We’ll take your money, but…

I have used three marketing services so far, and I have lost all the $15,000 I’ve invested in those services.

Part of it it was my fault because I did not know what to ask for.

I would say I need help with marketing, and they would say: “sure, we’ll take your money, but there are no guarantees this will work!” And sure enough, it didn’t work.

This offering is such a common practice that we have accepted it as the cost of doing business. 

However, I have discovered this proposition from a marketing agency:

“You will only pay for the ad costs and 10% from each sale you make from our leads. If you don’t make any sales in the first 30 days, we will refund you all the ad spent.”

Crazy right?! Who would refuse such an offer? There is zero risk to you, and you can only make money from this investment.

So why do most agencies shy away from making such a bold offer? The answer is simple: they are not that good. Therefore they will put all the risk on your shoulders. If it works, great! If not, they still get paid. 

I love performance-based compensation. It immediately separates those who know what they are doing from the pretenders. It aligns all the incentives: all the parties win, not just the agency. 

If you read this and think “it can’t be done”, it might serve you better to change your thoughts to “I don’t know how to do this.” At least this new attitude opens the way to learning new skills. And if your crack this nut, you’ve hit the jackpot! 

One of my dumb moments – Fast Beats Free!

More than 15 years ago, a friend of mine pitched me this idea:

“Let’s band together and create a CMS (content management system) app that people can use to build their websites.“

My reaction?

“That’s dumb! Why would you create a paid CMS app when you have WordPress and Joomla that are feature-rich and free? How are we going to compete with that? Why would anyone pay for using our app?“

Time proved me wrong. 

My (no longer) friend moved on and partnered with someone else. They created the CMS, and they sold the service to lots of customers. 

Many years later, when I discovered this, I was confused. I could not understand who would pay money for a service that you could get for free elsewhere. I imagined that were regular users who were duped into buying this CMS app. 

But I was wrong again.

Eventually, I discovered on my own that I would pay for software that had a free alternative. Why? Because it saved me time.

“Fast Beats Free” – I’ve heard this line from Alex Hormozi, and it clicked so hard in my head as many puzzle pieces were falling into place. 

As a young person, when I had lots of time and no money, I would always go for the free stuff since I imagined I would have plenty of time to figure it out. But a paid service is for people who already realized that time is the most valuable resource, so they would gladly spend money to save time. 

So how do you compete with WordPress or Joomla!? You provide the same service faster and with customer support. And that is exactly what my friend did. And his customers were not duped, but they got immense value from building their website in hours instead of months. It was truly a win-win situation that I could not see.

I hope this story will challenge you to think differently about how you go around building your online presence. And to realize that if someone can help you do it in a few days, they are worth way more than someone who can help you do it in six months! Even though the six months person works longer and harder for you. 

It’s not about the effort; it’s about the results and how fast you get them. 

Fences and Websites

Building a fence and building a website

When you hire a team to build a fence around your property, what are your expectations around the process and the results? 

Do you expect to constantly monitor the work to make sure the lines are straight and that workers are not cutting any corners? Do you expect to provide the tools and replace them or do maintenance for those that get broken? Do you expect to manage each worker and tell them what to do, when they should do it and how? 

And for the end result, do you expect to have to do fixes after the work is finished and do lots of maintenance as time passes? 

On the flip side, do you expect to simply show them the property line and describe what the fence should do: keep out wild animals, large and small, and be sturdy enough to require very little maintenance in the future? 

Here is the thing: there is no correct answer to these questions. Different people have different expectations. Some love to get their hands dirty and get very involved in the process, while others need the results, and they would rather do something else while the fence is being built. The problems appear when these expectations are not discussed upfront and are assumed. 

We also need to consider risk and price

When you do get your hands dirty, provide all the tools, and give all the directions, you are taking on all the risk of making sure the result is a good fence. The people you hire just do as they are told and shoulder no risk. So the price they can command is not that great. You pay them less money, but give more of your own time. 

When you buy the results: a fence that meets the specifications, the construction team needs to shoulder all the risk. You don’t care how they do it, how many tools they break in the process, if they need to fire someone along the way, or if they use your fence to train a junior team member. This construction team can command a higher price, and you pay more with money but with much less of your own time. 

Both are valid options, but you need to make a conscious choice and get clarity: is the team who asks for a ton of money willing to take on all the risk? On the flip side, when the price is “too good to be true,” are you ready to pay with your time and with taking on the risk of failure because it turns out the price was way too low to allow for a good job? 

