Debate with Nathan Wrigley and David Waumsley
Setting up the Debate
This should be fun. Not directly related to WordPress, but many of the business courses and events for those running WordPress services focus on this.
Overwhelmingly, (or loudly) they advise a type of value pricing over fixed rate. This is where you charge according to the value to the customer and because it is about making more money it is about finding customers who see the higher value.
Nathan is going to argue the fixed rate side and David will argue the value pricing side.
Apple and Starbucks are good products based examples of success with value pricing. Their costs may be similar to competitors, but they are able to charge more. The difference in quality may actually be very small but significant enough to buyers. I think a lot of the specialist shops started to do this in the 80’s, for example Dunkin Donuts, Tie Rack and more.
It’s more sophisticated model as it looks at all the factors that affect the psychology of buyers. Look at Apple’s “1000 songs in your pocket”, getting the value of the iPod over in opposition to a rival, cheaper mp3 player.
Most people don’t have a clue about actual costs (if there is such a thing). They have comparisons and a belief that things that cost more are of better quality. A small number of people alway buy the best. Most tend to avoid the cheapest if they can.
If you are someone who really does their research and hates to buy anything over the minimal cost, the chances are you are not consistent in all your buying.
It is a mistake to assume your customer thinks like you. If fact, if they are coming to you for what you know, it is almost certain they don’t.
With custom services fixed pricing is difficult anyway. You don’t get to control clients who you depend on to deliver the goods, so it is very easy to undercharge and go out of business.
Charge well enough and you may have enough time to make a difference to clients overall profitability. Some that value pricing implementers focus on – solving wider business problems (more time more profit- not just delivering functional software).
It can be a solution to the problems of fixed rate. A client sees a low rate and excludes you. Clients don’t understand what you can do for them so have no context for the price.
This method is far more transparent and accessible to clients, they understand this because this is how commerce usually works. You see a price in a shop and you expect to pay that.
You don’t have to hide what you have charge others. People can see what they are getting easily, you can put your rates on your website and casual browsers can made decisions without having to speak to you and get into complex negotiations in which you have to convince them of the value that you can add.
Long term relationship of trust could be easier to form if the client feels you are trying to give them the best cost. This is easy to underestimate, but we all feel good when we’ve received a great deal, and annoyed if we feel that we’ve been taken for a ride. With value pricing, if you don’t knock it out of the park, you’re going to open yourself to the criticism of ripping people off with empty promises.
It is not easy to show value quickly. Saying simply ‘we offer this service for this fee’ is easier, although I suspect that those with big budgets might not be looking for this attitude.
Promising to deliver what is beyond your control is problematic. Our industry seems to have many customers who feel they have been robbed.
Probably too many folks are trying to find “value” clients. Many competitors set up yesterday with a page builder and a script from a course and think they can charge top prices. I really think that this is an industry problem that’s going to get worse and worse!
The biggest promoters of value pricing teach it but have stopped doing it. They are out of the business they are telling you how to run yours.
We don’t do value pricing because we can’t be bothered with the pitching.
We like the more passive nature of the hosting and care. The price is low so people have no reason to search for cheaper during a recession, but profitable enough to feel some security.
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Transcript (if available)
These transcripts are created using software, so apologies if there are errors in them.
Nathan Wrigley: [00:00:00] Welcome to the WP Builds podcast, bringing you the
latest news was from the WordPress community. Welcome your host, David Waumsley, Nathan Wrigley.
Hello there and welcome to the WP Builds podcast. This is episode number 198. Entitled value pricing versus fixed pricing. It was published on Thursday, the 24th of September, 2020. My name's Nathan Wrigley and a few bits of housekeeping. Like we always do before the show begins proper. Please head over to wp.com.
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You can find all of the live [email protected] LA you've already in our Facebook group. Okay today, we're talking about value pricing versus fixed pricing. So the idea when you walk into a shoe shop is that you see the label on the shoe and you know that it costs 80 pounds for these pair of shoes.
It's fixed pricing. And this. Presumably is the way that many of us have built websites in the past. You've just given a fixed price and people have been able to discover what that is walls even before they communicate did with you, perhaps by looking at your pricing page on our website. But more recently we've got into value.
The idea being that you price based upon the value that the client will receive from it. So if they've got a big business and you increase that business by 10%, but something that you could do, you could charge significantly more. And that's the point you can charge significantly more. is this suitable for you?
