Studio Sessions
Discussions about art and the creative process. New episodes every other week.
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Studio Sessions
34. Price Your Work Based on the Value You Create: Part 2
In our continued conversation on value, we explore how successful business transformations require systematically analyzing operational challenges and demand willingness to make significant investments in solutions, even when costly. The importance of seeing strategic improvements as investments rather than expenses emerges as a central theme, supported by data-driven decision-making.
We examine how this mindset applies to service businesses, particularly in value-based pricing models. The discussion highlights the effectiveness of tiered pricing options that solve core problems while offering premium value additions. This approach helps shift client perspectives from cost-focused to value-focused, much like how operational investments can drive long-term business success.
The conversation reveals how focusing on efficiency without sacrificing quality can lead to improved customer satisfaction and profitability. This balance of streamlining operations while maintaining core brand value demonstrates how strategic thinking and value creation can transform business performance across various sectors. -Ai
If you enjoyed this episode, please consider giving us a rating and/or a review. We read and appreciate all of them. Thanks for listening, and we'll see you in the next episode.
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Chilly's Baby Back Ribs.
Speaker 2:Chilly's Baby Back Ribs, it had been a golden afternoon and I remember having the familiar conviction that life was beginning over again with the summer. There's been a couple videos on youtube about chili's success in its specific sector of the restaurant business, where, um, you know all those restaurants applebee's, chili's, olive garden, red lobster, they, they just were all losing money. Issues with profitability customer satisfaction.
Speaker 2:So they had all these metrics that were unfavorable and Chili's, their CEO, came in and who knows if there were consultants involved or experts or whatever involved and they basically diagnosed. They looked at all the symptoms and then diagnosed the root causes in each sort of category customer satisfaction, profitability overall. You know all this stuff and so in these videos they talk about well, we realized that the way we were cooking hamburgers was really inefficient. So you would go back, you would have the patty, you would cook it on one side, then you would scrape it off, flip it over, et cetera.
Speaker 2:We found out that there are machines out there that can cook a hamburger on both sides and they said these machines are incredibly expensive and we may not have the money to buy these machines for every single chili. There's like hundreds of locations across the country. But we're going to start chipping away at it and we may have to take on debt. We may have to borrow money, whatever it is. That's the other thing A lot of clients like. It is unfathomable to them that they would borrow money to work on a video project to help them solve a problem.
Speaker 1:It's a lot less tangible than a 25 seconds per customer on a hamburger. And that's it, stopwatch.
Speaker 2:Yeah, yeah, this like that immediately creates an emotional conversion, because you can show them it takes 10 minutes to cook the burger this way. It takes five minutes to do it that way. They can extrapolate out the savings.
Speaker 1:What's five minutes? I'm paying an employee Da, da, da, da, da.
Speaker 2:Okay, we're saving x amount of yeah and then, you know, chili's looked at the menu. They saw that we had this kind of chicken tinned chicken finger, and this kind one's tempura, one's this like all the time. They basically cut out all of that stuff, reduced expenses, simplified things, created more efficiency, streamlined everything. But they also understood like there's there's a beating heart to this company, there's a vibe to it like we can't. We can't sacrifice that either. Yeah, so how do we keep the best parts of our restaurant but create these efficiencies and all that? And they have been one in that sector, one of the only profitable restaurants out there. And the other thing too is, as the food quality went up, customer satisfaction went up. Man, have you been to Chili's lately? Chili's?
Speaker 1:is pretty good. Fire on all cylinders when the mouth goes out Right.
Speaker 2:And that's what happens. The same thing for you as a video business. You start charging based on value. You have a value-based conversation, you solve a company's problem. Man, you will not believe what these kids did with our business.
Speaker 1:They made this video.
Speaker 2:They came in. They asked us a shitload of questions. It was really uncomfortable, but we spilled our guts. They told us we needed to do this. We did and it's working.
Speaker 1:I think it's so easy to get caught up in. You know, this isn't completely just a fake business thing, this is a real business. There's a lot of moving pieces to a business, but it is easy to get caught up in a bunch of everything and sometimes it's really hard to see the core problem. And I, you know, reference steve jobs again because, yeah, why the hell not?
Speaker 1:um, when he took, when he yeah did the apple turnaround in late night, you know he's he might be, you know, a bit odd in how he approaches people and things and social dynamics, but he said the core of this company is good products. That's right, and he got rid of all of the bullshit. And they're like well, we still actually sell a lot of Apple IIs or whatever we still make money on those and printers.
Speaker 1:Yeah, man, we've been killing that market. And he's like I don't care. He's like take it off. And 20 years later they're still the biggest company, or they are the biggest company in the world. Because he was just like yeah, you know what, we're going to do computers. We're going to have one line of them.
Speaker 2:We're going to do laptops, we're going to do these little iPod things going to do laptops, we're going to do these little ipod things and apple people call it the apple tax, but apple really charges based on the value of their product, your experience with that product and I talked about that in a video I'm editing right now where in college I would always make these custom pcs running windows xp and all that, and I was constantly troubleshooting shit and it wasn't my build of the pc tower, it was all kinds of items, all kinds of apps that would start up on login and you couldn't get them uninstalled from the computer or whatever other troubleshooting issues. I had Bugs in Windows XP, all this stuff.
