Today’s article is contributed by Blair Enns, Principal at Win Without Pitching
We’ve gone from an era where creative firms never published their pricing to one where, while it’s not yet common, there’s a bit of a trend toward it among certain types of firms.
There are right and wrong motivations for disclosing your pricing on your website and right and wrong methods of doing so. Let’s explore them.
First, let’s examine the idea of why a creative firm would consider publishing its pricing on its website. Let’s start with what I hope is the obvious wrong motivation.
Wrong Motivation: Demonstrating Affordability
A firm that publishes low prices is essentially competing on price and sending negative messages to the marketplace about quality, confidence and sophistication. Selling on low price can be a viable strategy for fully-productized businesses that have a production advantage or an economy of scale that lets them sell more cheaply than their competition. These businesses don’t mind dragging prices down and squeezing out less-efficient competitors as a means of gaining marketshare.
You’re not in such a business and therefore not employing such tactics. (If you are then you’re destined to always run your business from your parents’ basement.)
Right Motivation: Demonstrating Exclusivity
The opposite approach of publishing higher-than-market prices as a form of positioning is a more valid one. Pricing is positioning. Let’s be clear, however: where Logos-R-Us might price logos at $499, a firm trying to position itself as upscale isn’t going to price logos at $50,000. They’re going to speak in more general terms about the size of budgets they work with. More on that in a minute.
Right Motivation: Advance Client Qualification
Some firms do a great job of inbound lead generation but end up attracting a high volume of price buyers or other budget-challenged prospects. In such firms it can make sense to publish pricing guidance as a means of keeping the gnats at bay. Putting pricing guidance on your contact form is a good way to help vet such clients and ensure that anyone who does reach out has at least some idea of how much it will cost to work with you.
Now let’s look at the right and wrong methods of publicly disclosing your pricing.
Right Method: Minimums
I’m a fan of using a minimum level of engagement (MLOE) in the sales conversation. It can make sense to publish such minimums.
“Our minimum level of engagement is $100,000 in fees over the course of 12 months.”
Or the more subtle, “Projects typically start at $25,000.”
Right Method: Ranges or Examples
I think ranges and examples are the best ways of publishing pricing guidance, saving the more rigid MLOE for the sales conversation where you can imbue some flexibility and use it as a negotiating lever. Ranges and examples provide guidance but still leave the door open to opportunities just below the minimum level.
“A typical project ranges from $100k – $300k and our clients typically spend between $500k and $2m over the course of a year.”
Wrong Method: Package or Tiered Pricing
Increasingly, I’m seeing creative firms, and digital firms in particular, publishing tiers of services with pricing attached. This is a trend borrowed from Software as a Service (SaaS) companies, many of whom are sophisticated pricers. On Salesforce.com’s pricing page for example, I count seven obvious pricing principles, nudges or other tactics designed to leverage the mental shortcuts buyers use, sometimes irrationally, in their decision making.
Many of these pricing principles can be applied in a creative business, including the use of options and bundles.
There are important differences between SaaS companies and creative firms however and therefore implications on pricing strategies. Most SaaS companies are selling products in large scale which means they’re effectively pricing the product and not the client. (More correctly, they’re using sophisticated segmentation strategies on large markets to group clients and price the segments, but compared to your business where you should be pricing each individual client, they are effectively pricing the product.)
Price the Client
In your firm you want to price the client and not the service. That means taking full advantage of price discrimination (a good thing, in spite of its name) and the subjectivity of value which I’ll sum up thusly: a service you perform for one client can be significantly more meaningful and valuable to another client, therefore you should charge less to the first client and more to the second.
When you publish package pricing you remove your ability to practice price discrimination and you force yourself to make significant judgments on the value you propose to create for your clients before you even have a conversation with them.
It is a good idea to think and price in tiers, bundles and options – just make sure that each is constructed for the client, in the sale, and not an off-the-shelf package with a predetermined price.
In summary, it can make sense to publish some pricing guidance on your website to help you with positioning and to prequalify prospects, just avoid specific prices for specific services, and if you do employ the pricing tactics of tiers, bundles and options (as you should), don’t make the mistake of assembling, pricing or publishing them before any conversation with the client.