The High Cost of Low Price

Author Kirk White once told me that Jack Canfield, of Chicken Soup for the Soul
fame, has an interesting way of setting prices for speaking engagements: ask for the highest number you can without laughing. Canfield has mastered the idea that competing on price is nearly impossible if you're not WalMart, something that I've always understood intellectually but I've struggled with emotionally.

You want me to charge HOW much?
My Duct Tape Marketing Coach is quick to tell me why I should never overspend on advertising, but when he saw my list of services he was quick to tell me that my hourly writing rate was much too low. There are a lot of costs that have to be factored in to the rates you charge.

• Overhead expenses, like the ink cartridges, the internet access, top-notch business cards, and the like.
• The time spent on activities like marketing, meeting with clients, and other critical functions.
• Anything that contributes to top-notch customer service, like overnight deliveries, a solid guarantee, and staying up all night to finish a project that the client really needs done quickly.

It's pretty easy for a business owner, particularly one who used to do the same kind of work for somebody else, to underestimate how much to charge by failing to consider what his services really cost to provide.

The economics and psychology of price
On top of the business considerations, pricing services and products too low can impact my business in other ways. For one, if I pick a price-point that is too far below what others in my industry are charging, potential clients may think I don't have the experience to do the job right, and look for more competent help elsewhere. Drop it even lower and I find myself with rates just a bit higher than writers in the Phillipines are charging. I can't compete with someone who can live on four dollars an hour, at least not on price. My target clients don't go to Elance to find writers, because they know that you get what you pay for.

Overcoming my own objections
I know all of this, but the knee-jerk reaction to setting an appropriate price is, "Good gods, nobody will ever hire me!" Luckily, I had a near-disaster of my own that helped me overcome that objection.

In my Practical Marketing Program we've learned that providing educational content is absolutely necessary these days - people want to know what you know before they'll give you a try. So, I took a long, hard look at my Professional Wordsmith blog, which has been functioning as my website. It has served me well, but I needed something with more pizzazz, and elected to build a Wordpress site because it's powerful, customizable, and easy to learn.

I picked a company from the list of recommended hosting providers with Wordpress built in and arranged for my domain name to be transferred. As soon as I got access I realized my mistake: with no way to compare them, I had gone with the cheapest company, and it showed. Wordpress may be easy, but trying to navigate GoDaddy's interface is anything but! I immediately asked to cancel the transaction and reverse the domain transfer, but ICANN, the organization overseeing such things, has rules preventing transfers more often than every sixty days.

As I puzzled this all out, my site and my email service tanked, and I was in a near-panic when I discovered I had a solution right under my nose: I knew that Kathode Ray Media, a Hudson Valley marketing firm, is excellent at web design, but I didn't realize they also provided hosting services. Arielle Doerle took a look at my situation and quickly hashed out a solution: keep my domain registered through GoDaddy, but transfer the hosting to Kathode Ray. I didn't know there was a difference, and there wasn't a person at the other end of a phone to lay it out the way Arielle did. She got my hosting resolved so that my email was up and running again within the hour, and within a week I'll have a site with all the flexibility of Wordpress but without the headaches of a distant stranger hosting my site.

So what did I learn? Without going on a serious tangent, a few things:

1. Shop local, you ninny!
2. Don't assume the companies you already work with don't provide a service you need. Ask, you ninny!
3. Be suspicious of low prices! I just can't get the level of support I need from a discounter like GoDaddy. Knowing that my domain is safe, my email is reliable, and my site is customizable by me is valuable to me. Being able to pick up the phone and get a problem I don't even understand fixed in under an hour is invaluable to me. You just can't put a price on value.

For me, the value I provide is in listening to my clients, and taking the time to make sure my words say what they mean. I guarantee work that's free of the grammatical, spelling, and typographical errors which are common in the work of even the most fluent writers of English as a second language. I revise when I miss the mark, and I listen to the feedback I get as carefully as I do during the initial interview for the project.

That's value to someone looking for writing. After seeing how valuable choosing the best was for me and my website, I am now ready to price my services fairly for the value I provide.