Speaker 2:And my girlfriend at the time had an iBook G3 running Mac OS X.
Speaker 1:Xp was probably the last great Windows In my opinion. I loved XP. I thought I loved xp was like probably the last great window in my. I loved xp.
Speaker 2:Um, I thought it was great she was running mac os 10 and every time I would use your computer for long stretches of time, I'm like this is just an effortless, yeah, intuitive, simple, awesome experience it sold itself every time like I loved xp but, yeah, I had some friends who had macs and I got my first mac in like 2009, yeah, um, and it sold itself.
Speaker 1:Yeah, like I had a. I had a tutor when I was a kid and she had one of those, like you know, the bubble Macs or whatever, and I just remember she would like pull that up and I'm just like, wow, this is gorgeous Even then.
Speaker 2:Yeah, so. So with a Mac, you know, not only are you saving time, do you feel like things are more intuitive, but you feel better owning one. It feels good to look at it. They look at all of that stuff and go yeah, it's $1,600.
Speaker 1:It raises your expectation of what a computer could be For a Mac.
Speaker 2:You bought your laptop recently. I have several Macs as well.
Speaker 1:I will say I do think the quality like especially on the software side, it's getting lazier in piece parts Like they. They have kind of, I mean, and jobs hasn't been there for 10 years 11 years, 12 years.
Speaker 2:They've expanded their product.
Speaker 1:They're starting to do a bunch of different stuff and it's because they're so big Like I honestly think steve jobs would probably walk into investor meetings and be like like I don't give a fuck if you're you know share, whatever like. If your share value doesn't go up year over year over year over year, yeah, um, and they can't do that now. They're the biggest company in the world there's a lot of expectation.
Speaker 1:They have the biggest cash pile in the world, um, but it does feel like I mean, especially with like iphone updates and stuff like that, you're like damn, this is clunky. Or like this isn't. Like, the music app isn't working, yeah, like why are you guys actually?
Speaker 1:using this, yeah, like has anybody realized that the music app, like is butt cheeks like 20 of the time, or like the podcast app won't work right? Um, or like, yeah, it's. A lot of the native apps are kind of just oh, this is like there's half the screen is missing at all times, or so there are, I will. I'm not just going to give them a pass and be like oh, it's great, like there's some quality issues that I think are starting to creep in, but right, all in all, it feels like they have the best cohesive experience of the brand.
Speaker 2:Now, one thing that Apple does brilliantly is they, for each computer, have different options, different price options, where you can get the base Mac Mini the new Mac Mini that was announced for $599. Or you can upgrade it base Mac Mini the new Mac Mini that was announced for $599. Or you can upgrade it every single thing, top of the line and pay just under $5,000. For a Mac Mini Without customization, you have usually three price points $599, let's say, $799, $1099.
Speaker 1:Maybe even take a step back and just kind of give the logic behind that.
Speaker 2:So when approaching really any pricing whether you're a service-based company, pricing based on time and materials, commodity or priced on value I think, without question, you should be giving your potential client three price options. You should be giving your potential client three price options. We see this all the time in everything that we do, from a Dropbox subscription to Doritos at the grocery store. You can get the snack bag, the regular size or the party size. There's an option for whatever situation you might think of.
Speaker 2:Any software has like three Cars, you know there's the base model, there's the mid-tier model, you know, there's the base model, there's the mid-tier model and there's a fully decked out model. I mean, my f-150 has, you know, even more than three options. There's an xl, which is like fleet and construction vehicles, there's the xl stx, which is a little bit more options, there's the xlt, the xlt sport, there's xlt lariat, you know, so on and so forth, which you have to be careful that you don't have too many options, because then people get decision fatigue or decision paralysis. So in my pricing, especially if I price something that's a bit more of a service, like oh, we want to to run a 30 second ad on one of your YouTube videos, okay, well, I'm not going to just give you three price options for that 30 second ad, but I'll give you the price for the 30 to run a 30 second ad, a 60 second ad and a 90 second ad. 30 second ad is, let's just say, a thousand dollars, 60 is two, 90 is 3000. And there's, you know, different sort of details within that. Not only are you getting more time, but, I don't know, maybe there's other value added things to each tier as it goes up in cost, um, but the big thing is, from everything that I've experienced with doing that and studied about the people who taught me that that's a better way to go, is it changes the way the potential client looks at you, instead of issuing them an ultimatum.
Speaker 2:The price for the video is $10,000 and that's it. It's sort of it's will I or won't I work with you when you give three options. Well, we can do a video for $5, $10, or the high-end video for $17,500. Instead of it being an ultimatum, the person on the other end is going. It's not whether or not I'm going to work with this person, it's how I'm going to work with them.
Speaker 2:Are we going to go for the base option at $5,000? That, you know? You know gets 50 to 75% of what we need done, done, but it's not quite there. The middle option is a good fit. It's the Goldilocks thing, right, the middle option is a good fit, but now that I'm looking at the high end option, that's a pretty good value. I didn't even think about wanting 24, seven, access to the person, or I don't know what. Whatever the extra value added things are, you know, in comparison to the 10,000 hours, the 17th, you know let's go with that one. Or, you know, when you were hoping they would take the $5,000 option, they're actually going to choose the middle one at 10,000, which is more than what you were expecting.
