Posts filed under ‘Pricing’

DBRx Launches New Workshop Track at Vision11



The small-group, consultative approach of the Design Business Rx sessions run by Deb and Susan at the Vision shows have proven to be both extremely popular and incredibly fulfilling for the participants. So, in the spirit of DBRx, there is now an entire track of small-group workshops, focused on key topics past attendees have requested. Presented by acknowledged industry experts, the DBRx workshops provide an opportunity for you to receive specific advice and information based on your interest and needs. These business-changing strategy sessions are intense, detailed and focused on YOU, allowing you to leave Vegas with pragmatic action plans that will grow your business. 

Deb and Susan along with industry experts Melissa Galt, Vita Vygovska and Vickie Ayres will be presenting the following workshops:

  • How to Ignite Demand in YOUR Client Base
  • Fame 101
  • 5 Marketing Mindsets to Make YOUR Design Business Profitable
  • She Told Two Friends: Developing a Powerful Client Referral Systems
  • QuickBooks Deep Dive
  • Love Your Business Twice as Much—And Get More Done in Half the Time!
  • From a Whisper to a Shout: Social Marketing Secrets for Designers
  • The Power of Packaging: Bundle your Services & Build Sales

DBRX@Vision11 is a series of educational workshops that will run as an adjunct to the Vision 11 seminar program in Las Vegas. Unlike the general seminars, these will be highly focused, more advanced sessions, where a small group of attendees will walk out the door with something—a marketing plan, a press kit, a new target market,  improved customer service techniques, etc. etc.

You’ll be working in sessions with 10 people, at the most, in order to give you  the time and expertise necessary. This will most likely require pre-show and post-show homework on your part.  Each workshop notes any additional preparation, exceptions or materials.

 

7 February 2011 at 2:37 pm 2 comments

More Money, Less Pain

The June edition of Psychological Science published the results from six experiments conducted by psychologists and a marketing professor that tested the power of money in relation to social interaction. In one of the most startling results, they found that merely touching money or thinking about expenses affected participants both physically and emotionally.

In one experiment volunteers were asked to take a “finger-dexterity” test, one group counted stacks of $100 bills, while the other group counted paper. Afterwards both groups were but into a social interaction simulation where they were meant to feel snubbed and isolated. The group that counted out the money before the simulation rated their level of social distress much lower than the group that counted paper.

In another experiment, the same “finger-dexterity” test was taken and then the volunteers were asked to dip a finger in very hot (122 degree) water. Those who counted the money rated their pain as lower than those who counted paper.

The pain test was then repeated but with the volunteers now writing about either their expenses the previous month, or the weather. After the finger dip, those who wrote about spending their money rated their pain as higher than those who wrote about the weather!

“These effects speak to the power of money, even as a symbol, to change perceptions of very real feelings,” like pain, said Kathleen Vohs, a marketing professor at the University of Minnesota and co-author of the study.

What does this mean for the designer? It’s just one more thing to consider when presenting the project costs. Clients need to feel comfortable enough with the potential of your work to transform their lives and their interiors to offset the real and psychological pain of letting go some of their hard-earned money! It’s about making sure the client understands the value–both immediate and long term–of investing in their home décor; so that the experiential satisfaction they get from the process and the results more than offsets the purchasing pain.

See more about this on Live Science. Within that article are also links that discuss the value of “experiential” purchases vs. “product” purchases.

7 August 2009 at 8:46 am Leave a comment

Commitment Pricing, Part 2

I was speaking to someone about yesterday’s commitment pricing post and he made me realize I left out  some important information. So here’s a follow-up.

First, I don’t want it to appear that I was advocating raising your prices with no consideration for any of the other components that go into setting your prices.

To be successful with commitment pricing you need your clients to invest more than just money with you. They need to invest their time, attention and emotions in order to realize the full value of what they’re purchasing. Now custom design is already a time-intensive and emotionally fraught process, but it’s important to remember that you’re not in the business of selling products, but of an improved, enhanced, more beautiful life. If that’s not worth an investment in time, attention and emotion, I don’t know what is!

