Psychology counts when pricing a product or service. Take note that in every store, the price of items always ends in .99, .98, or .95 and never .00. Number psychology research has persuasively shown that buyers do not like zeros. Stores do not sell items for $100.00, they sell them for $99.95, because customers associate zeros with premium prices that they’d rather not pay.
Furthermore, the phenomenon called the left digit effect causes our brains to misinterpret that $99.95 as having a value closer to $99.00, instead of $100.00. Lindsay van Thoen, columnist for The Freelancer’s Union, says that our clients are like any other consumer and Freelance consultants should bear that in mind when pricing contract proposals.
When we are invited to submit a proposal, we are all excited. Here comes money! The last thing we want to do is to wind up in a wrestling match with a client who wants to nickel and dime. We take pains to itemize the major components of the project and provide the rationale for the total project fee. Nevertheless, haggling may ensue. According to van Thoen, Freelancers are wise to follow the lead of retailers, cut the zeros from our proposals and make it easier for clients to agree to our price. Resist the temptation to price your project at $5,000.00. Instead, price the project at $4825.00 or $5175.00.
Unfortunately, clients sometimes feel that Freelance consultants pad price quotes, even when an itemized accounting is provided. A figure that does not appear to be rounded-off, but appears to be specifically customized to the service requested and contains few zeros that may imply that we’ve “rounded-up” the fee, can be more trust-inspiring and believable to certain clients.
Other ways to make it more palatable for clients to accept our proposals are to 1.) Ask the client for the project budget and work with them to provide services that you can afford to provide within that valuation and 2.) Provide three levels of service: good, better and best, so that clients can choose services according to needs and budget.
Pricing pundit Rafi Mohammed, founder and CEO of the consulting firm Pricing for Profit in Cambridge, MA, offers two valuable pieces of advice to keep in mind about pricing. First, prices must reflect the value that clients place on the service. Second, different clients place different value on a given service. Offering “good, better, best” options allows the client’s need for the service to be met in a way that is in line with the value placed. A good pricing strategy is an important part of your marketing plan. It sets the stage for building a profitable enterprise. It is imperative to set prices that reflect the client’s value of what we sell and, equally important, to help the client perceive that listed prices are trustworthy.
Happy 4th of July!
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