How To Look at Pricing Differently
Our Austin WordPress Freelancers reviewed several strategies to implement value-based pricing during our August Deep Dive Discussion. We looked at industry standards for pricing related web development services and how our individual experience, specialized knowledge, and skills affect the value we offer our clients. Additionally, we discuss how to qualify potential clients, so we are working with the kind of customers who appreciate how our special skill set and experience can add value to their businesses.
I want to start these class notes the same we started our class…by stating right up front, that everything Nick and I know about ‘value pricing’ we have learned by either surviving our own mistakes; or listening to, and being inspired by, Chris Lema. His presentation at the 2015 PressNomics Conference inspired a radical re-thinking about how we dealt with our clients and our business. Later that year, Chis followed up that presentation with a webinar, “You Can Quote Me…” This webinar discussed some additional insights for WordPress Freelancers on how to develop a sustainable pricing model. His key point and the one I wanted to share with our WPATX Freelancer Community is that inexperienced WordPress Freelancers often end up deciding prices based on an estimated time-frame or by comparison to other freelancers practicing in the local community. That is not the way to build a sustainable business.
So let’s start with something so obvious we often miss it. As a WordPress Freelancer, your technical and management skills increase over time. As you build upon and expand your specific expertise you will become more valuable over time. Increased competence yields increased efficiencies, so your pricing should increase over that same time. That thought process is the foundation of ‘Value Pricing.’
What Is Value Pricing?
Value Pricing is about understanding your client’s business environment, their business model and how your specific expertise can provide the solutions they are seeking. Using the value pricing strategy, a freelancer sets a project price by considering the perceived-value your service or product customer carries and how much that client is willing to pay for you to deliver the solutions they are seeking. In other words, pricing your service or product on the basis of what the customer is ready to pay for it. This is a pricing strategy which sets prices primarily, but not exclusively, according to the perceived or estimated value of your service or product to the customer, rather than according to the time and material formula to deliver the service or the product. Value-based pricing is the setting of a product or service’s price based on the benefits it provides to consumers. By contrast, cost-plus pricing is based on the amount of money it takes to produce the product.
So, here is the catch about value-based pricing. A freelancer can’t use value-based pricing unless they have focused and really understand a specific market segment — their ideal client. This goes back to understanding the importance of staying in your swim lane. Each of us a special niche. We may have landed in that niche due to nurturing a specify skillset or a personal passion for the subject; but somehow, most of us end up as a specialist in something. For some in our community that special focus may be designing/developing UX/UI – how site visitors interface, use and experience a WordPress site. For Nick, his passion and his business niche are designing and developing information architectures. As a Senior WordPress Back-end Developer, he specializes the system design and implementation of custom, often complex database solutions that address client data management issues. He knows the special needs of his market segment. If a client asks him for a theme with specific UX/UI features, which is NOT his market segment, he refers that client to someone in our community with that specialty. To be a profitable freelancer, you can not be all thing to all people. The phrase Chis Lema used to describe your market segment was identifying your Corner.
Find Your Repeatable Niche and Invest the Time and Focus on Building a Core Expertise That Increases Your Value
We have discussed the idea of a repeatable niche in previous Deep Dive Discussions Tthe intelligent introvert’s Patron Saint, Seth Godin, refers to the process as finding and building your Tribe. You need to invest the time and focus to be considered an expert in a specific niche — to know that market segment well enough to be able to add value to the clients in that niche. As you build your expertise, start generating niche specific Use Stories on your site. This helps your market identify you as a knowledgeable, experienced resource. Clients are willing to pay for your experience and the added value it offers them. Your increased value to the market significantly increases the price that niche is willing to pay for your services.
What Am I Willing To Change
The adoption of ‘Value Pricing’ requires two major shifts in how you think about your freelance WordPress business. I’m not going to even pretend this process is easy. Changing how we freelancers think about ourselves and our business gets personal and sometimes uncomfortable. I get that, it’s taken Nick and me years to move toward value-based pricing and we still have to give each other pep talks.
To start with, you will have change how you regard your projects. You must accept that clients want results and are inclined to pay more, provided you help them reach their goals. You need to understand their business model well enough to not only see their Vision for the project but help your clients to see, and buy into what that Vision means to their business. This type of client engagement goes far beyond pitching the look and feel of a client website. This type project interaction is communicating the results the client gets from using that website to grow their business.