I mentioned “full value” in the previous paragraph. Commitment pricing needs to match or exceed the value your client’s get from the service or products you’re offering. What do I mean by this? Just think about how interested or dedicated you would be to selling or promoting something that isn’t worth what you charge for it. What’s the point, for you and for your clients?

And finally, everyone is familiar with the concept that a happy client is easier to build additional business from, in terms of both future projects and referrals, than having to cold-call or market to unknown prospects. So think of your commitment pricing as a means of establishing a support system, for your clients and for your business. Staying in touch, following up, servicing them three-months, six-months or one year down the road, is definitely good for business, but it costs something to do that. This is one aspect where commitment pricing is very aptly named!

So make a commitment–to your clients, yourself and your business–and I think you’ll see the difference almost immediately.

16 July 2008 at 3:13 pm Leave a comment

Commitment Pricing

We’ve all been there…trying to determine how to price your services often seems to be the biggest struggle i our business. Charge too much and you’re afraid you’ll lose clients. Charge too little and you can’t earn a living.

But take another look at those statements. Charging “enough” to make a living doesn’t really seem like very satisfying goal. Instead of just looking at your costs, your competition, etc. why not look at your clients. How much should you be charging to get committed, sing-your-praises clients AND to deliver the level of service, training and expertise they deserve?

Being in business costs money, and the costs keep going up every day. When you charge less than you need in order for your business to thrive; you’re not just short-changing yourself financially, you’re depriving your clients of the full experience, benefit and range of services they should be getting from you. You’re not committing fully to them, in terms of what you’re willing to offer, because you can’t afford to do what you’d really like to do for your clients. 

Commitment Pricing is especially important for designers because this business is not based on need or necessity. It’s not commodity selling, because commodities—something that is widely available and has little or no distinguishing characteristics—is what design is emphatically NOT!

Any consumer, when willing to invest in something customized, something unique and distinctive, usually recognizes that the higher price for such products and services carries with it a commitment on both sides. For the seller to deliver, service and respect the investment of the buyer; and for the buyer to appreciate, value and respect the seller.

Think about some of your recent purchasing decisions: Are there any examples of commitment pricing you can identify and apply to your own business?

14 July 2008 at 4:44 pm Leave a comment

The Money Mirror

Take a moment to think about our ingrained training regarding money. People are “filthy rich” or loaded with “dirty money.” Those who don’t get business degrees are doomed to become “starving arists”, but everybody better get to work anyway because “time is money.” Money is unnatural because “it doesn’t grow on trees” and it’s alright to struggle financially because, after all, money can’t you love or happiness. Besides, everyone knows, “money is the root of all evil.”

These issues are rarely directly addresses when designers discuss pricing, but our ambiguous emotions regarding money certainly play a part. As an industry we frequently undercharge because:

  1. We based our prices on our perceived competitive set…and they’re already undercharging
  2. We are fearful that a lack of credentials mean we can’t charge as much as some one who has [check any that apply] ___ been in business longer  ___ more training  ___ an office/studio/retail location ___ other
  3. We’re afraid of looking greedy/aggressive/“snooty”/“out-of-touch”/etc. 

Our attitude toward making money from our skills, talents and abilities is a reflection of ourselves. It’s a mirror of our self-worth; and as solo or small practitioners our inability to look into that mirror and see the results accurately often sabotages our best efforts to grow our business.

What does your money mirror say to you?

10 July 2008 at 3:39 pm Leave a comment

Designer Definitions

One of the most frequent topics of discussion to come up whenever Deb and I run a seminar or presentation regards identity and definitions.

In some states, of course, the phrase interior designer can only be used by a licensed professional, so many believe, by default, that interior decorator is a “lesser” choice. I’d like to point out, however, that many of our best known, most praised design talents in the U.S. were (and are) proud to be know as decorators… reaching back to Dorothy Draper, Billy Baldwin, Sister Parish, Mario Buatta, Charlotte Moss, etc. 

