Image by Striatic on Flickr
This is a guest post by Tommy. As in “just Tommy no last name Tommy.”
What do you do?
No, actually you know what? I don’t care what you do. What can you do for me?
Come to think of it, I don’t really care what you can do for me either.
I have 10 million people a day telling me what they can do for me.
Do you understand the problem that I’m having?
Now we might be getting somewhere.
The biggest problem with online businesses.
Well, business in general, is that everyone is so eager to tell you what they do.
Tell me if this looks familiar
“I help entrepreneurs make their business awesome” “I teach solo business owners how to engage with their customers and increase their bottom line”
“I help bloggers make money on the internet”
There are a million other templates I could use, but you get the idea. Everyone is telling you who they are, what they can do, and how awesome they are.
But guess what? If everyone’s doing it, it’s not interesting.
And the truth is, online is the only place in the world where people who specialize in a certain area are so eager to impress you to get your business.
If we were to see specialists in other businesses be so eager, it may actually creep you out.
And because we’ve trained the marketplace to expect this sort of “Just let me prrooooove myself to you mentality” it actually marginalizes your ability to actually help people.
Going to the Doctor.
To really demonstrate what I’m talking about here, I’m going to tell you my most recent story of going to the Doctor.
Over the past few weeks, my stomach has been killing me. I eat, it hurts. I breathe, it hurts.I poop, it hurts.
Finally, I decide that it hurts enough to go to the Doctor.
I tell my doctor that my stomach hurts, and immediately he gives me 5 different medications.
He tells me to take these medications, “just in case” then schedules me for an operation to have a piece of my stomach removed.
Then proceeds to tell me that he’s done this operation 50 times in the last three weeks, to remove a piece of my stomach is “actually not has hard as you would think” and with every single one of his patients he’s pretty sure they’ll see total success and after the recovery period.
Of course, I’m a little hesitant, so I ask if I can get the names and numbers of the people who have had the surgery so I can vet the quality of his work.
I also ask if he can do a different smaller, no risk, operation on my toe, “so I can be sure he knows what he’s doing”
He agrees, so now I have a list of names to call, and that nasty hangnail is finally taken care of (surely now I’m ready for that stomach operation right?)
Of course this is false.
And if the medical industry worked like this, we’d be even more screwed than we already are.
Yet, when it comes to online marketing, and by extension blogging, this is exactly what 99% of people are doing.
You tell me how awesome you are, how much you can fix my problem, how you’ve done it for so many other people, but really you’ve never taken a second to shut up and actually listen to me.
In the case of the doctor visit above, had I gone to my doctor he would have asked me a million and a half questions, poked at my abdomen, and finally asked me to drop trow and turn my head and cough.
Is it embarassing?
Maybe, but if I know it helps me to fix the problem, than I’m probably going to do it.
And let’s say that he felt a lump in my abdomen, if it were even just an indication it could be cancerous, you can guarantee that he’d have me scheduled for a biopsy, and if it meant I would just know it was cancer, you bet I’d be asking if they’d be willing to dig in tomorrow.
Diagnosing the problem.
Now let’s think about this for a second, if your doctor told you it was possible you had stomach cancer, you’d probably be all for the biopsy too, just to find out.
You’d be willing to let them cut you open and take a piece of your body out, with the only guarantee being your specialist could “learn more about the situation.”
How profound.
Now let’s apply this to your business.
How well are you diagnosing the problem on a case by case basis?
Or better yet, with your blog how well are you helping people to identify they even have a problem?
In most cases, people don’t know they even have a problem or how serious their problem actually is.
The only thing they’re really familiar with is the immediate pain they’re having right now.
So if you’re using your content to tune them into the pain and show them just how serious that pain is, they can only assume you’re so familiar with the pain, because you know how to fix it.
So for example: Which sounds like something a normal human being can identify with?
“I help you get more comments!”
vs
“Without feedback, your businesses relevance is slowly eroding.”
If you picked number 2, congratulations!
You’re a normal human being.
The second option is relevant. It’s something you’re familiar with. It’s something that might be keeping you up at night.
If you’ve been noticing that your feedback is dwindling and your sales are started to taper off, you might be wondering if your business is still relevant to it’s customers.
And as a service provider, while your specialty might be “Get more comments” the context for the conversation you have with your prospective customer is wildly different.
