Editor’s note: This post was written by Seb Atkinson, a search marketer at Selesti, a multi-award winning creative digital agency. Seb has helped a range of clients grow their online presence, from start-ups and small businesses to large international corporations. Follow him on Twitter.
Setting prices for your freelance and writing services is a very important part of the sales process, and if done correctly can earn you great profits, or on the other hand leave you little to show for your work. If you’re freelance writing job boards but struggling to close deals at the right price for you and your client, then read on to discover how to improve profitability using the power of emotion.
How do you set prices?
Freelancers typically set their prices based on an hourly rate or on a per project basis, usually starting with some form of the calculation ‘x percent over cost’. This calculation is not always the best way to charge customers, however, as it doesn’t take into account the value of your service that is being delivered, or the price that the customer expects.
For example, suppose a business approached you to write a very technical article or document on a subject you’re highly knowledgeable on. You might be able to write this article in just three hours, because you’ve studied this topic to a high level.
Imagine to your surprise, how shocked your prospect is at how cheap your quote is. That would be because they have compared your services to other writers who have less knowledge in this area, and therefore have had to charge more for the work to take into account extra research.
The result is that you could be missing out on a lot of extra income, or at worst miss out on jobs because your prospects perceive your services as being too cheap!
What is the right price?
The truth is that we’re not rational when it comes to assessing the value of a service. “We like to think we know what price is the right one, but the fact is that we make relative comparisons,” said Bill Poundstone, author of Priceless: The Hidden Psychology of Value. “Behavioural economics has found that perceptions of price are like those of physical quantities, like dark or brightness and heavy or light. If you don’t have a benchmark for price, your willingness to pay is fluid and contextual, which is something companies can use.”
Even if the services offered are the same, there are often intangible reasons for choosing one provider over another. For example, does the customer trust one provider over the other to deliver the work to a high standard based on how their pitch went? Or, can a recommendation to use a certain provider sway the decision, even if other providers seem better in every other respect?
Because there is no ‘right price’, to set your prices, you need to know who you’re being compared to. Who else is your prospect considering, and why? What do they like about the other providers, and what do they dislike? Have they worked with them before, what is their experience, and what did the prospect like from their portfolio?
Getting answers for these questions allows you to build a better picture of the prospect’s needs and wants, and what value they put on satisfying these, helping you to set prices more in line with their expectations, winning you more business.
How should you present your prices?
The next thing to consider is how to present your prices. By knowing how much information your customers want to process, you will know whether to simplify your pricing and your marketing or to include more data to answer all the possible questions. For example, should you package your offerings into a set of bundles with basic details about what they include, or do your customers want to see a detailed list of line items?
Again, research is the key to finding out these answers. Asking your customers reveals a preference, ensuring you either don’t waste time producing complex quotes that list more information than your clients want or ensure you provide enough information required to close the deal.
Similarly, giving different pricing options is another way to increase sales, with the use of some psychological concepts. For example, if you’re selling a bundle of services such as a set number of blog articles per month, you can use a technique called Goldilocks pricing, or the compromise effect. This takes advantage of the fact that people are reluctant to make mental trade-offs between different products and services, so presented with a choice of three tiers at different price points, they’ll usually pick the middle option.
Decoy pricing is another powerful option. Again, three price points can be presented, however one product is structured to subconsciously tell the prospect that it’s the best value of the three. This can be used to encourage prospects to opt for a higher spend through a better value product. A great twist on this technique is to emphasise the small price increase for each pricing tier and the extra service available at this cost. For example, a service may start with option A at $99, while option B costs just $10 more but offers 15% more value. Meanwhile, option C may cost just $20 more than option A, but offer 30% more value. This makes it easy for prospects to see that option C requires just a small extra investment for much better value, helping to convince your client that spending slightly more will improve their ROI.
Help your prospects make a decision
To maximise your profits, it’s important to make it easy for prospects to see how they can get the most value, both between you and your competitors, and your own services, rather than trying to force them to make a decision that’s not along the lines of what they want to do. As you’ll have seen from the paragraphs above, research is key, as you’ll need to find out the real reason why a customer bought from you, which invariably is an emotional choice, not a rational one, then ensure your pricing is centred around satisfying the right emotions.