If we offer a service, how do we price our time? The title of this blog is taken from a song where ship captains used to try and skip port without paying the dock workers and/or crew. You can listen to a version here: Pay Me My Money Down.
Ewan Davis devoted an edition of The Bottom Line on BBC Radio 4 to the challenge of pricing for professional services – The Price of Time. His guests included a senior partner of a magic circle law firm, a global communications group executive and an on-line estate agent. They discussed their pricing models ranging from hourly rates to straight commissions and how they adjust these to meet client expectations.
One challenge they faced was how you charge for the value you add to a client or customer. E.g. “The future’s great the future’s Orange” campaign there was a major “disconnect” between the fees charged and the value added. Many clients want certainty, transparency and value while increasingly many prefer fixed pricing. In the legal profession you will also be familiar with the notions of no win, no fee. As we become increasingly data rich we can measure the precise outcome of some advice, especially communication campaigns. Yet at the outset it can be almost impossible to quantify the value you may add.
Paul Gauguin’s painting recently sold for $300m reinforcing that value is in the eye of the buyer. Yet I’ve always liked the Monty Python Life of Brian scene on haggling which I think suggests this is a game we all play. It was eye opening to attend a Yorkshire car auction many years ago and learn from the characters “wheeling and dealing”. I was struck that after one car deal was aggressively concluded the seller handed some cash back to “sweeten” the deal.
I’m not sure that the “customer is always right” e.g. the way the major supermarkets and other powerful organisations like Amazon & Apple treat their suppliers. It is not the way forward for a balanced market and fair society. I love Simon Biltcliffe’s notion that our suppliers are ten time more important than our customers!
Maybe Pay Fair is a way forward for the professional services? In essence trust that your clients or customers will value what you are selling and appreciate the value you add. Maybe pricing is just a game but surely we can find some rhythm and soul to foster openness and trust? Hope & Social get people to sing, play and dance while trusting people to Pay What You Want. Pricing becomes an opportunity not a problem.