How to Figure Out What You Should Charge


Table of Contents:
I. Why is Pricing So Hard?
II. Pricing is all Mindset
III. It’s Not Your Fault
IV. Price Anchoring
V. How to Sell Using Price Anchoring (Quick 3 Steps)
VI. Conclusion & Resources


Why is Pricing so Hard?

One of the most burning questions I had when I first got started in consulting was, “How much do I charge?!” I would go into cold sweats every time I thought about raising my rates to even close to what I knew I could charge.

Maybe you’re like I was. If you keep asking the same thing, you’re not alone. So many copywriters, consultants, and even service providers I meet ask the same thing. It’s a difficult thing to price correctly, and the reason is because you’re thinking about it all wrong.

Pricing is All Mindset

Pricing really is more art than science. There really aren’t any magic numbers that work for every person, market, or problem. Let’s look at the consulting realm:

There are consultants charging $50-100 an hour and there are consultants charging tens of thousands per day. Don’t believe me? According to my copy of Dan Kennedy’s Magnetic Marketing*, Dan charges something like $19,000+ per day to fix their marketing and build a direct mail funnel. Why such variability in what is essentially the same service?

The truth is, making more money as a consultant is entirely a combination of mindset + price anchoring + confidence. And the confidence in your rates is probably the most important of all of them.

It’s Not Your Fault

Look, it’s not your fault. What do all the “gurus” say when they talk about pricing your services? They say something like this:

“Price what you’re worth!”

But “Price What You’re Worth” leads to a line of thinking that goes like this:

  1. Last time I worked for a client/had a job, I made $X per Hour
  2. In order to pay my bills, I need $Y per Hour.
  3. The other guys I’m competing with charge $Z per hour, therefore I have to charge Z.
  4. I can’t get work quickly despite advertising my rates, so I must be too high. I’m going to charge closer to $X.

Yiiiiiiiikes people. This is bad. This is why we get that race to the bottom that every freelancer warns about. It’s bad mojo and it’s killing your business. (That and hourly billing, which is an evil handcuff.)

The truth is, there’s a better mantra you have to use when you price. Are you ready?

It’s simple: “IT’S NOT ABOUT YOU.” 

Seriously, stop thinking about youyour worth, your skills, your experience. Your prospects don’t actually care about that beyond the value of a story, which is what it takes to get them interested in you in the first place. Otherwise, it’s meaningless to most prospects, who by the way don’t know you from Scott down the street.

Instead, focus on themTheir problems, their goals, their pain pointstheir awareness level. Heck, even their budget, which is likely a h-e-double hockeysticks level above your own  meager need-per-month.

Have you ever read the book, “How to Win Friends and Influence People?”* It’s a great book, by the way, and one you should grab immediately. The gist of it is pretty simple, and it goes like this: In order to be interesting, you have to be interested.

That is, people enjoy talking about themselves. They enjoy it so much that they’ll think you’re the greatest person since sliced bread if you’ll let them ramble. People are craving to be heard and understood. You taking a few minutes out of your day to do it will mean the world to someone else. And that’s how you create relationships.

So when you’re marketing, you had better be talking about them. Don’t talk about yourself. Talk about the problem that you solve. Which brings me to the next point: price anchoring.

Price Anchoring

Price anchoring is the idea that the first piece of information you receive about something will create a bias that colors the rest of your experience. This is why it’s so hard to change your prices with existing clients, and why you have to anchor it to something else (e.g., your posted rates are now significantly higher than they’re paying, and you don’t want them to feel like they’re getting second-rate work from you because they’re paying less. Etc). 

P.S. Eric Yu talks about the three benefits of price anchoring. I highly recommend you hop on over there when you finish with this post.

How to Sell Using Price Anchoring:

  1. Find out what their most painful problem is
  2. Discover and discuss what that most painful problem costs them or is worth
  3. Talk about your pricing in relation to solving that problem

For example: as of July 2016, I charge $5000 per month for my consulting and copywriting. It’s a terribly low number for the results I bring, but we all have to start somewhere, right? When I sell my services, I always anchor it on the goal revenue I’m going to bring them as a result of working with me. I point to what I’ve done for other clients (usually 3-4X my retainer) as proof of the ROI.

Then I point to what else they could spend their money on, which wouldn’t get them the same ROI. E.g., hiring an expensive “graphic-designer-slash-marketer” at $60K, who doesn’t know direct response like I do. Or a six figure CMO who doesn’t guarantee her work like I do. When I’m telling a customer (and looking them square in the eye) and guaranteeing that I’ll bring them from $100,000 annually to $250,000+ annually or I’ll work for free until I do

well… that $60K in exchange for “guaranteed” $150K+ they didn’t know how to get starts looking pretty cheap, doesn’t it?

This is why your landing pages, sales letters, etc have to have benefits. This is why any copywriter you hire will rip out your “features” and “years of experience” wording right away. This is why the big time consultants barely talk about themselves.

Here’s a free Freelance Rate Calculator from Brennan Dunn

Example: Look at Ramit Sethi’s about page – everything he talks about  relates back to solving your financial problems. He only shares enough to prove that he’s just like you and that he understands what you’re going through.

Conclusion

Summary:

  1. Pricing is hard because you’ve been misled by everyone
  2. Price according to value, not to yourself or market rates
  3. Use Price Anchoring to your advantage

Now go thee forth and make more money!

via GIPHY

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Useful Resources:


* this is an affiliate link. Just do some Google searching for the title if you’d rather those pennies stay in Amazon’s/whoever’s pockets instead.

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