In the first instance, ” I help you get more comments!” your prospect is coming to you with their arms folded thinking “Yeah right, says you and every other jackass with a computer and a Twitter account”
But in the second case, “Without feedback, your business relevance is slowly eroding.” Simply by coming to you, your prospect has put themselves in the position of, “I need help”
Which I don’t know about you, but I like working with the people who know they need help, not people who are defensive from the very beginning of our relationship.
This also keeps you out of the position of constantly having to “prove yourself” and allows you to actually dig deeper into the problem to find out what exactly how the service you provide can solve that problem.
Charging higher prices.
So where does charging higher prices come into play in all this?
If you’ve taken the time to understand your prospects problem more thoroughly than anyone else in the market, and you’ve helped them to really experience the gap of where they are, and where they’d like to be, offering a service at a higher price isn’t only ok, it’s expected.
Think of it this way. You’re on the person’s website that said “I help you get more comments!” and you buy a $47 ebook that proposes that it will help you get more comments, even though you make the purchase, you know that even if the information in the ebook doesn’t work out, $47 is still a pretty low investment, so no harm no foul.
(in reality what’s happening is because the investment was relativity low risk, you’re not taking the information all that seriously too, so you’ve essentially handed somebody $47 for putting a bunch of words in a .pdf you may or may not ever actually read, but more on this in a second)
However, when someone’s taken the time to really help you connect with the problem, and help you understand that it’s potentially worse than you thought, if they offer you a low risk investment for a high caliber solution, you might err on the side of caution.
Would you trust a stomach surgeon to operate on you for $500?
Not if you value your stomach.
By taking the time to really understand your prospect’s problem, offering a solution at a higher price helps them decide if they reeeeally want to fix it.
When they’ve decided to invest in themselves, they’re going to listen to every word that you say, intently.
Does everyone buy? No of course not.
But if one customer pays the same as 10 customers, then guess what? You’re doing 1/10th of the work and making the same amount of money.
The trick.
Target people with money.
Don’t believe everything you read. Just because Chili’s is offering 2 meals for $20 doesn’t mean Billy Gates is strapped for cash.
And it doesn’t mean he doesn’t have a problem you might be able to solve.
But if you’re charging “common man” prices, it does mean he’s not going to take you seriously.
There are some people in the world who want “only the best” and will only work with people who consider themselves “the best”.
Under pricing limits your chances at being attractive, or being taken seriously by someone with money.
It’s all relative, right?
If you’re making 50K a year, there’s no way a $9 ebook would help you solve your issues.
If you’re making $500K a year a $47 ebook would certainly never be able to address issues that are relevant to your business, no matter how well the title seemed to target your needs.
Same goes for services, no way would a $500k/year business take you seriously at $2k / month.
They know that in order for you to also have a $500K business you would have to service 20 clients @ 2k/month. There’s no way that scales to be manageable. Even at 1 hour a day, you’d never have time for anything else, and they know it.
However, at 4 or 5 figures, that 500K business (consciously or not) starts to take you more seriously. Which is important, because they can easily afford you. Now, you just need to listen to their problems from their perspective.
Because when everyone else is pitching how awesome they are, paying attention and understanding where they are coming from is all you really need to stand out in their mind.
About the Author: Tommy Walker is an Online Marketing Strategist and host of “Inside the Mind” a fresh and entertaining video show about Internet Marketing Strategy.
I agree with you that “Under pricing limits your chances at being attractive” but this works only for brands with a certain status to maintain, for example luxury watches or handmade works of art. Like you mentioned, “it’s all relative” so for a prestigious brand to undercut its price might draw curious reactions from its customers because they perceive it as a lowering of value.
Business owners should differentiate between ‘value and ‘price in order to strike a balance between offering a high-end product at a price that aligns with its identity.
On the flip side, as a service provider the question you have to ask yourself is what limits you from increases your rates?
How much is it costing a company to *not* work with you and what value do you bring to the table?
While I talk about products in here, this really is meant for service providers like yourself. It doesn’t work just for brands with a certain status to maintain, it works for brands that are also establishing themselves in the market.
“It’s all relative” is really about your perception of who’s got money and who doesn’t. If you’re only going after people who you know have money (instead of just anyone who might listen) than you’re going to greatly improve your chances of getting a higher priced client.