Speaker 1:It's like how I always choose the middle car wash I'm like and that's it.
Speaker 2:So you see it all over the place, but why aren't we doing that with how we price our services or our value-based um uh, expertise?
Speaker 1:Do you, do you think that ever like backfires, in a sense of so? This has always been my contention with the three tiers is approaching a job from the standpoint of you have a problem, we need to solve it, we're going to do everything in our power to solve it, and here's the price it's going to cost for us to solve it.
Speaker 2:Yeah.
Speaker 1:And then you just so essentially you only give the top quote unquote option, well, or the middle option or whatever, and you're just like, hey, like I think part of it is that always feels kind of gamey to me.
Speaker 2:So you want to be careful that you don't think of it always as well. Let's just make up a low cost option that doesn't fully solve their problem, so we can funnel them towards the more expensive options. What I like to do, and the evolution of that approach for me, was each option solves the problem, but there are those intangible value ads, so the low option is um, we're going to solve this problem, but you have restricted access to me, so I'm available by phone, email or text between the hours of 9am and 5pm and you you know I'm not going to respond to emails, I'm not going to respond to phone calls, anything outside of that, and it's generally frowned upon that you would try to contact me beyond an email after business hours, whereas the high end option is for this premium.
Speaker 2:You and I don't wouldn't always do this, but you've got access to me 24 seven If it's three o'clock in the morning and you think of something and you want to call me and have a meaningful conversation about it and what we're doing.
Speaker 1:I'll wake up, I'll get out of bed, I'll wake up and have that conversation. Yeah, yeah.
Speaker 2:But I would add that as a value add on the three options because in the value conversation I went, you've done videos before. Three options, because in the value conversation I went, you've done videos before what were the biggest issues you had with your collaborators? Well, they were never available Like I would call and they wouldn't call me back for two days. Okay, well, I'm going to make sure that in one of my top options you will get a call back from me, guaranteed within an hour. Yeah, if I don't answer the phone, you know stuff like that. Well, what were the other issues issues? Well, they were late, or they didn't do this, or they left the location a mess, I mean whatever it is like.
Speaker 2:You just try to kind of get a sense of what are the things that are most important to them. In those sort of intangibles where you can present three options that get the job done, but you can add honestly, like more luxury service, more hospitality, more, um, more access to you, a little more white glove. Like, yeah, or it can be a time thing, like, hey, we're going to solve this issue. The low-cost option because of the other clients that we have, we're looking at a six-month turnaround time If you want to buy us out, we can get this done in two months. But we literally but. But we literally, like you're going to be our only focus and you're going to charge a premium to have direct access to us.
Speaker 1:I think there's even benefit to the other side of that, where it's like look, we got a lot of clients, we're going to have to rush through this project. We're going to have to get it in and out. Try to do it in like a month. Yeah, like because that like to do the best work, we need to do this in a month and get it out and move on to the next client. Yeah, if you're willing to pay for the premium, we'll spend three months on it. Yeah, we'll think through every detail and then we'll think it through again. Yeah, because we have the time, like we will spend a day. I mean, I'm thinking of it in terms of like design.
Speaker 1:Like we will spend a day looking at each typeface we pick we will spend a day looking at, like your company's historical values, where you want your company to go, what like. We'll spend a week looking at all your competitors or we'll condense all of that. You know you get a couple hours for each one of those steps in the process and then you know you'll get a product in a month. So I think you could also service it in terms of like yeah and I mean, yeah, you're talking about post time and video.
Speaker 1:Yep, it's like we could take six months on this. We could take a month. Yeah, you're willing to pay for the premium, but I get it. It's you're saying it's more time based, then necessarily like delivering on the price, like access.
Speaker 2:Yeah, it's other things that have value to the, to the client, based on that value conversation, things that are important to them, you know. So, like, if you hire the carpenter to make the, the Walnut thing, like, well, how long do you think this would take? Well, you know, for me to do this it's $2,000 and it's probably going to take me six months. Well, what if I paid you 10 and I got it next month? Yeah, whoa.
Speaker 2:Cause it's worth it to me to have this thing ASAP and I'll pay a premium for you to move your butt without sack.
Speaker 1:You know now if they're going to be like well.
Speaker 2:That's going to sacrifice quality. You know how do I maintain the quality? What's the fastest I can get this, and because timeliness is of value to me, I will pay a premium. It's like getting your car repaired Like well we're booked up all week.
Speaker 1:Well, can I pay you four times the amount and get my car done?
Speaker 2:tomorrow. Now, most of us don't think in those terms or we don't have the expendable income to do that sort of thing. But think about all the times that you've. You know you've gone to great expense or uh, to have something um sooner, faster, more quality. You know, whatever it was because the value of that outcome was so important to you that you were willing to put some more risk into the situation to try to acquire it, and that's I like the triangle.