Are you better with value pricing or are you better with fixed pricing? David and I debate it today. I hope that you enjoy the episode. Hello
David Waumsley: [00:04:10] today, we are looking at value pricing versus fixed rate. So I'm going to enjoy this actually, Nathan, it's not directly related to WordPress, but there are so many business courses and events for those running WordPress services that focus on it.
And I think it's probably true to say that overwhelmingly they advise a type of value pricing over a fixed rate, and that's how I better explain it. That's where. Yeah, you charge according to the value to the customer, because. It's more about finding out what customers see as their value. So it's a kind of, it's quite sort of sophisticated model, rather than just what you, it costs you against, what you need to charge on an hourly rate.
So Nathan, you're gonna argue the. I was going to say fixed rate, but I'm going to say the non-value pricing. You're going to argue.
Nathan Wrigley: [00:05:04] Yeah, I think basically, yeah, because I don't have any, I don't bring any value. So it would be almost ridiculous for me to argue now. It's interesting. I think there's an awful lot in the value pricing argument, but we obviously have to take one side or the other, and I'm far more comfortable with the whole fixed rate thing.
largely because I don't really, I don't really feel that the things that I've done in the past. the knowledge that I've gotten so on have led me to a real solid understanding of what value pricing is and how I might go about doing it. And also just the nature of the clients that I've had, where budget and things like that have been proper constraints that it's more difficult to justify.
I think. When you get into value pricing, there are certain ways which you can clearly win on. and I think the type of client that you've gotten, the nature of things that you've done in the past and experienced that you've had and so on can really stack up to make it a win. But yeah, I'm going with fixed pricing.
David Waumsley: [00:05:58] Yeah. And it's music that I'm actually doing the value prices side, because I'm the opposite on I N and in some ways I have a bit of a beef as well about how value pricing is used in our industry a
Nathan Wrigley: [00:06:09] bit. So in a way
David Waumsley: [00:06:10] I would have thought, or, if we were picking sides on this, initially I would have said, Because I th I associate you more with the value pricing, probably because you did that WP elevation, which is a course, which is very much a kind of about that, and maybe adopted some of those principles and also silly one that you're an Apple user.
So you're a Mac rather than a PC person. Yes.
Nathan Wrigley: [00:06:34] Yeah. Yeah. That's an interesting thing to bring up straight away. Do you want to join to go through, actually, before we go through that, let's just get to the bottom of what these things are. So fixed pricing. What I'm thinking here, as you said, is anything which is not value pricing.
So it could be an hourly rate whereby you charge it. I don't know, save $70 an hour for tasks that you perform, and you may be. Set the clock going at the beginning of the task and end it, and maybe rounded at some point, but also the idea that you would scope out a project, figure out what it's worth, add in a percentage in order to make it profitable, some sort of contingency fund and then just bill based upon that and, get your deposit and then do a third step age, second stage, third stage or whatever, and yeah, get the amounts of money for that.
And then in the end, you've. You've paid for the product and the client knows exactly what they're getting, but it's largely built upon the, the idea of charging by the hour, which is very much not in Vogue at the moment, but, without a shadow of a doubt has a place in the market.
David Waumsley: [00:07:36] And where there's room for confusion? Cause I think in our industry, when we talk about value pricing, most of the time it's about talking to a client and trying to find out a little bit about the client's own budgets, what it's worth to them to have a website, what that website might earn them and cost it according to that, which is maybe different from when we talk more generally about value pricing.
Good successful examples of probably Apple and Starbucks who do have,
Nathan Wrigley: [00:08:03] because they've got
David Waumsley: [00:08:04] products, fixed rates, but they still. If you'd like, they've still use this more sophisticated model to look at the psychology,
Nathan Wrigley: [00:08:11] see how
David Waumsley: [00:08:13] they can present the offer in a way that it's going to mean more to people and have value in their life.
So there's a bit of a difference between I think, value priced and in products and services. And how it relates to us.
Nathan Wrigley: [00:08:27] Yeah, it's really interesting. The psychology of it, I feel is the bit that we're are we going to not have much insight into, but it's also, I think probably the key component it's about speaking to the client or the business or whatever, and trying to, pull leavers in their brain, which make them think actually, what.
this feels like something yeah. Of value. They're suggesting something, which I hadn't necessarily thought of. They're seeing that they might be able to increase our revenue by doing this, and this and so on. Okay. It's possibly more expensive, but at least they've come up with these ingenious ideas and they're putting their.
