We live and work in a commodity-driven world. This article is relevant to all of us in the promotional products industry, as well as retailers, plumbers, designers…you name it. We are always being asked to justify our pricing. It’s not a fun topic, but one with which we all deal.
How do you react when someone asks you why you charge what you do, or why your prices are so high? Can you justify it, or do you find yourself apologizing for trying to make a living?
I know…we’re not all Canadian.
It’s like this: money makes many people uncomfortable. Especially those who have chosen to do what they love. Creatives and entrepreneurs all do what we do because it’s what we enjoy. Isn’t that rewarding enough?
Well…no. Every so often I enjoy eating.
I’m a freelancer. While I do actually work for companies, clients and organizations, I do get to set my own pricing. Then the real fun begins: having to answer the question “Why are you so expensive?” on at least two levels. First, I owed myself an explanation. Secondly, I had to explain it to my clients.
I recently read something about this which seems relevant…at least to me. In that this is my column, that’s all that matters. In that you have chosen to keep reading up to this point, you’re either interested or bored. I’ll flatter myself a bit and go with the former.
Here’s some of what I read, cut-and-pasted and ultimately interrupted by me:
“The question “Why are you so expensive?” has three elements. WHY, YOU, and EXPENSIVE. The word WHY demands justification, immediately putting you on the defensive. Do you wish to go there?
“Here’s the thing: if you are comfortable with your rates, there is no need to defend them. The moment you feel unsure about your prices (and your self-worth), you’re more likely to lower your fee at the first sign of resistance”.
When I first became a consultant, my own uncertainties and, yeah…insecurities made we question my fees every time we got that far along in the discussions. As soon as a customer uttered those awful words “we have a limited budget,” I believed them, and I lowered my price. Big mistake.
Let’s face it: we have no way of knowing how much a client can or can’t afford. What we all should know is that we can’t afford to work at lower rates. Low fees are often seen as a sign of inexperience and amateurism. You’re a professional…act like one!
Stop being so desperate. Have some dignity. You’re not a non-profit organization. You’re entitled to make a living. It’s not a crime to turn down work or walk away from a bad deal. There’s always someone else out there willing to lower his pricing and standards in order to ultimately earn what amounts to little more than pocket change.
But let’s circle back to that awful question. “Why are YOU so expensive?” Well…compared to whom?
The unspoken assumption is that there are others who are willing to do it for cheaper. I first wrote “less” but no…”cheaper” seems more appropriate in this instance. You have to realize that the prospect is talking to you for a reason. You’re a star and they know it. Or had better…quickly.
What is it that you bring to the table? That age-old question: “why you and not the lady down the street?” This is where you listen to your prospects, and you give them what they need without an attitude. You may be even new to the business, but you are a professional!
Going back to that article I’d read: "A wedding photographer I used to work with got this question all the time: “Why should we pay you a fortune for a few hours of your time?"
She learned that the first thing she had to overcome was the costumer’s ignorance about pricing and ignorance about what’s involved in doing the job. Most people had no idea of the going rate, so they had no way of telling whether someone was expensive or not. They just heard a number that seemed high. They made a mistake many beginning freelancers make:
Thinking that what you make is what you take home.
They did not realize that the fee for a photoshoot paid for professional cameras, lenses, lights, a shooting assistant, computers, editing software, a website, advertising, accountant’s fees, taxes, memberships of professional organizations, insurance, continuing education, a retirement plan, transportation, a photo studio, time spent looking for work, doing the books, editing photos, et cetera. Whatever is left has to pay for rent or mortgage, groceries, utilities, childcare, vacations, charitable donations, and many other expenses.
And that’s that: what’s the actual cost of you doing business? Your clients have no clue about this, nor do they care. However, if you don’t build these expenses into your fee, you will go broke. Did I mention I like to eat?
I’ve certainly done this, and I’m sure you have too: I’ve often perused a restaurant’s menu ahead of time and yes…looked at the prices. Do I call the owner and ask them to justify the $50 melted cheese sandwich? No! I instead choose to eat elsewhere. I am certain that that restaurant can justify, at least to themselves, the cost of that food. And you know what? More power to them.
I have to admit: all of this is making me hungry. Okay..who’s buying me lunch today?
Mike Schenker, MAS, is “all that” at Mike Schenker, Consulting, where he assists businesses entering the promotional products industry, mentors professionals, and offers association management. He is a promotional industry veteran and member of the Specialty Advertising Association of Greater New York (SAAGNY) Hall of Fame. He can be reached at mike@mikeschenker.com