Speaker 1:It's like you've got cost, you've got time and you've got what is it Cost?
Speaker 2:time and quality right, so good, fast, cheap is typically how you do the triangle yeah.
Speaker 1:But it's like. It's like, if you, if you want it, yeah, if you want it, good and fast, it's not going to be cheap. If you want it, you know cheap, cheap and good, yep, then it's not going to be fast. It's not going to be fast, yep.
Speaker 2:That's always how it is, I love that I love that.
Speaker 1:Yeah, that. Yeah, Good, fast cheap relationship of looking yeah, and I think that's important to lay out with clients immediately. It's a good, fast, cheap triangle. Pick two.
Speaker 2:Just a quick blurb on another way that you want your client to be thinking. You really want to ascertain if they're thinking about what they're going to do with you as an investment rather than expense. If they're thinking of what they're working on with you as an expense, they are not a good candidate for partnership. So that's what I mean. Like somebody's willing Chili's is willing to borrow capital to install these hamburger things. Like they see that this is an investment.
Speaker 1:Yeah, they're looking beyond the immediate yeah.
Speaker 2:And the hope is that through your conversation with this person something sometimes that's as ethereal or intangible as what a video is going to do for their business that you can come up with a similar feeling with regards to how that burger machine is going to cook burgers twice as fast.
Speaker 2:Um, you may not be able to nail down all of that stuff in a scientific way, but you can arrive at a mutual understanding of what the solution could be and what the value of it is to to better see the cost, uh, of doing it, um, as an investment rather than an expense.
Speaker 2:So yeah, pricing based on value, having the value conversation, investment versus expense, three price options in your proposals, and your proposals really should just basically regurgitate what the client said to you what the problem is, what they value. The problem is what they value, what the plan, what the strategy is to solve that problem and why you are uniquely equipped to help them do that. And then you put those three price options down, typically the highest priced option to the lowest price option, and go from there. Yeah, and I also start out with 100% of payment up front. If this is a $10,000 engagement, that's the option you're choosing you pay me in full up front and if they really push back against that I'll go down to half now, half at a specific date, not at some arbitrary date.
Speaker 1:Yeah, not at like some arbitrary benchmark of progress. What I've done before is half up front, half upon Essentially mock approval. So you give them the mocks and it's like, yes, yes, yes, no or whatever. And then it's like, okay, we'll go in and finalize these and deliver, but you got to pay before we go do that.
Speaker 2:And then it's like, okay, we'll go in and finalize these and deliver, but you gotta pay before we go do that, and the only reason I don't do that is because a date they can't control mock approval. They can do things that take control of getting there out of my hands. True, they could go on vacation for two months or two weeks, they could have an emergency, you know whatever, and all of a sudden they could go on vacation for two months or two weeks, they could have an emergency, you know whatever and all of a sudden, well, you said mock approvals.
Speaker 2:That hasn't happened yet. Yeah, but that's because of you. You said mock approvals yeah, yeah, well, if I start this on August 31st, you're going to pay me the other half on November 15th. Yeah, uh, yeah, and if we're not where we need to be, it's most likely because of you.
Speaker 1:Right, and like, if it is because of because of me, it's like I'll take responsibility for that and adjust accordingly, right, I think yeah, mock approvals within a date timeline yeah, like you got to set whatever comes you have to set a date. Expectation of the project starts here, the project ends here. Of the project starts here, the project ends here. You're all the time on time under budget, whatever. In order to serve those metrics, you gotta have those metrics.
Speaker 2:And that's a good approach too, like mock approvals, because it could be that you're working really efficiently and things are clipping along and mock approvals come in a month before the date. So you can say mock approvals or November 15th, whichever happens first. So those are good ways to approach it as well. And if, when you put your terms out, if they balk at that point and it's a lot of pushback, red flag and most likely what's been happening is they have been going along with what you're saying, to be polite or agreeable or act like they're down with your process, some kind of like.
Speaker 1:Like you said, there's like a mental health thing, maybe, like they're conflict averse yeah they, you know, but typically you can feel that I will say, typically you can kind of be like, ah, they're being weird or like their behavior is a little bit and and you can kind of feel that off, but never push a project. This is my, my personal opinion. Um, never push a project if, if the client's like you're seeing red flags. Yeah, every time I've seen red flags and I've tried to push through it, I've regretted it. Yep, without fail.
Speaker 2:Every time, yep, you've got to read the room and kind of go look, I'm still sensing some hesitation or some uncertainty here. Take some time. You know you don't want to like. What do we need to do? What do I need to tell you? Because if you're desperate, if you have any air of desperation at all, like that's- not good.
Speaker 1:You've given up control completely too, and like you've given up credibility yeah, a little bit.
Speaker 2:Um, there was one other thing that I wanted to touch on quickly.
Speaker 1:Yeah, and I first of all, just thank you. Like this has been, like this has been super helpful for me. Um, kind of hearing the take on these things and getting to push back, especially like the, like the three pricing tiers, like I think the kind of extra white glove service is a really good way to look at it.
Speaker 2:Yeah.
Speaker 1:Something that I'm a little more comfortable with and being like oh, this is the quality you get for this and this is the quality.