Their reputation on the line here to do it. yeah, the psychology, I think is really important because without that interplay of psychology, there's no way that you're going to get people beyond the fixed rate. That just seems in every scenario in life, just about everything has a price tag attached to it.
you go into a shop and certainly where I live, maybe not so much where you live, David, I don't know, but yeah. Yeah, there's a price. And you walk in, you buy a pair of shoes. There's just no quibbling. That is the cost. If you want to buy that pair of trainers, it costs 89 pounds. If you want to buy that pair, it's 59.
And there's probably some reason it's 89 as opposed to 59. Sometimes I think it might be the same ecology it played, but you get the point, you pay what you pay for, what And so stepping outside of that, Is an uncomfortable proposition, not only for clients, I think because they're not used to, not knowing the price entirely up front and so on, but also from my point of view, I find that a difficult thing to do because I'm not really sure what it is that I'm bringing in terms of value, but also because money, and I have a strange relationship, I've just.
Yeah, really disliked talking about it and so on, typical the person that I am. And, yeah, so there we go.
David Waumsley: [00:10:18] we didn't talk about this earlier, but it's interesting what you just said about, I don't know where you are when I think about it. because Goa in India at the moment I've grown up.
If you like thinking that kind of fixed pricing is the way it is, you'd like to see a price tag every way you go. And you like to be able to compare it with some others and add value pricing is a new app.
Nathan Wrigley: [00:10:39] Up there thing.
David Waumsley: [00:10:40] But when I think about it being in Goa value pricing is the way that everything is done.
it, when the shopkeepers come out in the morning, the most important thing it's a kind of tradition is to get that first sale. It's their good look for the day. So they, for them, that's the last one they will sell. Possibly even at a loss to get that first sale, because they've got that. But also anybody else who comes in after that point is chances are they're going to be looking at who you are.
To give you the price on it, based on what they've gathered about you.
Nathan Wrigley: [00:11:13] So we've all had that experience. Haven't we, when we've been on holiday, you feel you've bought something and you know that you've probably paid over the odds for it. but it. It feels like an okay transaction because you're on holiday.
You've got a little bit of spending money set aside and so on. and also sometimes it's just not worth it cycle, but yeah, the notion that you can walk into a shop and see a pair of trainers, and then you can open up your mobile phone and see what they cost on an online range of stores and pick, okay.
It's the exact same thing. great, but it's 20 pounds cheaper over it. This particular website or this shop, this bricks and mortar shop. Yeah. I'll go over there and buy it. There is something very comforting in that, you can do your own market research and come out with the winner, but obviously we're not selling trainers.
We're selling something a little bit more aspirational. And when we, before we recorded this call, we got into the whole design thing, design, separated away from code. So the way it looks as opposed to the way it functions. And I think. In value pricing that can often be the, the thing which is more persuasive than anything else.
David Waumsley: [00:12:17] I think when customers, why I think we need value pricing in our life, or we need to take it seriously. Why I can argue for it quite easily. It's because,
Nathan Wrigley: [00:12:26] it's. We
David Waumsley: [00:12:28] have to have some kind of conversation with the client so they can understand, because we do so much
Nathan Wrigley: [00:12:33] when
David Waumsley: [00:12:34] we build a website, it's not necessarily what they thought they wanted when they came, they may be just thought I wanted these pages and then wanting to look nice on, with our branding.
But they hadn't thought about the traffic or the conversion side or all the automation that we can also deliver in their business for them. They haven't gone through all of these things. So if you've got a fixed price and you have to fix it, you've got to come to know what people are coming to you for.
I think the value pricing, if
Nathan Wrigley: [00:13:01] you
David Waumsley: [00:13:02] committed right yourself down with fixed pricing, if you've got a fixed price and then you've got. Clients who might come to you got a big, bigger budget and they're expecting much more to come back from the results of what they're asking for. You're not going to get that work because you're going to be too cheap for them.
So I think the value pricing is very much about two things. Isn't it about trying to, have a conversation with people to really understand that problem that you're solving for them. And that will dictate a price, but also within keeping with the kind of budgets that they're dealing with.
if I was pitching for the interesting thing, when I started doing this, I did a website, this little.
Intranet, which I'm talked about for my employers. We're a big government agency and I did it in a weekend. It got adapted by them as a project, but that project itself must have cost a hundred times more than what it costs me to do it. And for one thing, When they were rebuilding that they wouldn't, they would never have gone to as low as I did, if even if they wanted somebody as a third party to do it.
But simply they cost that amount of money because of their processes.