But this concern over “what to call myself” is usually a cover debate for “how can I charge”, meaning does a designer have a greater perceived value to the client than a decorator? If you’ve ever found yourself having this discussion with yourself, your staff, etc. you’ve allowed yourself to become distracted from the key issue by semantics. 

And what is the key issue? You need to ask how you perceive yourself. Are you a color specialist? Are you a fantastic resource? Are you a good listener? Are you a problem-solver? Are you a space strategist? It all goes back to how you present yourself to your clients and what value you bring to them.

So our response to the designer/decorator debate? It doesn’t really matter that much. Get yourself out of the design-world bubble and start thinking bigger. Who gets called in when there’s an issue that can’t be solved  internally? Who gets paid the big bucks to advise, research, strategize and plan? Consultants!

You don’t have to call yourself a design consultant, but you do need to think of yourself that way. Why? Well, how about this really, really brief summary of Alan Weiss’ book Million Dollar Consulting.

* Focus on the value you deliver.
* Never count hours or charge by the hour.
* Make a case for what you can deliver. Once you’ve got your client on board, present your “fee” as an given.

According to Weiss, the client will almost always bite.

As always, we welcome your thoughts on this!

 

9 July 2008 at 5:45 pm 1 comment

Tips From the Grocery Store

In this weekend’s Sunday business section of the NYTimes there was an interesting article on Heinen’s Fine Foods, a 17-store grocery chain in the Cleveland area. While Tom Heinen, who runs the business with his twin brother Jeff was certainly hearing complaints from customers on rising prices, so far most of his clients are sticking with him. The article goes on to note:

“Their loyalty suggests a couple of things about the kind of middle-and upper-class shoppers Heinen’s tends to attract. While they are concerned about price, they’re increasingly thinking about their foods’ origins and quality. So they would just as soon not trade down from a store like Heinen’s that offers handsome local radishes and an excellent stir-fry station.

And they almost certainly don’t want to drive around to six different stores cherry-picking deals. “With two adults working and the kids going to soccer, I defy you to show me how they can do it,” Mr. Heinen said.”

Heinen’s is facing competition for those customers, Whole Foods entered the Cleveland market last year, and of course, there’s price competition from other regional grocery chains. Even at the best of times, running a grocery store sounds like a tough way to make a living. Margins are incredibly low, the stores are both labor- and logistic-intensive and just think about how gets tossed out from every store, every day. 

Heinen offered a couple of suggestion for savings, some of the same ideas he’s been mentioning to his customers. Not all of them are applicable to the design business, (but they’re certainly good for your grocery bill, so check them out here) however a couple can immediately be put to use. 

  1. Offer Artisan-Quality Deals
    Heinen’s had won Cleveland Magazine’s “best cheese selection” award
    for several years running as was determined to keep the honor. But
    with diary prices up 14% and the drop of the dollar against the Euro,
    they knew they needed to make bigger changes. So they went to their
    vendors and asked for help in finding artisan-quality products at
    reasonable prices. The result has been a new in-store focus on
    “Heinen’s Great Value Cheeses”. 
    Lesson: Ask your vendors for assistance in finding unique resources
    that fit the needs of your clientele. And then make sure to package,
    brand and promote those unique resources.
     
  2.  Is It Local
    Deb and I have spoken for several years on the need to develop a
    network of local resources that can provide unique products and
    services to the design trade. It started out as a way to move yourself
    out of the head-to-head price comparisons with big-box stores and
    direct competition. But with increased fuel costs, which means increased
    shipping fees, plus the spillover of the “locavore” movement, people are
    more than interested in this kind of shopping experience.
    Lesson: Become the “resident expert” for all types of artists and crafts-
    people in your area. Remember 10-years ago when every designer needed
    to have a least one faux-finisher in the rolodex? Well it’s time to expand
    your resource list once again!