The same applies when building a website. When you want to do it as cheaply as possible, you need to understand that you are taking on the full risk of failure, full maintenance, and a big chunk of the building process. But if you want a hands-off approach where you’re just interested in the business results, expect to pay a premium price for that experience and peace of mind (aka insurance against risk.) 

A cautionary note about the premium price 

Pricing is a signal. And someone reading this may be tempted to think that all I have to do now is raise my prices to a premium level to bring in the clients who want the “hands-off experience.” That is exactly what you should do IF you can deliver! And the price needs to be a lot higher to account for all of your mistakes and all of the things that will go wrong with the project. If you just charge more but don’t deliver, you are running a scam, and you will be found out. 

From the customer side: if someone is offering a premium hands-off experience at a very low price, you need to be cautious. How can they deliver without cutting corners? How can they afford high-quality tools and qualified people? Are they just boasting off to get their foot in the door? 

You need to get crystal clear if you’re shopping for price or value and then make sure the hired team can deliver on their promise.

Although important, nobody likes tests!

I should not have to write this, but testing your web application is very important, especially if you care about your brand being perceived as premium. 

And by testing, I don’t mean “does my homepage load fine?”. I mean the comprehensive end-to-end testing and stress tests to ensure your app still works when that marketing campaign hits. 

Even though good tests are essential in the quality assurance process, I have seen websites and applications that do not fail gracefully, with a friendly error message that explains what happened and offers a way to move forward.

Many software workflows attempt to convince the developer to test first or make sure their code is testable, but most developers do not use them. 

I thought about it, and I believe I found the reasons. 

Nobody likes tests because:

  1.  they are boring to write
  2.  it is not easy to write code that is testable – you need a specific mindset
  3.  they offer zero visual feedback to the paying customer – so in that sense, it is invisible thankless work
  4.  they need to be maintained along with the code base that does something 

Tests are a tough sell to both developers and their clients. Most often than not, we proceed with the attitude: “we will fix it when someone complains!”

On this blog, I care a lot about value. And from that perspective, I will say this: no client will ever come to you and say, “I need a website that will require about 20,000 tests for a code coverage of 90%”. Tests have zero value to them. Instead, they need a solution to a real problem, like: 

  • They need to build a premium brand. 
  • They want to sleep well at night, having confidence that the vast majority of the app functionality works and will continue to work even under stress. 
  • They need actionable data to help them decide where to move next with their web application: what is the bottleneck in performance? What is hurting conversions? 

These are all items the client cares about, and a possible solution is to write tests. But what you are selling is peace of mind, not code coverage. 

And yes, in some cases, especially for MVPs, tests are not essential for the bottom line, and so even if you know they are important in the QA process, that may come later once the product proved to be a hit. 

As a developer, I would get into the practice of doing tests and writing testable code. It is an excellent skill to have when things change faster and faster, and interoperability creates more complex systems. 

And as a client, I would put some monetary value on my peace of mind and knowing the app won’t break and see what solutions I can buy for that budget. 

 

How much for a website?

There is no such thing as the right price for a website. You can have something for any amount you budget. 

It may be better to shift your question to “Why do I want a website in the first place? What do I expect to accomplish?” Once you find your answer, it will be much easier to assign a budget that makes sense for you. 

A quick example: 

Say you want to build an eCommerce site that will bring in $200k in revenue per year. In that case, it makes total sense to invest $20k to $50k to have it built professionally.

Another example:

You are just starting, you don’t have an audience yet, and you need to test an idea. The expected revenue from this project could be as low as ZERO. Paying 20k for a test doesn’t make much sense now, does it? Perhaps this is a good situation where you need to look at some free options first. 

How to think about website costs, price, revenue?

A common misconception that I see is to think that all that you need is the web-design, which means a page on the Internet that looks like the picture in your head. There are plenty of tools to help you build that pretty picture for free, but once you have it, what will you do with it?

The most significant investment in building something is in marketing—finding the right people and presenting the right message for them. Once you figure out what you want to create, for whom and what it is the best way to engage with the audience, the web design part is super easy: mostly fill in the blanks. 

To better illustrate this, let’s have a look at some options.

