Year End Sale

by Randy Murray on August 13, 2010

This is my year end. Monday starts my 2nd year of publishing First Today, Then Tomorrow.

So for today, and today only, you’ll get a special bonus post (OK, I screwed up the scheduling and you got 2 yesterday, but in the best marketing sense, this is a bonus post!).

But let’s talk about sales and discounting for a moment.

In sales and marketing, you quickly learn that if you establish a pattern of discounting, say at the end of a year or the end of a quarter, your regular customers will quickly recognize this and delay their purchasing until those times. This is not a desirable state. Frankly, discounting even once shows that you are willing to negotiate on price and make discounts a permeant part of your dealings with that customer.

For a freelancer or independent consultant, this can be a significant problem. Your fees are already looked at as arbitrary. I’ve hired dozens if not hundreds of consultants over the years, long before I became one myself. I saw what worked and what didn’t. And when I became one myself a year ago, I took advantage of this experience and shaped my consultancy after the best of them. I’ll share what I’ve learned with you.

Here’s my pricing model:

  1. Pick a number that you think is representative of your skills, experience, and value.
  2. Double that number. You’ve underestimated how long any given project will take and how hard you will work. If that number doesn’t make you wince a bit, it’s too low.
  3. Be unapologetic about your pricing. Yes, you are more expensive than your competition. And you’re worth it.
  4. Be worth it.

If you have priced yourself correctly, a new prospect will think two things in this sequence:

  1. “Wow, that’s expensive!”
  2. Quickly followed by, “This person must be REALLY good!”

They’ll only think this if you present yourself confidently and if you have the evidence of good work and happy customers to back you up. How you get to that state is another discussion.

And a word about discounting:

Don’t.

Don’t discount. If a customer wants a project done by your hourly rate, charge your hourly rate. Do a damn good job at it, but charge your full rate. When you’ve finished with this project, you can bring up the subject of project rates, charging by the full project, not the time that it takes to complete the work. If you have a strong and clear understanding of the requested project, this can be profitable for you and a savings for your customer. Most of my customers quickly transition from hourly to project rates. And I’ve found that this results in predictable workloads for 2-3 months in the future – a great state for freelancers to find themselves in. Businesses like predictability and project rates do that for them.

On the other hand, don’t offer a project rate unless you have a clear understanding of the project and have a written Statement Of Work with the customer so you can’t be overrun with project change requests and project creep. A simple model Statement Of Work should be in every freelancer’s toolkit.

There is one exception to my discounting rule: I offer a discount on my hourly rates to customers who have a retainer agreement with me. If a customer agrees to pay me a monthly retainer for a specified number of hours and they exceed that number of hours in a given month, I offer them additional hours at a discounted rate. That’s both an incentive for them to pay me a retainer AND it encourages them to freely use my services.  They know that they need to use up their reserve and they know that a few additional hours will be a bargain. You want customers who pay you a retainer to use your services. If they don’t, they’ll soon decide to stop paying you the retainer.

How do you set your pricing? Do you really get paid what you’re worth? I’m interested in hearing about your pricing models and how you deal with price and discount pressures. Please leave a comment and join the discussion!

  • Share/Bookmark
The Year End Sale by Randy Murray, unless otherwise expressly stated, is licensed under a Creative Commons Attribution-NonCommercial-ShareAlike 3.0 Unported License.

{ 2 comments… read them below or add one }

1 Iain Broome August 17, 2010 at 12:40 pm

You’re right, it’s so tempting to sell yourself short and easy to forget that high prices usually mean great service.

And of course, it’s very difficult to go up with your rates once you’ve set them at a specific level for a clinet. If you do a great job, they’ll inevitably expect the same quality for the same price. It stands to reason.

Great post – very thought provoking!

Reply

2 Randy Murray August 17, 2010 at 1:52 pm

Thanks, Iain.

So many writers and other freelancers do sell themselves short. They’re scared to death about not being able to land enough work to keep themselves alive.

I understand that. That’s why I recommend that young writers and freelancers apprentice themselves to established professionals. That will help them gain the experience they need to eventually go it alone and charge fully what they’re worth.

Reply

Leave a Comment

{ 2 trackbacks }

  • Tweets that mention Year End Sale -- Topsy.com August 13, 2010
  • Poniendo precio a los trabajos | cjnavas.com August 13, 2010

Previous post:

Next post: