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Blair Enns on Pricing Creativity

About This Talk

This talk is by Blair Enns and was recorded on October 26, 2020. You can learn more about Blair by:

Timestamps

00:00 Intro
03:38 3 Things You Can Price and Sell
07:12 Rule #1: Price the Client, Not the Job
14:09 Rule #2: Offer Options
20:01 Rule #3: Anchor High
25:45 Rule #6: Limit Your Written Proposals
29:00 Rule #4: Your Client Should Never
30:15 Rule #5: Master the Value Conversation

35:31 The Goal of Value-Based Pricing

What is Pricing Creativity?

Pricing Creativity is a book written by expert consultant Blair Enns. But it’s also an activity that creative firms underdo every day. Pricing creativity is an important determinant in profitability and the long term sustainability of your firm, too. 

In his talk and in these notes, you’ll learn what you can price and sell, and the rules for pricing creativity, as laid out by Blair Enns himself. 

3 Things You Can Price and Sell

You can only price and sell three things as a service provider:

  1. Value: pricing based on the value you provide, fully disconnected from the cost of your inputs and outputs
  2. Outputs: the deliverables you make and give to your clients, and are typically tangible
  3. Inputs: selling people, time, or effort

The most profitable business model per unit is pricing value. But that’s not the goal of value pricing. So what is the goal of value pricing? Read on to the end to find out. 

Rule #1: Price the Client, Not the Job

What’s the price of a logo?

Nike’s logo was designed for $35 back in the 1970s, or about $200 in today’s dollars. Pepsi’s logo cost $1M. So is a logo worth $200, or $1,000,000?

It depends on the client. A logo is worth a lot more to an established brand with scale, money to spend, and high risk when it comes to a new logo. By the same token, logos are worth less to smaller businesses, or to people who have projects that don’t already have stakes. 

Rule #2: Offer Options

We humans make lots of errors in how we perceive the world, particularly when it comes to comparison. In the image below on the left, squares A and B are actually the exact same color, as demonstrated in the image on the right. 

blair-enns-comparison

Wet is dry, cold is hot, black is white, expensive is inexpensive – it all depends on who you ask, and how the options are presented. 

Choice architecture or nudging allows you to control the context in which people make decisions. As an example, Starbucks has three sizes, all designed to get you to choose the middle option: Tall, Grande, and Venti. 

Most people have extremeness aversion, so they end up choosing the middle option more times than not. 

Rule #3: Anchor High

The first piece of information is likely to skew your decision. This is known as the anchoring effect. 

If you’re presented with a big number first, you’re likely to choose a bigger number if prompted. As an example, Blair surveyed some workshop and asked them the average blended hourly rate of other attendees under two conditions: one group was primed with a number, and one wasn’t. The results demonstrate the power of anchoring:

blair-enns-anchoring

Rule #4: Your Client Should Never See a Price Before They Hear It

Whenever you give a price, tell your clients before you show them. 

Rule #5: Master the Value Conversation

The objective of the value conversation, according to Blair Enns:

To determine the value you might create for the client, and the share you might command (as compensation), while maintaining the expert practitioner position.

There are four steps in the value conversation. 

Step 1: What do you want? 

Determine what the client is hoping to accomplish. Not just the deliverable, but the business outcome they’re focused on achieving. 

Step 2: What will we measure? 

Define the KPIs or metrics that will drive the project. This will tell you and the client what to pay attention to, and give the client a basis to assign a value to the project. 

Step 3: What’s this worth to you?

After the client chooses KPIs for the project, they should be able to assess how much it would be worth to achieve those metrics. 

Step 4: What would you pay for this?

This is the payoff in the value conversation. Once clients understand what they want, what they’ll measure, and what it’s worth to them, the only thing left is to assess the relative value of what they’d pay for it. This question helps clients assss

  1. What will we measure?
  2. What’s this worth to you?
  3. What would you pay for this?

Rule #6: Limit Your Written Proposals to One Page

Blair recommends you limit your written proposals to just one page. The point of that page is to facilitate a conversation about which option is most important to your client, not to cover every single possibility or contingency your client could face. 

Your one-page proposal should look like a pricing table, similar to what you’d see on Salesforce’s pricing page:

The Goal of Value-Based Pricing

The goal of value-based pricing is not to become more profitable, though it may have that effect on your firm or consultancy. 

Instead, the goal is to focus the firm on creating extraordinary customer value. If you do that, you’ll become more profitable, but also help your clients more than before. 

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