Industry Standard Pricing (No Such Thing)
There’s no such thing as a price that the industry has standardized.
Sure, the electrician who’s part of a union is obligated to charge a certain price.
Of course, the agency who hands out a rate card is going to make sure its prices land somewhere close to the other agency they’re competing with.
But in reality, in the mind of the buyer, there isn’t an industry standard price for anything.
There are only things that push, and things that pull. And the price is usually, but not always, something that pushes. The price usually pushes back.
Anxiety #1: The Price is Too High. So No.
In the Forces of Progress Diagram, we see that a high price is definitely a point of anxiety about the solution you’re proposing.
Of course, a high price is usually taken as a bad thing to reduce at all costs. But a high price is only half the story. A low price is also suspect.
Anxiety #2: The Price is Too Low. What Am I Missing?
Another anxiety is the price that’s too low. It signals to the buyer that there might be a catch.
- ←⚬ The price seems low
- ←⚬ There are too many features and add-ons I won’t use.
- ←⚬ Maybe this thing will break on me once installed.
- ←⚬ Maybe I’m dealing with an amateur.
And maybe your solution or proposal or service might induce many other anxieties – besides price – that will turn off (push back) the buyer and make them say ⚬← “no” or ⚬← “not now”.
Solve for all these others anxieties, and confidently set a fair price.
The Two Pricing Universes
The first pricing universe is that of hourly pricing. How much will it cost? $150 an hour, $60 an hour, $25 an hour. You count your time on a time sheet, you bill the hours worked.
The second pricing universe is that of value-based pricing. You give a price that solves a problem you can both measure, with a solution whose impact you can both measure. Since you know what difference your work will do to your client, and you both know how it’ll be measured, you’re just going to do what needs to be done to make that difference happen. Increase profits, reduce costs. Increase this, reduce that.
Going from one pricing universe to the other is hard work. A lot of how you do things is bound to one universe.
Competing Against Yourself
So what can be done? You can compete against yourself. That is, you give out options that fit in the different universes. Option 1: hourly pricing. Option 2: value-based outcome. Option 3: If anything were possible. (Also value-based).
That way, each option ends up competing with each other. In each, the price is just one point of anxiety (or attraction) among many other influences.
Each option will elicit its own set of forces (pushes and pulls) in the buyer’s mind.
At that point, for that buyer, there really is no industry standard price. Because they don’t want an industry standard result.
Stay Sharp!
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Pascal Laliberté
@pascallaliberte