True story: I was doing a newsletter for a large company, and doing it well, meeting metrics and getting a lot of kudos from the target readers. I lost the contract to a competitor bidding three times more than what I was charging.
I was a one-man band. The competitor had fancy offices and associates, and an account manager.
My client, the manager in the large company responsible for the region, apologized. “Everybody really involved knows that you’ve been doing a great job,” he told me. “But upstairs, the marketing people wanted to put more money into marketing in the region. They charge more, so that’s how it went.”
“It sucks, but it happens a lot,” he said. “They don’t have time to look at the detail. They assume the more expensive bid is better quality work.”
Another true story: I shared the podium several times with a channel development expert who had a one-man business doing seminars, consulting and some specialized loose-leaf binder products. He would talk about channel development. I’d talk about business planning.
He billed $10,000 per seminar day.
I watched him turn down an offer of five straight days for $25,000 plus expenses. I was amazed.
“Tim, watch me do it and learn,” he said.
Pricing is your buyer’s best indication of your value. I can’t say that I didn’t stare into the face of self-doubt many times during the years I survived as a one-man planning business. And I won’t say that I didn’t back down on pricing many times. But my friend had it right. In the professional services business and the expert business, low price isn’t often a good indicator. People buy on confidence, reliability, name and assurance, not on price.
The stories are here today, I suppose, because I just read an excellent, thorough, detailed piece on pricing of professional services by Pamela Slim (author of the book Escape from Cubicle Nation). She says:
By professional services I mean things like coaching, consulting, financial advising, writing and Web design. Basically, any gig where you sell your knowledge for a fee.
If that’s you or your business, you’ll find her post very useful.
[ This post was originally published on Nov. 30, 2007, but has been updated to be as useful and relevant as ever. ]