Speaker 2:Yeah, we don't want to start off with like a half measure and then that top option is the only one that really solves the problem I think also one other thing oh, I know what I was gonna say just really quick on on this side, and two things.
Speaker 1:Yeah, there's actually another thing I want to get to too. This, um, the in terms of, of quality, or just if a client approaches you, I think the best, obviously, you, you can try to solve, you know their problem. But if there's ever a client and they approach you and you're like, hey, this is what I have in mind, is this price comfortable for you? Um, this is that's. It's not a science, it's not 100 of the time, sometimes a client will approach you and be like I don't have any money, but I have this project, and you're, oh my gosh, this is an industry I've been trying to get into for years, or this is a project that I've been.
Speaker 1:And if you explain that to the client, or you know you are on a level of understanding like this is something that I'm going to do for you because, like there's some projects, honestly, where I'm like I would have done that for free. Yeah, Never. You never want to lead with that, Sure, but sometimes the deal breaks down or they just don't have the money and it's like, man, this is for something I really believe in or this is for something I believe, nothing.
Speaker 1:So, no, um, it's. You know, it's something that I I'm really passionate about, or it's something I've been trying to do for a long time, or something similar to something I've been trying to do. That's okay, I think, to be like, okay, like we let's have an understanding about this, but I want to do this. Yeah, it's totally okay. I don't think it. It has to be an exact science.
Speaker 2:Well, and on that, when they don't have any money, there's other ways to get paid. So don't have any money, okay, well, let's talk about a commission based on the value I create, especially if you're selling something.
Speaker 1:Or value exchange, maybe it's a gym or something it's like. All right, give me and all my employees a lifetime membership to this gym and we'll do this video, or it's an ownership stake in the company.
Speaker 2:Ownership stake in the company is a great way to do it, especially for younger businesses that might not have capital.
Speaker 1:Obviously, make sure it's a business that you think actually has potential, or else you're just getting yeah ious um but ownership's a fantastic way to do it.
Speaker 2:I know a lot of people have done that the commission thing is also a great way for the owner to see the value, because then they go okay. Well, if this video is going to make us an extra $500,000 in revenue and you want a 25% commission, that's a. That's a lot of money I have to shell out. But now, but if you were going to charge me less you know less than that to make the video without the commission, that reframes their understanding of the. You know the fee to get it done.
Speaker 1:Maybe it's cheaper in that case for them to go get a loan at 2%.
Speaker 2:Well hey, I'll take on all the risk and get nothing up front in exchange for a commission on it which has the potential to have a much higher payout than the fees that I'm saying it's going to cost to do this.
Speaker 1:I hijacked you. You had two more things.
Speaker 2:Yeah, I had two more things. Now I got to re-remember them, sorry, no, it's all good, um oh. So, uh, first thing, um one thing, that somebody doing video especially if they're doing like a paint by number service but they want to transition into value-based pricing.
Speaker 1:You just literally cut off the question. I had that was it. That was the biggest thing. How do you go from A to B?
Speaker 2:Well, and what I'm saying is not necessarily how do you do that, but the biggest mistake that people make in assessing what a video is going to cost. Even if you're charging based on value or based on time and materials, a lot of times in the value-based pricing dynamic you are also the designer. So it's one thing for someone to say, hey, we have a car show at the whatever center and we need three-camera coverage of the panel. It's pretty easy to cover the cost of that, right. Well, I got a day of prep, I got three cameras, I got to get batteries. It's pretty easy to cover the cost of that, right. Well, I got a day of prep, I got three cameras, I got to get batteries. It's pretty straightforward.
Speaker 1:That's also a job that's harder to value base, because you can probably just go hire your paint-by-numbers crew.
Speaker 2:But you can still do a three-price option where you say let's do the super basic approach all the way to the high-end, more luxury approach it all the way to the high-end, more luxury approach. It's going to be three cameras, but they're high-end cameras, it's going to be a producer on set because we want someone to interface here. You try to figure out what are those luxury accommodations you can put in there that are more profitable, where, instead of just charging $5,000 to film an event, you can charge $20 because the person's like wow, they'll have a producer, get us a meal and they'll do this and they'll do that. You know what I mean. You try to pad it that way. The thing that's overlooked often in the value-based dynamic where you're working with a client to solve their problem, is you don't account for, or you completely under-assess, what the cost is of designing the video, and that might be script storyboards, the research that you're doing in similar videos from other places, the case studies that you're looking at from other agencies or studios that worked with this place, or whatever.
Speaker 2:um, your I mean script, just in script there's just research, the depth of writing, like writing is always writing you gotta sit down and just do it or you didn't contact the people that you're gonna have to subcontract or hire to help you do it. So you come up with the cost. You think the editor is five hundred dollars a day. But the editor because it's documentary, whatever, there's more footage to go through they're like no, I'm $750 a day. Well, you estimated your cost at $500, but now they're $750. So you're taking a hit on your margin, even with the value-based pricing, because you didn't really properly assess what the cost is.
Speaker 2:The other thing, too, is, with value-based pricing, before I write a proposal, if I know I need the help of other people, I'll I position them to price me based on value. This is what I want. This is what I care about. What are the price options? To have you come in and help me make this thing? Tell me what's gonna make you amped to do this, because I'm just gonna put it in the proposal, not a line item, yeah, but it's just gonna factor into the cost. I want you to get paid an amount that makes you feel you have to step up to the plate and that you have to commit.
Speaker 1:People want to work with your company in the future, like every production company that I loved working with when I was doing that full-time, when I was doing production full-time.
Speaker 2:Like you get to know the producers and the production companies that aren't going to fuck with you, that aren't hammering you to come down on your price all the time.
Speaker 1:And you, all, you, as soon as that name pops up on your phone, you're like, hey, I'll do it.
Speaker 2:Yeah, like you're pumped about it. They appreciate me. And that's the dynamic that I'm talking about. When you work with a client that treats you as a collaborator, not an order taker, you have such a solid foundation for collaboration and same thing happens with people that you might subcontract film crew designers, whoever it is like. I want all of us to do well in this project.
Speaker 2:I don't want to come up with a quote on my own oh man, $10,000. I think it's $10,000, this video. And then, all of a sudden, I'm asking my collaborators well, how much is it for you to, um, color correct? Or for you to add, uh, edit this thing, or for you to come operate a camera? Oh shit, your rates 800 a day. I thought it was 500. Well, can you do it for this much? Then, all of a sudden, they have bad energy on this shoot because you're not paying their rate. Like it's, it's just, it's just a. It just kind of makes a little bit of a mess, in my opinion. So, um, that's that's typically how I approach those things as well. Um, and I had one other thing, but I can't remember what it is um, do you have any resources?
Speaker 2:for people so for me, the, the people that help me understand the mindset shift from commodity-based pricing to value-based pricing. Um, we'll link them in the show nights but the show notes. But there's chris doe, who, um has a youtube channel the future, the future. Um, he's really good at that and he's like the person that too.
Speaker 1:I think he literally stopped his design business and now he just does like business education.
Speaker 2:I think it was like that profitable for him Consulting content creation around that, because even with a good client dynamic, it was still sort of client work and I think, ultimately you're in service to helping someone at the top of the pyramid be more profitable and make more money and you're you're an element in that process, whereas I think he realized, well, you know, this isn't like necessarily a purely ego thing or or arrogance or whatever I don't think that's always a bad thing too.
Speaker 1:Like I think a great attitude to have is like yeah, yeah. I rather than I rather be the one influencing how that looks, than somebody else influencing how that looks.
Speaker 2:But yeah, I'm just looking up the um other resources that I have here.
Speaker 1:And, like you said, we'll throw these in the show notes.
Speaker 2:Yeah, um, I don't want to play this, but I forget what his last name is Jonathan. Well, he doesn't have his last name in here. There's another gentleman named Jonathan and I'm totally blanking on his last name, but he's like a software consultant for companies with their software systems and stuff and he was experiencing burnout and bad client dynamics and low profitability and all that stuff. And he picked up this book, an old book from like the 80s, called value-based fees. It was like a guidebook for consultants to charge based on the value they create versus just like hourly rates. Yeah, and that's actually something to touch on too. So he was a great resource because he just has like a macro kind of philosophy, mindset, approach to it and would sometimes give examples from specific industries. But, um, he's a great resource as well. Um, the other thing, too, about hourly rates because a lot of people law firms, um, accounting firms, video, video professionals, editors charge hourly or day rates and because that's the industry standard, we think that that's the only way to do it a lot of the times. But to me, as someone who hires subcontractors, I tend to prefer a project rate with three options rather than an hourly or day rate and the analogy I give is why Uber is so successful, in my opinion.
Speaker 2:Used to get in a taxi cab, no idea how much it's going to cost. Meters running, sit in traffic. It's more expensive. Just constant anxiety, just constantly anxious. You know you need to get from point a to point b, but not knowing how much it's going to cost is like torture. And so uber figured out well. People will pay a premium to know a fixed price. They'll pay a premium to schedule a ride versus getting one on the spot. They'll pay a premium. This is uber's such a perfect example. They'll pay premium to have only an electric vehicle or to have a luxury vehicle.
Speaker 1:You do have rich people who are just wealthy enough, though, to where they were in the cabs. Yeah, just sit out here for 30 minutes, because they don't.
Speaker 2:Yes, that number could be a thousand and they're like whatever People would tell you oh, you're going to Chicago, you're going to New York. Watch out that the cabbie takes the right. They're not taking you the scenic route to Jack, and that's the thing, right? When you charge somebody based on hourly rates, it's a conflict of interest. You're incentivized to make the thing take as long as possible, because the longer it takes hey man, who cares how long it takes to get this video done? They're paying by the hour. Man, we're charging $125 an hour to post-produce this video. So let them give all their notes, let them change the scope of the project, all of that stuff. Who cares? Yeah, just send them the invoice every week for what their hours were. Same thing with you know law offices, my accountant charges based on hourly. I'll send them all my stuff.
Speaker 1:I'm like I don't know. I used to have an accountant that charged on hourly and it was just constant anxiety every time. Yeah.