The article wraps up with a series of questions that are great to have in your arsenal for your next price shopper

“So this is what you have to ask yourself: If you are patronizing a grocer
that doubles your coupons, discounts your gasoline or runs other expensive
promotions, how exactly are they staying in business? Are they gouging you
on the second most popular brand when the most popular one goes on sale?
Do prices bounce around so frequently that it’s impossible to keep the baseline
in your head?

Shoppers can play the discount game and win by shopping six different stores,
buying only the sale items and products they have coupons for, buying in bulk
and then cooking from the pantry and freezer. But is that really the live most
of them want to live?”

Switch a few words and you’ve got a great defense for why you’re not the cheapest, why you don’t need to discount and what the real value of working with a design professional is.

As always, let us know what happens when you put any of these ideas into practice in your business.

30 June 2008 at 6:08 pm Leave a comment

Design & Our Marketing Assumptions

Sorry for the long break between posts. Things got busy with ICFF and NeoCon and several tight deadlines and then some family issues…but I am going to sincerely try to drop the ball for that long again! 

During my time away from posting I’ve been having some very interesting conversations about the design business. Talking with designers, manufacturers, product developers, etc. I’ve been told over and over again that at “the high end” the market is doing fine. But when it comes to custom design, what is “the high end”? Is it based on your hourly rates? The materials you use? The type of work that you do? And this is where we start to get into the murky and often uncomfortable muddle of emotions and justifications that often passes as analysis among many designers. Take a look at the statements below and see if you recognize yourself in any:

1. My designs are more valuable because… Fill in the blank: I use couture methods, my work is better designed and better constructed, I only use the best fabrics, linings, etc. 

2. Unique, custom designs should command a higher price in the marketplace. (Command? Who are you talking to? Or trying to convince?)

3. My work is valuable because of how much care, effort, concern, detail, etc. I put into it.

4. I should be fairly compensated for doing what(ever) I love to do.

The main theme: It’s all about you. You want to get paid because you’re proud of what you do, you believe you do it well and you work hard doing it. But how much value does that have to your customers?

I know design is important. I know it can change lives. I know that good design improves our lives and that poor design can be harmful. But design does not, can not, exist in a vacuum. It has to be put out there in the world and experienced; because if design is just put on display and not used, it’s merely style.  

Follow this train of thought and you begin to see that a designer’s job is not just about creating; but about making work that is functional, practical, usable and real. It’s about stating the case not just for your designs but for DESIGN, good design, as a worthwhile, valuable practice. 

Designers face many real challenges when it comes to setting a price on their work and finding the language with which to promote it, but don’t add your own emotions about why you do what you do to the mix. Instead become an advocate for the design values that matter to you and brought you to this work. It’s often a tricky balance––we get into the design business because of our passion to create, but you can’t let that passion overwhelm the dollars & cents of being in business.

17 June 2008 at 4:39 pm Leave a comment

Demystifying Fees: A pricing panel recap

I attended a pricing panel discussion today that was part of the Brooklyn Designs show. I wasn’t able to stay for all the Q&A at the end, but still managed to jot down some interesting notes. To see who was on the panel check out the description here. 

Following are some the comments I found to be most interesting. I’ve put the comments into quotes, but these are all really paraphrases of the notes I took!

“I used to bill Net 30 for purchases, but I realized my customers didn’t really 
get that. They couldn’t tell if that was a good deal for them, or a good deal
for me. Customers understand retail, so I now do my purchase pricing
in a Less Retail format. It’s actually more profitable for me and makes them
happier because they can immediately quantify the value.” 

“I can’t remember what seminar I it was, but several years ago I went to
a pricing presentation and one of the notes I took was that everyone
should go back and raise their fees 3%. Main reason: it’s not a big increase
but by the end of the year it will add up.”

“Fixed fees may seem cut and dried, but often become problematic. No
matter how well you think you’ve defined your scope of services, detailed
the project in a letter of agreement or contract, it’s 99% certain there will
be changes, revisions, delays, or other issues that will mean additional
non-projected work. Which means you have to go back to your client for
more money. That’s a situation which is never good for the relationship.”

