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The Power of Pricing: Define Your
Worth, Costs And Competition
 By Paul StrikwerdaVoice Actor
One of your jobs as an entrepreneur is to manage your client’s expectations. Let me give you an example. If you take on a project that you know you can easily do in two days, tell your client you can get it done in three.
Guess who’s going to look good when you hand it in, 48 hours later?
That way, you not only create the expectation that you can beat a deadline. You’re also showing your client that she’s a top priority, and that you really know your stuff.
Meanwhile, you’ve allowed yourself an extra day should anything unexpected come up.
Does that make sense?
FOR PRICING, TOO
Pricing is one of the most important tools for managing your clients' expectations, as well as your bottom line. Your price point sends a clear signal to your market:
This is what I am worth.
WHAT PEOPLE PERCEIVE
Like it or not, there is a clear link between perceived quality and price.
Otherwise, every wine connoisseur would drink Beaujolais out of a box and Pottery Barn would be out of business.
Remember this:
Your fee structure will help you attract the kind of customers you want to be working for, and the type of jobs you are shooting for.
At the same time, it will weed out the folks that cannot or will not afford you; the ones that are most likely to give you a hard time anyway.
AND MEAN IT
Here’s the deal, though. Your fee must be backed up by:
Simply put: Be an expert and do your homework.
Don’t just pull a rate out of a hat. That’s lazy and crazy.
DETERMINING YOUR RATE
Find out what the competition is charging.
Then ask yourself: “Do I want to charge more, less or the same?”
Smart pricing decisions require at least three elements:
1. Facts about your own cost of doing business
2. The client’s evaluation processes
3. Competitive activity
CREATIVE VS. COMMERCIAL
You’re an artist and somehow, some artists (and clients) believe that there’s a clash between creativity and cash. Doing what you love should be enough of a reward. Well, I don’t think Andy Warhol or Keith Haring would agree with that.
Being creative and being commercial can go hand in hand, and since you’re in business to make money, let me give you a simple formula:
Profit = sales volume x price – cost
SIMON SAYS ...
Have you heard of Hermann Simon? He’s a German economics professor and one of the leading experts on pricing. Together with Robert Dolan, he wrote a book called Power pricing: how managing price transforms the bottom line. He calls volume, price and cost “profit drivers.”
Simon says something very interesting:
In other words, when people get a haircut, they conveniently forget that they’re also paying for the rent that the salon is forking over every single month, or for the training the staff receives so they can make every teenage boy look like Justin Bieber.
CARE ABOUT COSTS
Clients don’t care about your costs. But you should. That’s why you have to figure out the answer to this question: How low can you afford to go? What is your Price Floor?
KNOW YOUR FLOOR
A Price Floor is a point below which a product or service should not be sold. In the long term, the price must obviously cover the full costs of a product. Otherwise, the seller cannot make a profit and will not survive.
Volume never makes up for selling below cost. Ask Dilbert.
DREAMS VS. REALITY
Every year, tens of thousands of self-employed people file for bankruptcy because they made one big mistake: they followed a dream and forgot to run the numbers. They are what I like to call ‘under-estimators.’ Literally.
Knowingly or unknowingly, they started selling below cost in an effort to drive out the competition, or even out of ignorance.
Some started giving their work away for free, hoping to get exposure and attract business.
Last time I checked, my local baker was handing out free samples, but never entire cakes.
And between you and me, he doesn’t strike me as a marketing genius.
CUSTOMER'S PERCEPTION
Professor Simon puts it this way:
HOW MUCH PAIN?
Go to any tattoo parlor and see for yourself how much pain people are willing to suffer in exchange for the pleasure derived from a name, permanently painted in the perforations of their delicate flesh. Years later, they spend a fortune burning out their ex-hubbie’s initials with a laser beam … turning the man in question into an ex-boyfriend, once removed.
But I digress. We were talking about perceived value, weren’t we?
ABOUT PAUL ...
Paul Strikwerda is a 25-year veteran of the voice over industry whose Nethervoice service features German and Dutch voice-overs, translation and evaluation services. Born in Holland, he has worked for Dutch national and international radio, the BBC and American Public Radio. Although 90% of his work is in English, Strikwerda also records in Dutch, German and French. Clients include Novartis, Johnson & Johnson, and the Discovery Channel. He also publishes an informative and entertaining blog, Double Dutch.
Email: paul@nethervoice.com
Web: www.nethervoice.com
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First off, your cat has strange taste :-) The company Next Acoustics makes a 26' retractable mic cable and you only pull out as much as you need. That should be a bit more feline-friendly.
Heres the link: http://www.nextacoustics.com/Products_Detail.php?ProductID=23
Are you using Word2WAV for your training narration? It saves a lot of time splitting and naming all those separate files:
http://www.word2wav.com/
Every editing voice talent should remember how much money the client saves by not having to hire an editor to do this tedious and time-consuming work. Because it is a separate skill, you should build it into your fee and specify it on your invoice.
Not so long ago, some colleagues started selling their gear because "there was no money in voice-overs anymore".
Then a homeless panhandler working the I-71 exit ramp in Columbus, Ohio, became a YouTube sensation, and Kraft paid an estimated $1,0000 for 5 seconds of his voice.
The biggest mistake we can make is not to be aware of what we bring to the table. That's why I keep on reminding my colleagues of one thing:
Your added value is always higher than your rate!
I agree with calculating-in unexpected problems when quoting an estimated time of delivery. I did just that last week while working on a large, very tedious corporate training narration project. I calculated 50 hours of studio time, and boy I'm glad I did. On Sunday night I found I couldn't record because my cat had literally chewed the mic cable, rendering it unusable. The Guitar Center didn't open till 11am the next day, losing me 3 hours of studio time Sunday night and 5 on Monday morning. Thankfully, the new cable worked and all was good, but I had lost a whole day of recording due to an unforeseen kitty camping out in my studio.
My client actually wanted to pay me less for that job than he had done for a previous, smaller project, but I wrote to him with a detailed account of how and why so much studio time was needed to read, record, save and send 1,375 separate files. Many consisted of recording just one line such as "click on the search icon." After my explanation, he agreed to pay my requested fee.
I do love my job. Really!
Thanks again, Paul. Always a pleasure to read the interesting information you provide us with.
PEARL
This is a *really* helpful reminder that economics is a social science. Exceeding a client's expectations goes a long toward building confidence, a great reputation, and repeat business.
Also, thank you for the succinct and helpful summary of importance of knowing the cost of doing business! My 'day job' is analyzing financial information for others. When I set my own rates, I was concerned, because after factoring in my costs, I wasn't sure if they were competitive. Self-employment is always a bit of a gamble, but having followed this model in other endeavors, I know that I have the best chance of succeeding and growing by starting out with realistic numbers.
Again, thank you so much for this helpful article!
As always, your articles always bring things close to home. I appreciate it!