Have you ever asked yourself how you can charge premium rates when there are so many freelancers on services like Upwork and Fiverr that are charging bargain-basement prices? Is there a way to even stand out and be considered among all the low offers?
The answer might surprise you. In this post, I’m going to show you how to stay out of the race to the bottom of the pay scale and instead, use value-based pricing in your freelance business.
In freelance design work, there’s often a misconception that in order to get steady business, you have to charge the lowest price. The truth is, the top priority for savvy clients isn’t price. It’s getting a solution to their problem.
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In a search for a solution to their problem, there will be clients who perceive the solution in one of two ways:
1. Getting the Lowest Price
There will be those clients who look for the bargain-basement price. In these client’s minds, their problem is box they need to check off, rather than as an investment. In order to check the box off and make the problem go away, they feel they need to find a solution, yet they don’t want to spend a lot of money.
For these clients, the problem will not likely be solved in a satisfactory fashion. They may feel they’ve accomplished something in the short term and gotten a good deal initially, but they’ll still have to deal with the ongoing issues that come with the problem. Their buyer’s remorse will kick in and they’ll wonder why they didn’t spend a bit more to knock the problem out for good. Or worse, they’ll just keep nickle and diming themselves in an attempt to solve their issue.
2. Getting the Best Value
This other type of client understands that the solution to their problem will do one of two things: save them money or make them money. They realize that to get an answer to the problem they have to fix whatever is broken in their business.
A smart business owner realizes that to fix the problem, you may have to make an investment. A smart business owner is going to look for the solution that best solves the problem, not necessarily the best price.
For example, when I was shopping for my first vehicle, I didn’t have a lot of money. I was being very cautious and shopping to get the best deal. I had some things in mind about what I wanted, in a vehicle, but also realized that I only had so much money to spend.
After doing some shopping, I found a truck that I absolutely fell in love with. It gave me exactly what I wanted, and surprisingly enough, it was under my budget! I drove the truck for years and years and years.
A couple of years after I made the purchase a curious friend asked me what I paid for the truck.
As I told him, I had a nagging thought, “Did I pay too much?”
He paused for a second, and then asked, “Mat, do you like your truck?”
“No,” I said. “I LOVE my truck.”
“Then you didn’t pay too much,” he answered.
For me, that was a huge lesson about purchasing based on value. I had found exactly what I needed and I loved the truck so for me, the price that I paid was not too high.
When we are dealing with customers, it’s the same situation; they’re looking for a solution, and savvy customers realize that to solve the problem, it’s going to take an investment.
Consider these three things when pricing your services based on value.
Know your customer and the potential outcomes associated with their buying decision
In other words, know the “why” of their buying decision. What is the problem that they’re trying to solve, or the question they’re trying to answer? What is their ultimate goal in hiring you?
Then find out how much value that solution will mean in tangible terms for that business. The benefit your product or service provides influences the value of the product you’re providing, so you need to know your customer’s market and how much profit or loss actually rides on this project.
In your client’s mind, if they can spend a dollar and then get two back, that’s great. If they could spend $1,000 and get $2,000 back, that’s even better. And if they can spend $10,000 and get $100,000 back, well, they’ll do that deal all day long!
When using value-based pricing in your freelance business, you need to know what kind of value you’re going to bring to their business, and make the price commensurate with the benefits the solution provides. When you know your customer and the potential outcomes of the purchase that they’re going to make with you, you’ve got a big leg up.
Higher Prices Lead to Higher Perceived Value
There’s a misconception that higher prices scare people away, and I’m not going to say that they don’t. After all, if I go shopping for a product and see two on the shelf that are about the same, I’m likely to pick the less expensive choice. Why? Because I don’t see an added benefit by paying more. If I can get what I need and the cheaper product, that’s the one I’ll buy.
However, there are instances when I make purchases and don’t necessarily look at the price; instead I look at the perceived value.
For example, when shoe shopping, I could buy the cheapest ones, but I also know they probably won’t last very long. The more expensive pair of shoes automatically holds higher perceived value. They are going to hold up better over time, and while more expensive, will actually save me money in the long run. The more expensive shoes are the better value.
Looking at a higher price doesn’t always scare clients away because smart clients will look at the perceived value, not the price.
Here’s another consideration. When people pay more for a product or services, they tend to be more responsive.
Think about it, If you get something for free, you’re not going to pay as much attention to it. But if you make an investment in a solution or a product, you’re going to take much more care to make sure the product or solution gets implemented correctly.
When working with clients that are willing to pay a little bit more for your services, they’re going to be the best clients you can have because they are responsive. They have invested in solving their problem and will work with you to do it.
I’ve had those bargain basement shoppers for clients, and typically, they don’t treat the work I do as priority. They don’t answer phone calls. They ignore emails. They’re slow getting materials delivered. They haven’t invested the money, so they don’t have skin in the game.
A higher price means people will perceive and treat you differently because of what they’re paying for the service or product you’re offering.
Start with Your Price at the Top and Work Down If Needed
The one thing that you cannot possibly do when pricing your service, is start with a low price and then expect to charge more.
When you start with a higher price, you put yourself in the driver’s seat because it gives you more control and wiggle room. You can always work with your client to bring the price down, and in negotiating with your client to meet their needs and budget, they’ll feel like they’re getting a good deal. And you will still be making the money you want and deserve for the work you’re doing.
When I learned the power of value-based pricing, it was a game-changer for me and my business, and I hope it will be for you, too. If you have any questions, drop me a comment down below!
If you want more information about creating a profitable freelance business, I invite you to check out my Freelance Blueprint. Find it at www.freelanceonfire.com/blueprint