“In commercial work, a common fee structure is a percentage of the build-
out costs. I’ve moved away from this because it causes trouble. There are
always going to be cost overruns and now the client is faced with having to
pay more to complete the job and pay you more based that…to them it feel
like they’re paying twice for other people’s problems. Again, a good way to
damage a client relationship.”

All in all, it was a pretty interesting discussion. One of the panel members has a current rate of $300/hr and charges overseas clients $350/hr! Of course, the old line about “not even a surgeon charges that much” came up, but I was thinking about that on my subway ride to the office. Most designers are independent practitioners, that hourly fees goes to cover all types of overhead that most surgeons (and many high-paid lawyers) do not directly have to account for. Meaning, the rate a lawyer at a leading law firm charges includes overhead charges, yes, but those costs are also disbursed in the rates of the jr. lawyers, the research assistants, etc. The fees are all there, but the shock of one $300/hr individual is spread out over the billable hours of several $75/hr and $150/hr other players.

And let’s face it: It costs a lot to run a business these days. Deb and I were just commiserating on the high costs of workman’s comp (not to mention all the other necessary business insurance policies) AND the fact that insurance audits seem to have become ever-more frequent.

When you look at it that way, $300/hr isn’t that much to charge to cover all the overhead (office rent, utilities, software, insurances, sampling, etc. for the main expenses) plus have enough to re-invest in your business, plus enough to pay your vendors, contract workers, etc. PLUS and most importantly, pay yourself! Because how many hours in a day or a week do you have available to bill? Certainly not eight hours a day, five days a week.

It was definitely an interesting hour! What do you think? Is $300/hr crazy or wonderful?

Note: I know I wrote yesterday that I would follow up with the second part of The New Yorker innovation piece, but I thought the pricing info was too good to sit on. I’ll get to the innovation piece next week.

9 May 2008 at 4:26 pm 1 comment

Perception and Pricing

Earlier this year researchers from the Stanford Graduate School of Business and the California Institute of Technology published the results of a study on the effect of price relative to preference in the Proceedings of the National Academy of Sciences. Not typically a widely reported on publication, but the outcome of the study caused many in the mainstream media to sit up and take notice. As covered in the New York Times, The Economist, CNet and others, Antonio Rangel, along with Baba Shiv and John O’Doherty conducted a very interesting wine-tasting.

Participants in the study were presented with two glasses of wine and given no other information other than that one wine was $5/glass and the other was $45/glass. Using functional magnetic resonance imaging (fMRI) they documented that the part of the brain that experiences pleasure becomes more active when the drinker thinks he/she is enjoying the more expensive wine. Of course, both glasses of wine were from the same bottle.

“What we documented,” said Shiv, “is that price is not just about inferences of quality…but that price changes a person’s experience with a product.”

The researchers ran different variations of the test, for example, when one wines was said to cost $10 a bottle it was rated less than half as good as when people were told it cost $90 a bottle, its true retail price. Moreover, when the team carried out a follow-up blind tasting without price information they got different results. The volunteers reported differences between the three “real” wines but not between the same wines when served twice.

Rangel, having only studied consumer reactions to wine pricing, is hesitant to extrapolate too much, but says he believes that the bias toward higher prices occurs in many areas. And history has certainly shown that conspicuous consumption and waste are an important part of many societies.

There are many instances of this price-placebo effect, and many companies throughout the years have used it to their advantage. One my favorite, all-time examples is the L’Oréal slogan “Because I’m Worth It”: The L’Oréal products cost more than the other haircare and make-up options on the shelves, but extra cost was rendered incidental by the branding. And while there are many considerations to keep in mind when pricing a product or service–your local market, demand, profit and revenue goals, etc.-it important to realize the additional information and now, clearly, experience value, that pricing plays in terms of branding and positioning.

What’s your take on this? Do you think you’re in a position to bump your prices and improve your customers’ experience?

6 May 2008 at 6:34 pm 1 comment

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