Nathan Wrigley: [00:14:12] Yeah, that's a really good point. And I think the thing which courses like WP elevation, they specialize on is trying to try to put into your head the things that you can value price against. So you know that the conversations that you could strike up, the things that you could put in front of clients, the ways to say things, the psychology of how to frame things and when to go in with what.
Particular offer and so on. and I think a lot of these things, just for somebody who's been born in a society where everything has a price ticket, a lot of those things are counter intuitive. No, that's not true. Not counter-intuitive just not intuitive. you don't know necessarily come up with them.
So it takes people to them. I read all the literature and half the psychological thoughts and all of those kinds of things to put it together so that you can understand it. but it doesn't necessarily make it that easy to do. In my situation. Yeah. You were talking about the fact that you'd built something and it was largely able to achieve what the end product that costs a hundred times more could do.
I'm I think it's fair to say that me and a lot of other people, I'm sure I could include you in this really struggled to figure out what those things are, what the value of those things are. And it's probably because our process. Hasn't developed in that way. We haven't decided to spend that much time, but also largely because the clients maybe, yeah, can't bear it.
And that's something that you can always bear in mind is the clients might have a budget, which is dramatically. Dramatically reduced compared to what your value pricing would have. And, to some extent, especially now it's a bit of a buyer's market where if you're going to say, I can build you this website and it's going to be on an inc 5,000 pounds, 2000 pounds, 800 pounds, whatever.
and then they can go off and get a really similar experience somewhere else. And it costs half of whatever you said. It's difficult to, it's difficult for them to justify, but that's where the design and the way that you pitch your offer and no doubt, even things like we got into talking about offices and the way that you, the way that you look, it might even be the way that you dress the computer that you bring to bear with them, the documents and the brochures that you've got, the clients that you've had in the past.
The, like I say that, even down to the. The kind of environment that you put them in inside your office, luxury, everybody in there's 50, 50 agents, all answering calls over there. There's 25 coders all over. they're all sitting at dead cool desks with nice chairs and they've all got the latest Apple Mac.
It all swells the feeling that this is a company that you can trust and so on. Whereas with me, it's just me probably showing up in jeans and tee shirt. It's from questions.
David Waumsley: [00:16:49] I know it's the same. we did think didn't we, that might be might favor value pricing, or it might be easier to do that.
If you're more focused on the design things, the kind of beauty of it. Cause you can create that vague image. Very easy. That's accessible. Someone can see it straight away. same as dressing, if you dress well, they can see that you might be a certain type of person. You can present your offices and the kind of the kit that you have as part of the package.
It's a bit harder. I think if you're a little bit more on doing the code inside the functionality of a site where your you've got to connect that then to their business aims. the value prices. The well known ones who do it with the products, the apples and the Starbucks. they vain.
Apple, we were talking about that before the thousand songs in your pocket for the iPod was phenomenal as a marketing message, backed up as you were pointing now. Because, before, and I was mentioning this to you when we were talking before I, had some early MP3 players that I literally bought from places that were like pound shops, they were, they cost nothing.
They effectively did the same thing, and pretty much a hundred times more, less than a and an iPod, but, they did it. Didn't they got the value over. They've got somebody to understand. What this might mean for their lives?
Nathan Wrigley: [00:18:06] Yeah. They also managed to capture cooled and they Apple for years now has just been cool.
I don't really understand how that works, but the, do you remember Microsoft came out with a rival product. It began with a Zed or Z, as he might say. I can't remember what it's called. It was something like the Zuora or something like that was fall. That's a thing. Anyway, it functionally did everything, but it wasn't an Apple product.
and so it didn't have that kind of cue Dawson Apple must've spent absolutely billions, really billions of dollars on not only hiring the best video makers and the best with the best ideas. Yeah. Producing sublimely cool commercials, which even me at the age of probably 30 something, not really their target market, even I could feel that those adverts were cool.
and then on the back of that, there's a product thousand songs in your pocket. It was just so compelling. He never actually, yeah. Won me over because at that time I wasn't consuming music via headphones. I wasn't commuting or anything. They didn't really have time for it, but there's, if I'd have been going into an electronic store at that point, I would have been at.
You would have had to have persuaded me not to buy the Apple one, not the other way round. And so moving this onto web design, if you can, if you are a really capable designer, the way it looks, the way your website looks, the way your office is looks the way that you can show.