I noticed on your about page that you do copywriting for “small business owners” and would say that’s a very broad audience that can cover all sorts of affordability levels.
“I’m a small business owner”, usually comes out of the mouth of someone who believes their business is small.
However, someone who identifies themselves as an “Entrepreneur”, or even a “Start up” have a lot more ambitious goals for themselves, and therefore might be the type of people you want to be targeting and networking with.
I believe that if you switch your target market from “small business owners” to “funded startups” you might have an easier time selling what you have at a higher rate.
Also finding dynamic lists of recently funded startups isn’t horribly difficult, and the words they use to describe themselves have a dramatic impact on their success or failure overall, meaning they would be able to more immediately be able to recognize the value you bring to the table.
Whereas a “small business owner” might have to fight with themselves to justify even a less expensive rate, because they have to struggle to make any sort of spending decisions.
On the flip side, as a service provider the question you have to ask yourself is what limits you from increases your rates?
How much is it costing a company to *not* work with you and what value do you bring to the table?
While I talk about products in here, this really is meant for service providers like yourself. It doesn’t work just for brands with a certain status to maintain, it works for brands that are also establishing themselves in the market.
“It’s all relative” is really about your perception of who’s got money and who doesn’t. If you’re only going after people who you know have money (instead of just anyone who might listen) than you’re going to greatly improve your chances of getting a higher priced client.
I noticed on your about page that you do copywriting for “small business owners” and would say that’s a very broad audience that can cover all sorts of affordability levels.
“I’m a small business owner”, usually comes out of the mouth of someone who believes their business is small.
However, someone who identifies themselves as an “Entrepreneur”, or even a “Start up” have a lot more ambitious goals for themselves, and therefore might be the type of people you want to be targeting and networking with.
I believe that if you switch your target market from “small business owners” to “funded startups” you might have an easier time selling what you have at a higher rate.
Also finding dynamic lists of recently funded startups isn’t horribly difficult, and the words they use to describe themselves have a dramatic impact on their success or failure overall, meaning they would be able to more immediately be able to recognize the value you bring to the table.
Whereas a “small business owner” might have to fight with themselves to justify even a less expensive rate, because they have to struggle to make any sort of spending decisions.
Pricing is not difficult as soon as you remove how you feel abut yourself from the equation: charge whatever you can get away with. Before you think that sounds bad, consider that anyone who undercharges probably has a much harder time making a living than a person who overcharges. And the truth is that very, very few people overcharge. It’s practically a non-issue. The perfect reaction to your pricing is: “Well, they’re worth every penny.”
You can’t make any claims to greatness or quality or results and then make an offer that doesn’t live up to that (and I’m not saying that’s what you’re doing, I’m just making a general statement). That kind of inconsistency is almost as bad as an outright lie because you’re communicating that you’re not worth your own claims. Claim less or charge more, then price and value will be in alignment. There is a line between “getting a lot for your money” and “I can’t believe how cheap this guy is… he must not be very good.” You don’t want to go anywhere near that line.
You make a very very good point. My approach to pricing is “How much is it costing you to *_not_* fix the problem. Which can very easily be uncovered in the type of conversation we’re talking about in the article.
Let’s take the self checkout at the grocery store for example. This piece of machinery now takes the place of 4 even possibly 6 checkers. while it’s sad for those checkers, for the company they now don’t have to worry about unemployment, insurance, disability, or salaries for those 4-6 checkers. Salaries for the average clerk are $29,175/year but on salaries alone the company saves about $116,700 – $175,050 in a single location.
Now let’s think about this for a second. What are those self checkouts really? Simple touch screen interface, tied to a payment processing system, tied to a scale. There’s not even a conveyor belt, which means less moving parts, and pretty much only software is the only thing that could break.
And just by putting these things in your store, each store will save at least 116-175k per year!
While I don’t know for sure, I can guess that the programmer who first came up with it did it on some sort of hacked system.
If they went to the grocery store chains and said, “Look at this! I have a computer system that can replace employees, and it’s really cool and your customers will love it!” Chances of closing that deal are pretty slim.
