Business & Design : Pricing (How Much to Charge?)

A sad story with a happy ending from Scott Hindell, who is teaching Business and Design this summer:

I had a student a while back who was a freelance story board artist. Prior to going out on his own, he worked for a well known agency that billed handsomely for his work. When he went on his own, he felt that without the credibility of the agency, he should charge less. So he heavily discounted his rate, compared to what the agency was billing him out at, and bid on a lot of jobs.

While he was able to inch along, he was clearly struggling. In my class, I showed him pricing isn't as complicated as most think, and that pricing isn't only an issue of underlying costs, but more importantly, is relative to the market. After completing the exercise, he was able to see that the market value for his services was considerably higher than his pricing. So why wasn't he getting work? It's a great deal, right?

Humans still possess one of the strongest computers on the planet, our limbic brain. This part of the brain is able to calculate massive amounts of data. The problem, though, is its output comes in emotions. In this case, trust or distrust. While this might have been the deal of the century for his prospects, when they looked at the price, it didn't match up with his resume and the value he was offering. So, when in doubt, they moved onto the choice they could trust.

In the end, he raised his price, and immediately began to get more work.