Tuesday, April 20, 2010

The scariest pricing idea ever...

Seen over at The Freelancery (found on my Twitter feed - social media strikes again) was an article on a different kind of pricing structure.

As consultants, we struggle with the old hourly rate vs. value add question as well as with how to gather feedback from our clients on how they perceive our work. The folks over at The Freelancery are proposing a pretty radical notion - pay what you think it's worth.

It's a concept that took off in a number of industries, particularly during the GFC. London restaurant Little Bay decided to do away with bills asking customers to pay only what they want for meals in an unorthodox bid to beat the credit crunch. The results were very interesting. Sure there were people who paid less (or nothing at all) but there were plenty who paid a lot more than the standard price of the meal.

While this idea is no doubt a terrifying one, it's also a brilliant one. You say to your clients "I'll do the best possible job that I can and you pay me what you think it is worth" - this way you actually do deliver some great work and if the client sees value in this, will be willing to compensate accordingly.

The Freelancery believe that clients will respond to this idea too. They say "Most will be astonished that you offer the option. It shows you trust them. That you value their judgment."

An interesting idea - what are your thoughts?

1 comment:

  1. THG:

    I'm the folk at the Freelancery who served up the idea. There was a HUGE reaction to this (broke the server for a while) from every quarter, mainly because it pricked at something visceral: "how much is my know-how/experience/endurance/speed/innovation actually worth?

    There is no smooth, trouble-free answer to this. But from what I'm seeing, figuring an engagement fee purely on man-hours, direct expenses, plus profit margin, is probably not the answer.

    Maybe that is just your 'cost of goods sold.' The cost of the mushrooms, rice, shrimp, and butter in the restaurant dish. From there on, it's all about how good the experience is.

    Anyway, thanks for bringing up the idea.

    Walt K