Chapter 5: Setting Prices
Part 3: The Psychology of Pricing
To understand the psychology of pricing, let's do a quick thought experiment.
Scenario 1: You're gutting and remodeling your kitchen. You know exactly what you want done, down to how you want the water connected, but you don't have time to do it. All you need is labor, so you hire someone cheap and leave detailed instructions.
Scenario 2: You're gutting and remodeling your kitchen, but all you know is that you want it to feel "airy." The only thing you know about pipes is that they lead to secret worlds in some Nintendo games. You look for a higher-end contractor because you feel you can trust them with making your vision a reality.
In the world of information technology, things tend to work the same way. Shai Almog, a one-time technology consultant and the founder of mobile development solution business CodeNameOne.com , puts it this way: "When you want someone to do a job, you seek a low price and then treat the consultant like any other employee. When you want an authority figure, you seek out the high price so, if something doesn't work out, you can lament that you spent on the best option."
If you're new to the world of IT and to business ownership, you may be more comfortable with lower prices while you figure out how things work and what you can expect from the day-to-day experience of running a business.
But if you've been around for a while and have expertise in your field, know that clients expect to see higher prices for your services. It can be nerve-racking to charge what feels like sky-high rates for work that comes easily to you. Heilweil acknowledges that many IT professionals new to the business side of things have trouble believing that anyone would pay that price for their services. But it's essential to get over that belief barrier.
Almog notes that he was as surprised as anyone to find that clients who paid the most for his services were nicer, easier to work with, and more respectful. "I didn't understand that people want to pay," he says.
But it's true. Of course, you can set the perfect price for your services, but if you don't find any clients to pay it, your business won't succeed. Luckily, Chapter 6 is all about selling your services without feeling like a slimeball, cutting your prices, or otherwise questioning your sanity for trying to go into business for yourself in the first place.
“It will require more work that you think. Starting a business seemed easy. I knew people who needed computer help, and they were willing to pay. After burning through the friends and relatives who are in need at the moment, having a constant stream of income becomes more difficult and requires more than expertise in your field. Plus, there are always unanticipated setbacks that make it seem like the world is against you.” — Nick Boris , owner, Pittsburgh Technology Management
Next: Chapter 6: Selling IT Services without Becoming a Free Consultant