In fact, the sales people probably weren’t selling the checkout kiosk at all. What they were selling was the solution every grocery store owner (and really every business owner period) is looking for, “How do I decrease my overhead, and increase my profit margin”
The kiosk is only a delivery system for that. Which brings me back to pricing. If the kiosk only cost a couple thousand in hacked parts, and took a developer to write the original P.O.S software framework, and let’s say the overall development of the first prototype took urm $15,000 (remember it doesn’t have to be sexy, just functional) How much do you think they would sell it for if they didn’t take the time to find out how much it was saving the grocery stores? triple? quadruple?
Realistically speaking, one of these machines could sell for 10-20 times that for a multitude of different reasons. It will save you $29,175 a year, it will never call out of work, it will never go on maternity leave, or take disability, it won’t ask you for insurance, it won’t mouth off to customers or become a liability, it won’t sell alcohol to minors (in my state that’s a $10k minimum fine) and it won’t quit it’s job requiring you spend time to replace it.
If the developer limited themselves to charge only 3 or 4 times that, sure the grocery stores would get a great deal, but the creator would just be walked over and would never be able to increase their prices after a while because they saturated the market place with a commiditized product, devaluing the entire industry, (and making way for shady folks to charge more for an inferior product, simply because “there has to be something better, this thing didn’t really cost us that much”)
In short,
my approach to pricing says it has to be somewhere in line with the value it’s bringing to the company. If I know what I have to offer will put an extra 5 figures in their pocket within a certain time frame, I’ll charge 5 figures, because after we’ve worked together, they still get to keep the knowledge (or product) and still get to profit off it.
(yikes, sorry for such the long comment!)
No need to apologize, since the example is a brilliant one that really informs how it’s not only possible but imperative that we price according to value. And where does value exist? Only one place: in the mind of the buyer. This where understanding your market shines, because you have to really know their concerns and pain points so you can let them see for themselves your solution alleviates a very real problem for them.
Tommy – this is great information – thanks so much! It’s so true that when we feel deeply listened to, we hold the listener in much higher respect.
It’s true, and it’s so counter to what the mainstream will say, which is unfortunate. We live in a world of everyone telling you how awesome they are, and very few actually take the time to listen, and really it stinks.
Excellent article Tommy, I’ll need to read it again.
I think I might have the skill of listening at least. Only this week a client said ” I love you. You’re so unusual,” as I happily sat quietly on Skype while she worked through something in her head.
I think I’ll emphasise my listening skills more, because I am pretty good at finding just he right solution for people, on a 1-to-1 basis.
If you’ve got this down, what you should work on next is moving to a group coaching session. That way you can help more people in the same amount of time. Do it right, and you can do crazy good in the world helping 10 maybe 20 people at a time
Tommy, I’ve heard this before and it never hit so hard as you’ve presented it. Excellent work. Great stories and writing style. My to-do list just got longer.
Thanks Josh! Sorry I didn’t get back to you sooner on this, but yeah, this is probably one of the most powerful ways I could think to present it, and it’s the only way that it all makes sense to me
Glad you liked it, now at some point you and I need to make a plan about moving yourself up into a higher price range.
Great article Tommy, so thorough! I wished I’d read it a year ago lol. I learned many of these lessons the hard way…but I did learn them and couldn’t agree with you more.
Sometimes those are the best ways to learn lessons though, and a year ago I might not have been able to put this article out quite honestly
great article, interesting and useful, choosing the right price can make one successful or not
Hello, i’m from Indonesia and i like your blog and your article…that is great, nice information…
Great article Tommy. Setting the right price not only applies to online but also offline. People always percieve by paying more for something they are getting more value. Most business owners spend far too much time competing with their competiters and less time convincing a potential buyer of their product worth.
This is exactly why Apple has been able to get away with selling higher priced computers, and personal accessories for years. It’s simply a better product.
Steve Jobs said it best a while back “In order for Apple to be successful does not mean Microsoft has to fail. In order for Apple to be successful, we have to be the best company we can be”
Whether you’re an Apple fan or not, those principals really do apply everywhere
That’s a great site, thanks for sharing, Alison.
Glad we could help!
love this article , thanks for the post
This post reminds me of a recent quote that stood out in a Seth Godin post: “One of the most effective ways to get your ideas implemented is to charge a lot for them.” <== I used to have a problem with this part. Now, not so much. There's quite a bit of truth in that statement.
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