Speaker 2:Like, yeah, I literally will send off the thing that I'm supposed to do, or give them the report that I need, and I'm like I don't know what the invoice is going to be. And then I'm like, oh, it was only $125.
Speaker 1:And other times I'm like $525?.
Speaker 2:I see the breakdown here and then it creates a little piece of shit between you and the person, like, like, it's just this little turd and you're like you could have done this quicker. Yeah, and it's like it's. How do I trust that you're doing it? What are you doing Like?
Speaker 1:that's their job You're paying them to. Also, though, like, getting back to like the everybody kind of just, you know, fakes their way through and like plays business. Um, and this, this is play business right, different, um, no, but playing like. I think it the best dynamic between a client and a company is just, you're both just trying to achieve something positive. Yeah, like, cut out all the bullshit. Yeah, cut out all the like, small talk, all the little horse shit stuff that people do in business, and it's just like look, I'm trying to do the best work I can do. You're trying to, you know, do the best like. I'm trying to do the like. Look, I'm trying to do the best work I can do. You're trying to do the best. I'm trying to do the best for my company, you're trying to do the best for your company, and we're going to meet in the middle and we're not going to try to have any perverse hidden incentives or anything like that Conflicts of interest.
Speaker 1:And if you can do that, then just cut out the crap and be a professional, yeah, and just like look, do you want the, do you want? I'll do the best I can to solve your problem.
Speaker 2:Yeah.
Speaker 1:And you do whatever you can do to do whatever you feel like it's worth to pay for that solution, and that's it, Like that's the dynamic. And if you can get to that dynamic, cut out all the crap, cut out all the like, oh of like, oh well this is this, and this is this and there's these rules and da, da, da.
Speaker 2:A lot of that stuff is just holding up the process at the end of the day. Oh, one other thing that I put into my proposal at the end, because we can't guarantee results, and I, you know that's always like a joke with the client If I could guarantee results, I'd be a billionaire. I would be doing this, but what I can guarantee is your satisfaction with the engagement.
Speaker 2:So I'll put in a 100 satisfaction guarantee. Um, you're going to be, you know I'll elaborate, necessarily. But um, if you're not satisfied, yeah, with how we work together and professionalism and all that stuff, I'll give you a full refund yeah, has.
Speaker 1:Has anybody taken you up on that yet? No, because you're in control of how satisfied they are.
Speaker 2:And again, they respect you, they understand your expertise. You're not an order taker, you have to step up to the plate to deliver. It almost guarantees that Satisfaction, their satisfaction, because you have so much responsibility that you were seeking and when you finally have that chance to not only deliver them a result and transform their business, but to then have something that's highly profitable for you it just is.
Speaker 1:it's almost impossible not to do it Well it reminds me of this great thing that I heard a while ago, where it was like I was talking about the dynamic of responding to the client immediately.
Speaker 2:Yeah.
Speaker 1:And so many people are like, oh my God, I'll get a text.
Speaker 1:I just have to respond and it hijacks everything. And there they were talking about. A solution to that is on first interaction with that client. Just set the expectation hey, you know we got your email, or we'll get. Like you send us an email, we will get it. And then send them an auto response. Even it's like hey, we got this. Um, you know we're not going to have this like a solution immediately, but your problem has been taken into account and like we're going to get back as soon as we possibly can. Yeah, or like, even say like, like we'll take care of this within 24 hours, like that's a realistic expectation. Or even you know whatever. And he was like the client. When the client is freaking out because you're not responding to an email, it's usually because the expectation hasn't been set. Sure, because all the client wants is to feel like their problem is being heard, heard that they're being they're being accounted for Yep.
Speaker 1:So if you provide them with that security that you're heard and you're accounted for and we're going to get to it, they're not going to be upset if you didn't respond in two minutes and and and that's another aspect of the package options right, if you have a client that really wants to have a response in some way immediately, that can be a premium option.
Speaker 2:Other people go on the low end option. They say, look, every Thursday we're going to get together and we're going to go down the list of all the stuff that you sent to us, all the questions, all this or whatever. It's every Thursday at three o'clock and we will accumulate the list and we'll go through it all at once, and that keeps you the person on the other end from getting hijacked, to feel like every time this client sends me an email or ask a question or whatever, I've got to stop everything and answer it. Um and so that can be a really effective tool and I think that's our job on our end performing a service or having received services to go.
Speaker 2:What didn't I like about it when I was on the other end? What you know, what don't I like about when I'm on this side of things? And coming up with tools like a weekly meeting at three o'clock on a Thursday to go through the list. Coming up with tools that make the collaboration as fruitful as possible, as tension-free as possible, and that you have managed expectations every step of the way. Again, that leads to a satisfactory experience and maybe even the results weren't there, or they weren't there to the extent that they thought they loved working with you. We made a big swing and uh, and didn't quite get to where we wanted. We can do some postmortems and kind of figure out what was going on and what we might do next time or do differently or whatever, uh, and go from there.
Speaker 1:What do you think like the biggest I'm looking at our time we are. This is either going to be the longest episode or we'll just break it into two, because we're almost at that point where we can just break it into two. So I'm just kind of shit. I'm like let's go ahead and just cover whatever we've got laying out there still.
