Why cheap pricing attracts pathological customers

NYT bestselling author Ramit Sethi and I continued our earlier discussion about getting your first consulting client by addressing a common pain point for freelancers/consultants, particularly those just starting out: how do you price your offering?

If you want me to tell you “You’re a Rails developer?  $100 an hour if in Iowa, $150 an hour if in SOMA, best of luck” you’re in the wrong place, because you should have learned in our previous installment that you need to present yourself as someone solving business problems rather than as a mere technologist.

Instead, we’re going to go beyond the tactics and talk about the psychology of customers (and consultants) that poison cheap relationships, why we typically underprice to begin with, how to walk up your rate in such a way that your customers continue to perceive outsized value from your services, and more.

When we recorded this, our agenda was to talk primarily about freelancing/consulting rates, but both Ramit and I have run product businesses for many years, so we couldn’t resist tossing in a bit about pricing for e.g. SaaS companies and info-products as well.

(Want to hear even more about this topic?  There’s a podcast coming up next week with Keith Perhac and Brennan Dunn, where we talk about how we transitioned our three very different freelancing/consulting businesses from where they were when we were young and stupid to three different models which work out fairly well for different reasons.  Subscribe to the podcast to hear it when the audio engineer gets done with the editing.)

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[powerpress]

Transcript: Ramit Sethi and Patrick McKenzie On Why Your Customers Would Be Happier If You Charged More

[Patrick notes: I have annotated the transcript heavily with my remarks, in this format.]

Patrick McKenzie:  Hey everybody, my name is Patrick McKenzie, perhaps better known as patio11 on the Internets. I’m a small software entrepreneur who has run a series of software as a service businesses for the last six years. Concurrent with that, for the last couple of years, I’ve run a consulting business largely helping software companies make more money by delighting their users and increasing sales. I’m here today with my friend Ramit Sethi to talk about how you can price your freelance or consulting offering better.

Ramit Sethi:  Hey everybody, Ramit Sethi here. Patrick, thanks for having me. I am the creator of a site called iwillteachyoutoberich.com. I also have a New York Times bestselling book by the same name. My background is in psychology and persuasion. I teach people how to use behavioral change, principles to change...

For the full transcript see here.