The Free Website

With today’s tools, you can have a professional-looking website for free. This approach is an excellent way to test your ideas with no dollar investment. Use this to build up your writing skills, get some feedback on an idea you have in your head, start a conversation about the thing you want to create and get a feel for what it means to manage a website. You may discover that you are sitting on a gold mine or that nobody cares.

The $250 Website

You have now moved to a paid hosting company and under your own domain name. 

The advantages you get are:

  1. you are signaling that you are taking this more seriously – if you invest in hosting and a custom domain name – that will set you apart from everyone using the free places. 
  2. you begin to build your brand – as people will now use your domain to get to your content.
  3. you get more customization options and more flexibility.

You may still not make money from the site, but the $250/year investment is not too big, and you are learning a lot. 

The $1,000 Website

At this point, you have an audience that trusts you and visits your content, and you believe you could help them with a paid solution. You deploy an e-commerce software on your site: a shopping cart (like WooCommerce), a payment gateway integration (like PayPal), a newsletter service (like AWeber), and maybe video content (on YouTube).

If your content is engaging and consistent, you may recoup your money in one year, so you are on to the next level. 

The $5,000 Website

At this price point, you already have customers, you know what they like, you know what they would like improved on your website, so it makes sense to buy a custom design to solve these specific challenges. 

You are also doing much better automation and integration of your tools. You will make regular backups of your content and customer list because now a loss of data will be costly. You are building up your analytics to help you make better decisions in the future.

You do expect to make somewhere between $30k to $60k per year in revenue.

The $10,000 Website

At this stage, you begin to optimize your site. You think about speed, caching, search engine optimization, user experience improvements, tracking your metrics. You are doing tests with your design and your messaging to see what works best for your audience. You may also choose to move away from platforms like WordPress and into dedicated software that better fits what you and your audience want to do. 

The revenue expected is between $80k – $120k. 

The $50,000 Website

Here we are usually talking about a major overhaul of your online presence. You will do much research and many tests, and studies about your audience and with your audience to make sure this next level is a perfect fit for them. You may hire a branding agency to fine-tune your online identity and create a unified feeling experience for your users, regardless of where they find you. Things like your logo and color scheme become very important. 

You will get automatic publishing and tracking tools to update your content across social media. You will build a managed community for your audience, where they can connect and learn from one another. You will have a team of people around you, helping you manage all the systems. 

A big part of this investment goes into research and marketing. If you get that right, then choosing the correct technology is very easy. Choosing the wrong technology can be very costly at this stage. This is why it makes sense to research first and build later.

The expected revenue is over $300k.

Conclusions

You can use the value you expect to create with your website and form that work out what kind of a budget makes sense to invest in getting there. 

The bulk part of that investment will go into marketing:

  • Understanding your audience.
  • Making you a better communicator.
  • Spending time engaging with your community.
  • Finding better ways to help. 

Are you buying work? Or are you buying results?

The answer to the question above is pretty obvious when we ask it like that. But in practice, almost everyone is busy buying work! That work may or may not get you the results you’re are after. 

Here is an example to illustrate this issue.

Say John hires Maria to code a website for him. 

After the initial discussion, Maria estimates that she will need 100 hours priced at $100/hour for a total of $10,000. 

As she thinks deeper and some research, Maria finds a ready-made plugin that costs $1,000 and takes care of half the project scope. 

What should Maria do next? 

1. Buy the plugin for $1,000 and charge for the rest of 50 hours. So Maria is left with $4,000 in her pocket and a plugin she now owns. The client will love her.

2. Have the client buy the plugin and charge for the rest of the work. She now has $5,000 in her pocket, and the customer owns the plugin. The client will love her.

3. Buy the plugin for $1,000, work 50 hours, and wait for another 40 to charge 90 hours. Maria puts $8,000 in her pocket. The client will be happy; he paid less and got it faster. 

4. Maria ignores the plugin, starts coding, hopefully, be done in 100 hours, and charge at least $10,000. The client will be satisfied if finished on time and angry for any extra hours over the estimate.

We can all agree that (3) is dis-ingenious. But in truth, all four options suck. 

With option (1) and (2), Maria feels cheated. She had agreed to do much more work than she would get paid for. She has no incentive to choose less work for her. Still, if she chooses option (1) or (2) out of moral obligation, in the back of her mind, she will resent ever having done any research! 

With option (3), she will have to live with the lie.

And if she ignores the plugin and does the work agreed for the money agreed, she is also cheating. 

