“The greater danger for most of us lies not in setting our aim too high and falling short; but in setting our aim too low, and achieving our mark.” – Michelangelo
Do you ever worry you are charging too much? What if you are charging too little?
Let’s discuss a rarely discussed topic: pricing. At your creative firm, how do you set your prices?
As owners, we constantly worry about charging too much as compared to our competitors. But do you ever wonder if you are charging too little?
Although I do have an objective methodology for how to calculate optimal pricing (hourly rates based on overheads, margins, utilization, blah blah blah), let’s go at this topic from an entirely different angle. Rather than asking “How much should you charge?,” let’s instead ask “How much could you charge?”
And what difference might that make?
Do You Want to Be the Best?
Let’s step back and look at your creative firm. Is it safe to say you want to be the best at what you do? Naturally, your answer is “YES!”
Here is a much tougher question: Are you prepared to do what it takes to be the best? If you hesitated a bit before answering “YES!” to this question, that’s okay. Every owner hesitates.
There’s a reason why. Let’s play a little game to see why your beliefs about pricing are what gave you pause.
Your Pricing Strategy
A few years ago when I was running my own 25-person production company, one of my producers pulled me aside to express a deep concern:
“The client said out of the three proposals they received, ours was the highest. I think we need to lower our prices!”
If you were me, how would you have answered her worry? Was my producer recommending a sound pricing strategy?
(In case you want to know what my actual answer was, I told her, “Good. We are the best studio in this market. And despite our high bid we are still in the running. Now let’s go win the project!” We did.)
I am all for being competitive. But every firm that leads with a “We can do it for less than the other guys!” positioning invites snickering from clients behind closed doors.
Don’t be the butt of jokes. I propose you approach your pricing differently. How about this, instead of your pricing being based on your competition, base your pricing on the value you’re capable of creating.
I realize this sounds vague and idealistic. But ideals serve an important purpose. Let’s see where they lead.
Breaking Out of Low-Budget-Thinking
As consumers we generally believe that if a thing costs more, it must be better. And whichever thing costs the most, must be the best. Look at your business and ponder this: in every market there is a firm charging the highest prices. Why shouldn’t that be yours?
What if you decided tomorrow to charge as if you’re the best, even if that meant you became known for charging high prices? What would happen?
“In every market there is a firm charging the highest prices. Why shouldn’t it be yours?”
I’ve done it and I can tell you, it’s like a Jedi mind trick you use on yourself to free yourself (or put pressure on yourself, depending on how you look at it) to actually be the best. Think of it like self-imposed reverse psychology for breaking out of what I call “Low-Budget-Thinking.”
Instead of Low-Budget-Thinking, make a habit of Big-Budget-Thinking. When bidding on the next project that comes your way, ask yourself this question: “If I were the best creative studio / agency / firm – commanding the highest prices – how much would I charge?”
Write down that Big-Budget-Thinking number and then ask yourself: “If I could convince this client to award me that Big-Budget for this project, what might be possible?”
See how it works? Now you’re thinking. With that bigger budget, perhaps you could:
- Hire that superstar designer you’ve always wanted to work with.
- Shoot on location with A-list talent.
- Invest in a new capability.
- Spend time crafting a truly innovative – and evergreen – concept.
- Solve the client’s bigger problem: develop a long-term strategy instead just another execution.
You will discover that Small-Budget-Thinking focuses your mind on limitations, whereas Big-Budget-Thinking focuses your mind on possibilities.
“Small-Budget-Thinking is about limitations, Big-Budget-Thinking is about possibilities.”
Pricing Reveals What You Believe
If the idea of charging your clients higher prices strikes fear in your heart, ask yourself, “What exactly am I afraid of?” Don’t you want to be the best?
Or to the deeper question, do you honestly believe you can be the best?
“Do you honestly believe you can be the best?”
If the answer to either of these questions is NO, this is why you hesitated to answer the question, “Are you prepared to do what it takes to be the best?” Danger, Will Robinson! Please don’t tell your clients – or your team – that’s what you believe. You’ve got soul work to do.
However, if you answered these questions YES, I encourage you to push past the fear and charge like you mean it.
“Push past the fear and charge like you mean it.”
Start with Big-Budget-Thinking. Dream up big ideas that show the client what you’re capable of producing. Pitch them. Win the job. Expect nothing but the very best from yourself and your team. Then go create the best work you’ve ever created. Amaze your client. And make no apologies for how much it cost.
The top Creative Companies do this every day. Why shouldn’t you, too?
(Note: one strategic byproduct of charging higher prices is healthier margins, which you will need to afford the best talent. Having top talent is the single most critical ingredient your firms needs to be the best.)
Pride In Spending
One principle that I learned years ago called “Pride in Spending” is worth noting as a real-world, albeit contrarian, challenge to Low-Budget-Thinking.
We all believe that people love spending less, not more, right? But if you look people’s actual behaviors, sometimes we humans love to spend more. Why? Because sometimes we take pride in spending more in order to get the best.
Luxury brands rely on this principle with great success. That guy driving a fancy BMW sleeps like a baby at night proudly knowing he paid top dollar for (what he believes is) the very best car money can buy.
Whenever possible, take advantage of the Pride in Spending principle.
Okay, let’s come back to earth. Most clients in the real world will resist paying higher prices. I get it. So I’ll end with two practical strategies for dealing with objections along your journey:
- If your clients resist because they don’t want to pay for the best, upsell instead using pricing options, such as the tried and true “Bronze, Silver, Gold” strategy. Almost every client who at first swore they could only afford Bronze will hear your fabulous ideas and come back with, “So we want the Gold option… but at the Silver price. Is that possible?” That’s progress!
- If your client still balks at your prices, employ a smart discounting strategy which doesn’t cheapen your offering.
Lastly, if your clients resist by saying they don’t want the best, that’s a much bigger problem: you need new clients.
Doing What It Takes
Back to the question, are you prepared to do what it takes to be the best? Now you can comfortably answer the question without hesitation. Go for it.