Why Clients Say You’re “Too Expensive” (And How to Fix It)

Key Concepts

• Anchoring: A psychological pricing strategy that involves controlling a client's internal frame of reference about price by establishing a comparison point related to the value or size of the problem being solved.
• Value-Based Pricing: Pricing strategy based on the perceived value of the service to the client, rather than solely on the cost of providing the service.
• Internal Representation of Money: Each individual's unique perception and reference point for what constitutes a "cheap" or "expensive" price.
• Pre-framing: Setting the context and purpose of a conversation upfront to manage expectations and encourage open communication.
• Monetary Value: Expressing the size of a problem or the potential upside of a solution in specific financial terms.

1. Introduction to Anchoring and its Potential

• The video addresses the common issue of creative professionals undercharging for their services.
• Matt Essam from The Future introduces the concept of "anchoring" as a powerful pricing strategy to potentially double or triple rates without changing the services offered.
• Examples are given of clients who have successfully used anchoring to increase their rates significantly (e.g., Yens going from $8k to $16k, Aleandro doubling a client's budget).
• The core issue is that creatives often make fundamental mistakes in how they present their pricing.

2. Understanding the Psychology of Pricing

• The video uses the example of a $500,000 property to illustrate that the perceived value of a price is relative and depends on the context (location, features, etc.).
• The brain automatically compares a price to an internal system of reference, which varies from person to person.
• The key takeaway is that to control how clients perceive your prices, you need to manage their internal frame of reference.

3. The Problem with Traditional Pricing Conversations

• Creatives often provide a price range without establishing a proper anchor, leading clients to compare it to previous experiences, other quotes, or referrals with lower prices.
• This puts the creative at a disadvantage because the client's reference point is often based on irrelevant or outdated information.
• The fundamental principle is that something is only cheap or expensive in relation to something else.

4. Anchoring as a Value-Based Pricing Strategy

• Anchoring is presented as a key component of value-based pricing, where the price is determined by the worth of the solution to the client.
• The video emphasizes that marketing and branding can contribute to anchoring value, but these strategies take time.
• The focus is on controlling the sales conversation through strategic questioning to establish a strong anchor.

5. Practical Steps for Anchoring Price

• The core strategy involves determining the monetary value of the problem being solved or the potential upside for the client.
• The video provides specific questions to ask during sales conversations to uncover these values:
  • "Why is it so important that you create this [deliverable]?"
  • "What do you hope that it's going to get for you?"
  • "If you could solve that problem, what would that be worth to you in monetary terms?"
• The example of Aleandro's animation studio is used to illustrate how these questions can be applied in practice.
• By asking questions about festival attendance, app sign-up value, and potential sales increases, Aleandro was able to quantify the value of his animations to the client.

6. Addressing Common Objections

• Objection 1: Clients don't want to talk about numbers.
  • Solution: Pre-frame the conversation by explaining why you need the information and how it benefits the client (e.g., to ensure a tangible ROI).
  • Example: "Today we're going to talk about your business goals... it would be really useful if you could share some of the numbers... because I want to make sure that if we decide to work together, there's some real tangible value for you."
• Objection 2: Clients don't know the answer.
  • Solution: Provide a spectrum of potential values to help them estimate the worth of the solution.
  • Example: "Would it be worth a million pounds? Would it be worth £100,000?"
  • If necessary, request a follow-up conversation with someone on their team who knows the numbers.

7. The Importance of Solving Big Problems

• The video emphasizes the importance of focusing on clients with significant problems to solve, as this justifies higher prices and leads to more meaningful work.
• Matt Essam states that he made it a requirement in his business to only work with clients who are willing to share their numbers and have a big problem to solve.

8. Conclusion and Call to Action

• The principle of anchoring is summarized as figuring out the monetary value of the problem being solved and ensuring that the price is compared to that value.
• The video encourages viewers to practice having these conversations and to consider whether they are working with the right clients.
• Viewers are encouraged to subscribe and share the video.

Key Takeaways

• Anchoring is a powerful psychological pricing strategy that can significantly increase rates.
• It involves controlling the client's internal frame of reference by establishing a comparison point related to the value of the solution.
• Asking strategic questions to uncover the monetary value of the problem being solved is crucial.
• Addressing common objections and focusing on clients with significant problems are essential for successful anchoring.