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In a business discussion, the question on price would invariably come up sooner or later. Ultimately, price often plays a major role in many prospects’ decision (it’s because we Asians).
[pullquote]“… it depends” is a blanket response for almost any question in life.[/pullquote]
Even when I don’t intend to engage the services of my counterpart, I sometimes ask about price out of curiosity, in case any of my friend or associate needs that product or service. But I often hear this unhelpful answer, which I used to say a lot, especially from freelancers in the service and creative industry:
What? That’s it?
But it really depends! What’s wrong with that answer?
Shockingly, a very small minority stop after that succinct response. It’s as if they’re not even trying. They fail to see that “it depends” is a blanket response for almost any question in life.
[pullquote]Business people want certainty, not surprise.[/pullquote]
It lacks sincerity
Furthermore, what does it depend on? If it takes a lot to get them to answer a simple question, it makes people wonder how far they’d go to do a good job. The seeming lack of sincerity (maybe they didn’t mean it) can be frustrating to prospects.
Some may even see this as dismissive as if they’re just being patronising and is uninterested to talk about it any further.
Business people want certainty, not surprise. They often have a budget at the back of their minds and simply want to minimise shocks to their finances. To them, not knowing when they will be charged extra is an unsettling thought.
Okay fine. It depends on (gives a laundry list of factors)…
But clients often don’t know what they need
It’s slightly heartening to know that the majority will not stop at “it depends”, and move on to list down the factors that affect the price. But what they fail to see is that there are prospects who are unfamiliar with a particular trade and don’t even know how to scope the project, let alone know what factors they need to take into account.
Simply put, most business owners hire professionals because they don’t know better and need guidance.
[pullquote]Anyone who’s had calculus explained to them when they were a child knows that overwhelming the uninitiated just ends up confusing them.[/pullquote]
It gets confusing
Anyone who’s had calculus explained to them when they were a child knows that overwhelming the uninitiated just ends up confusing them.
Dumping a whole list of factors without context is a sure way to distract the prospect from the main decision to be made, which is to take up the service or not. Some may even give up trying to understand and move on.
Is that a confusion smoke bomb?
Being detailed without understanding on the prospect’s part can also be seen as putting up a smokescreen. That doesn’t inspire confidence in the business relationship. Business owners are averse to working with seemingly unreliable people because they just don’t want to end up being scammed.
How you should respond to price queries
[pullquote]… shift your view of the price query from one that provides a quantitative answer to one that aims to manage expectations…[/pullquote]
Recognise that the question stems from concerns about finances (again, businesses want to stay in the green), and you have to address that. When you shift your view of the price query from one that provides a quantitative answer to one that aims to manage expectations, that’s when you’re on the right track.
“It depends on…”
Before you start dumping a list of chargeable items and factors to the person you’re speaking to, take the chance to understand the reason for their price query. If they are asking to help you spread the word, educate them on the way you price your service. In that way, they are equipped with the knowledge to help you spread the word and qualify the leads before they come to you.
If they are keen to engage you for their own business, then do your fact-finding and listen carefully to what they need and prefer. Based on what they tell you, share with them only the factors that affect your price structure that are relevant to their case. Not every project should be priced by man-hours (maybe they prefer going by word count) or needs materials (sometimes the clients have them already). If you sense impatience in the course of the discussion, then maybe you should consider simplifying your price structure by eliminating the variable costs as much as possible and tell them that you’ll lump everything into an easy-to-understand estimate.
The key here is not to overwhelm your prospect with too much information. Listen closely, think for them and communicate your pricing model simply and succintly.
Give a relevant case study
If you’ve handled a similar project before, then bring it up as an example. Share what you did and how much the entire project came up to. Let them know the variable charges as well. This helps them have a more concrete idea of how the project is going to go and how much it’ll roughly cost.
Let them know the range
After bringing up a case study, it’s important to emphasise that each client is different and they may end up paying more or less. Let them know the margin, but keep it tight. Otherwise, a wide margin shows how little control you have over your business and it’s as good as not giving a range.
[pullquote]Personally, I find that structuring two or three packages, giving each a fixed price then attaching an appendix of additional charges puts my clients’ minds at ease and simplifies their decision-making process.[/pullquote]
This also has the advantage of managing their expectation of what is the highest price they need to pay, and it becomes a bonus if they end up paying less.
Personally, I find that structuring two or three packages, giving each a fixed price then attaching an appendix of additional charges puts my clients’ minds at ease and simplifies their decision-making process.
Justify why you’re charging what you’re charging
If you know you’re undercutting your competition and will not be producing work that is at least of average quality, here is where you cover your ass. Tell them why you’re charging so low and what you’ll be omitting. Let them know that you can produce better work at a better price. This also gives you room to increase your price in future, should the client choose to come back to you.
If you’re charging way above market rate, let them know where that premium is coming from. People want to know the value of the work when they are spending good money.
Keep it simple
Business owners are making many critical decisions each day. If you can shortcut their decision-making process, you can close them with greater ease. Help them by simplifying your pricing structure where possible and communicate plainly, concisely and clearly.
After all, they are paying for someone to think for them, not give them more to think about.
This article has been updated for clarity.