She is cheating herself out of the growth opportunity. Why work better or faster when that means less billable “working hours.” Best be slow and friendly as you plow along. 

And she’s also cheating the client because you are not free to do your best job. She will do the regular “fast enough” kind.

It amazes me, especially in the IT industry, where performance metrics are easier to measure, that people are still buying work instead of results. 

Whenever discussing a new project, I almost always hear this question: “How long will this take?” because the next question is, “What is your hourly rate?”

And the answers to those questions are: “I don’t know how long it will take. This project is a collaboration, with lots of variables out of my and your control. It will take at least three months, but it could take 6 months or one year… nobody really knows.” And “I don’t have an hourly rate.”

My favorite alternative is to focus on results and not care about how long it will take. 

With the initial example, Maria would ask John why does he want a website. How will that generate value for him to justify the expense of creating one? And John might say, it would help him sell his handmade products to a larger audience, and it would make it much easier for customers to place an order. Maria continues to ask what is a realistic revenue goal for one year from the website sales. John thinks for a bit and says that based on his audience and some estimates, it should be around $80,000. Maria says she is confident she can help John reach his goal of $8,000. 

Now, if John has spent $8,000 to make $80,000, do you think he would care if Maria used a plugin or not, or how many hours she worked on the website? Of course not! He did not buy Maria’s time; he purchased a result.

And what about Maria? She is free from the moral dilemma from before. She can now employ her full experience and work as fast as possible, using any tools she sees fit to help John accomplish his goals. 

It does not matter if she can do it in a day because she has done the same thing before or takes her two months to put everything together. John will pay a fixed price. He will not be taxed for a “poor estimate,” and Mary is free to work as fast as she can and be rewarded for getting better at her craft and working less. All interests are aligned. 

I challenge you to buy results and not work. You will pay more upfront, yes! But you will get much better returns in the long run. If you still choose to buy work, there is no guarantee that “the work” will get you any closer to your goals. And the conflict of interests will make it almost sure that you will run over the initial estimate by a large factor, even if everyone is super honest and fair. 

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? 

What does it mean to add value to your customers?

“How can I add value?”

This is the question I write at the bottom of my daily planner almost every day. Why? Because I want to train my brain to think in those terms. Why? Because I hear this is the key to success.

I never managed to answer this question adequately. And I had the insight that I need to answer a different question first! And that is:

“What does it mean to add value to your customers?”

Looking at this question, I realized that my efforts have been selfish. I was concerned with “my success.” The reason I wanted to add value is that I become successful by doing so. 

This question forces me to face the fact that I don’t know what “value” means for my customers. Yes, I can make guesses, but I don’t truly know. 

So many times, I have been tempted and followed through with this idea: what I do is valuable to me, so it must be valuable customers too. And if they didn’t see the value, that was their loss! This approach has resulted in projects that are too complex or in features that I thought were cool, but the customers did not care about them. 

And this has happened because I never paused to ask: “what is valuable to my customer?”.

Value is very subjective, I have discovered. I don’t handle loss very well, so I have a reliable backup policy. But others are much more willing to start over again, so backup is not essential. 

I value aesthetics and elegant design. But most of my customers value ease of use and the ability to manage the website themselves. 

I also have discovered that I am biased. And my bias is not the same as my customer’s bias. 

The first step in discovering what it means to add value to my customer is to be humble enough to admit that I don’t know and that I need to have a discussion. In this discussion, I need to ask the customer what is valuable to them, and if required, to help them discover their values in that process. I also need to set my bias aside and truly understand where the other person is coming from. 

The second step is for me to determine if we are a good fit. Based on what I now know about my customer’s values, can I truly serve them in their best interest? And sometimes the answer is no. And in this case, I have to send them away. 

But there is a way to refuse to work with someone that is not selfish. You can still add value by making a recommendation and send them to a specific someone else (your competition), instead of simply turning them down. This way, interacting with you has still got them one step closer to solving their problem, and you have been generous and trustworthy enough to recommend another person for them to work with. You may have lost a client, but you have earned trust, and in today’s world, trust is precious. 

So how can I add value to my customers? It first starts with showing empathy and meeting them where they are at. And in some cases, it means saying “no” and pointing them in a different direction.

Credits: my viewpoint on marketing and adding value is shaped in great part by people like Chris Do, Seth Godin, and Blair Enns.