The next value-pricing hurdle you will have to clear is changing how you see yourself as a WordPress professional. You need to recognize and honor the value you bring to your clients with your unique skills and experience. Your contribution is more than just the number of hours you devote to a project or task. I believe one of the most difficult things for a WordPress Freelancer to do is let go of the beliefs that keep you thinking that you can’t price based on your own value and the value you’re adding to the client’s business. To be paid what we are worth, and build sustainable freelance businesses, we each have to see the unique value that we bring to tour clients’ projects that cannot be measured in hours.
Are you Psyched? Are you Ready?
If you are ready to do some ‘think-work’, answer the following sets of questions. The goal here is to figure out who might be your ideal market segment based on your interests and skill sets. Or, as Chris Lema refers to it, finding your Corner.
Step 1 — Which Corner Do You Want?
- Your first step is to decide which corner you want to own.
- What area is it that you specialize in that no or few other people do?
- You are not just a WordPress developer.
- You do not just build websites.
- Write down your point of specialization.
Step 2 — Who are the Players?
- Now you know which corner of the market you best fit into, you need to find out who your competitors are.
- Don’t just think geographically…though this is a good place to start.
- Are they solving a client’s problem in a different way to what you will be?
- Make a list of your perceived competitors and peers and get to know them.
- You want them to understand your point of specialization as well as you understanding theirs.
Step 3 — Understand Your Profit Margin
- Do you know where your “Profit Floor” is?
- Never a set a price that is not profitable.
- Price products so that every product or service sale makes sense.
- Is it sustainable going forward?
- Don’t have a loss leader to get people through the door.
- Open Excel and think about your last three projects.
- Figure out what the expenses and costs of each project were.
- Are you constantly testing?
- This will help you to understand your profit margin.
Step 4 — Put YourProduct Strategy In Place
- List all the extra items you can think of which will provide a benefit to the client in the future and that you can sell as an add-on to them.
- Now calculate the profit margins for each of these add-ons.
Step 5 — Make a Promise Today To Stop Answering the Hourly Rate Question
The next time a client asks you about this — have a confident answer in place about how your expertise can add to their sustainability.
Some Pro Tips about Value-Pricing Strategy
- Qualify your clients. Be as selective as your clients are. A good fit delivers great results.
- By the time someone calls you they have already identified a pain point and are looking for a solution. Clients want results and they want them now. Your value-pricing strategy should frame you as an ‘Accelerator’ — a way to get to their solution more quickly.
- Invest the time to listen and understand what your client actually needs, Be an active listener. Don’t start solving the problem too soon. Use the Go Wide/Go Deep question series we discussed in Client Discovery.
- Take The Time to Learn Your Client’s Pain Points
- Knowing the value of solving that pain helps you understand how to set a realistic price. Are you speaking your client’s language and taking the time to understand their needs?
- Know your client and dig deep to comprehend how much your solution is worth to them. Maybe you have lost customers in the past because you have priced too low rather than too high
- Never put a price infant of a client until you fully understand what is motivating them
- Give your Client Options
- Never put only a single option/price in front of your prospect.
- Giving options can help clients figure out what they need. Create options from which clients can choose High-end / mid-range / less they might have expected
- Keep a history of your proven track record. It goes a long way to justify your rates.
“A problem well-defined is a problem half-solved.” — John Dewey
After Class Resources
I hope these class notes help. I have included a link to the class Slidedeck below. I’m sorry if the transfer from Keynote to PowerPoint format sometimes does odd things to the headers and some images. Deepti and I urge you to join and perhaps contribute to the Austin WordPress Tribe by volunteering to take notes for our wpauston.com website, present at WPATX meetups or helping with our annual WordCamp. You can always find the current class schedule at https://www.meetup.com/austinwordpress/ We look forward to seeing you at an Austin WordPress Meetup soon.
Follow Sandi Batik @sandi_batik / @WPATX / Contact me at: handsonwp.com / LinkedIn https://www.linkedin.com/in/hsandrachevalierbatik
Follow Nick Batik @nick_batik / @WPATX / Contact me at: pleiadesservices.com / LinkedIn https://www.linkedin.com/in/nicholasbatik