Speaker 1:So you talked briefly a little bit about how to go from A to B. But on a more practical level, what if there know there's probably there might be one person listening or they catch it because of the search or whatever, and they are kind of operating on that, that commodity base pricing, and you know they they take what we're saying and it's great. But but how practically do you kind of go from? You've got all your clients and they expect a certain thing, and I mean, nobody wants to hear this, but I think it has to start with your skills and your expertise. Yeah, like, do you actually think that you have something to provide that is unique to the marketplace? And if the answer to that is no, then that's the problem. To start chipping away at first.
Speaker 2:Yes, I think typically, if someone is considering value-based pricing or they're feeling dissatisfied with commodity-based pricing, I think typically it's because they feel like they have value and expertise to bring to bear and it's not being heard or it's not being valued.
Speaker 2:Biggest thing is, if you have a roster of clients let's say it's even just five clients and you want to move toward value-based pricing, it is next to impossible to convert your existing clients to a value based system In rare instances if you really have a good relationship with them. It's professional but it's friendly, it's mutually respectful, all of that stuff you might be able to kind of like oh hey, look, we've been working together for X number of years and, um, we have charged you $100,000 over that time. What would you say? The value our work has created for your business? Is there a number that you could put on it, from the tangible to the intangible? Maybe they just have a gut check number. I think, honestly, the impact you've had is around $5 million. Well, you've paid $100,000 to create $5 million of results. Maybe you don't position, does that seem fair? But that's sort of what you're getting at.
Speaker 1:Would you be all right if, moving forward, we changed our pricing and nobody wants to hear that they're reliable, whatever is going on.
Speaker 2:And that client's sort of profit from you in a sense is decreasing because you're going to increase your fees. I think that would be such an outlier. So the ideal way to think about it is well.
Speaker 1:It would be an outlier for a client to transition.
Speaker 2:To transition to value-based pricing.
Speaker 2:The ideal way to do it is to say we're going to phase out these existing clients and the next time we have an opportunity to have a value conversation with a potential client especially if they are reaching out to us because of a referral or they saw what we did for another business and the impact it had that we can have that value conversation and bring them on as a client that's based on value.
Speaker 2:You know on as a client that's based on value. You know it's getting paying fees based on value and you would work with that client and you know, look at the client that is the maybe the biggest drag on things and either fire that client or shed that client or say you're going in a different direction. Um, and just continue to try to replace them with value-based clients. That, to me, is probably the best way to go. I tried, having that conversation, to convert a client from the way that we were initially charging to value-based and while it wasn't, you know, heated or you know anything like that, it, you know it just didn't transition into that.
Speaker 1:It's kind of like to a little, a little bit almost like taking. So when you're with your family, like your family always is going to see you in a certain light. I think of it like really close family that saw you grow up is always going to have a different perspective of you than a new person that you meet. And that doesn't mean that, like you're different, it's just the context that they're seeing. They're seeing you know some of the stupid shit you did when you were 13 or like when you were 20 and you did this or like what. Like there's a different context. Yeah, and I think the same can be applied for client work, where older clients like maybe it was your first and second client they've been amazing, amazing clients. And I'm not I'm not saying go and cut your clients, but you know, if that client is, if you're like, okay, I'm, you know, I've been doing this for X amount of time. Now I've got all this experience.
Speaker 1:I am doing things this way now Cause I think, that's going to be the best for my clients and for you know, my wellbeing, the wellbeing of my company, the employees of my company, et cetera. Yep, it's going to be really hard to get that client to change the way that they see you or your company?
Speaker 2:Absolutely yeah.
Speaker 1:So you know, yeah, it's one having the money conversation, but also just the perception of you, your expertise, your whatever. It's going to be really difficult to be like no, no, no, I'm, I'm value based now, like I'm an expert now, cause they're like here and I remember when you just started this thing you didn't have, you didn't even know one from one it's like, yeah, Yep. So I think that's an important thing to take into account.
Speaker 2:And you know, if those, if those individuals again are used to you being an order taker or the person you're interfacing with is not the decision maker. Well, you, you know what I mean like you would have to like. Well, can I have a meeting with the ceo so we can talk about how things could be moving forward? Um, well, we don't really have a problem, we just. The problem is we just need someone to do our social media or to make these event videos or whatever it is like.
Speaker 2:Well, you know, that's not really the work I'm interested in doing anymore. I want to move into, you know, stuff that's really going to have an impact on the business's bottom line. It's riskier, it's bolder, it's it's, you know, more innovative. You know all of that stuff. So, yeah, those are, you know, conversations to consider. Or you just you know, or you just slowly phase them out by we're not available for that project right now, and not a lie legitimately working with those value-based clients. Let us know when the next opportunity is to collaborate and we'll see if we can do that, especially if you're not on retainer.
Speaker 1:There isn't some service agreement or contract.
Speaker 2:Obviously, you're not going to just let them go if there's still unfinished business to do, unfinished work to do. So there's that too, a lot of stuff. It had been a golden afternoon and I remember having the familiar conviction that life was beginning over again with the summons.