Previous portfolio of amazing websites that you've done. I think the way things look can be really persuasive in this scenario, but I'm in a, I'm in a situation where I'm largely using page builders, which perhaps constrain that a little bit, but also it's not my forte. design isn't my forte.
and so my business has pitched firmly at, much more pedestrian things. Should we say? So
David Waumsley: [00:19:53] that whole,
Nathan Wrigley: [00:19:54] value pricing is a little bit more difficult. I was saying earlier, and I'm going to be shot down for this, but it's, especially given that WordPress is motto. If you like his code is poetry.
I was saying that it's, it must be difficult if you're a. If you're somebody that is a developer and writes code, and somebody comes to you and says, he says, look, I've got this idea for a while. Let's say a WordPress plugin. And they approached 10 different people who were all on the face of it.
It can write code. They are able to deliver the end result. It must be extraordinarily difficult to say, my result will be. Better, you should hire me, I guess in the end, it'll come down to the better relationship, whether you can prove that you've done things like this in the past, whether it's, you can do it more quickly and so on.
Whereas going to a designer and saying, show me your portfolio of websites that you've built, or I dunno publications that you've had printed magazine layouts, and so on. You can really get a strong sense right away of, I want them. They're totally what I want. They just look so cool. That's exactly the way I want my stuff to look.
And I'm prepared to pay significantly more to get you because you've just hit the nail on the head with the stuff you've done in the past. yeah. Anyway.
David Waumsley: [00:21:07] Yeah. And I don't think, a developer like that could really sell themselves on those, but you could. Do even if you just move towards the developer side, most of us having to build our sites on their own, but you would focus more as value prices do on trying to get that conversation about what are the things you could offer with code that they didn't know about certain automate actions that can be done, even if it's just as simple as the fact that.
people don't know that when somebody sends them a, an inquiry email, you can send them a string of other emails that are automated, that could save an organization a lot of time, and that kind of stuff, or make them more money. So you've got that angle to go.
Nathan Wrigley: [00:21:44] Yes. Yeah. Very much.
David Waumsley: [00:21:46] I think Apple and Starbucks are very much about the visual, the Starbucks again, it's ingenious, it doesn't work on me effectively because I still see coffee as coffee. But the idea that you focus on the things, like the environment, the leather, so Thurs. The personal touches, you can have it made how you like, but also even play into the fact that something, which it's true of all coffee that we have.
It comes from various parts. Yeah. The world, they have a way of presenting that. So it feels like there's a bit of adventure to your coffee. I'm going to select from, this generally the world and you can visualize it. Yeah. it's got a bit of adventure and glamour to that, which wasn't there.
When you say, do you want a coffee?
Nathan Wrigley: [00:22:25] Yes. Yes. imagine as a developer, just going back to what I was saying a moment ago, you were showing the products of your labor to people who don't code. and you're saying, look, but look how sublimely cool. This function is look at the way that I've looked at it.
Everything's perfect. I've commented it all perfectly. and it does it in staggered. It does, it manages to achieve this in house half of the time. I thought it would take, just going to have not particularly moisturize, there's going to be dribbling and boredom, but I'm a designer faced with the same problem.
Look at the way I've made this look. Look, it's just. Chalk and cheese. It's really interesting, but I think you're right the way that you present it and the way that you pitch yourself and the way that you turn yourself out in the office and the environment that all of those things are really persuasive.
But just to take my side again, the fixed rate side also. Like I was saying a moment ago that the pricing ultimately I think, is going to become more important than ever. So we're recording this in a time when, we've, we're still in the middle of the COVID 19, situation where were sufficiently far into it.
That it's pretty obvious that the economy has been hit fairly catastrophic, CLI globally. Lots of people are going out of work. They've lost their jobs, sadly, and. There's less money floating around the system. People have got less disposable income. It feels to me that. It's going to be harder than ever to justify value pricing as opposed to fixed cost pricing, because the value pricing let's be clear about this value pricing is about charging more.
You're not doing value pricing so that you can shave. Money off your fixed pricing. The idea is to charge double or triple or whatever it might be that you feel suitable. And I feel that in this environment, we're going to be struggling to get those marketing departments and the people in control of the purse strings to sign that stuff off, just because put simply there ain't any money around.
David Waumsley: [00:24:24] Yeah. I think when it's in the middle where you can see that people will spend less, there's always been arguments. I can't, I'll be sure to remember. I remember a very early, but probably a positive thinking book that was talking about how someone in a recession. decided to double the cost of their houses, real estate.
It was American thing and the how that was a success. So they went the opposite direction because that's what we expect invitation. Don't we, everybody, the cost is it's the time. If you've got money to buy stuff, because everybody else wants to sell off stuff because they're worried. So sometimes taking the opposite approach, maybe recession, isn't an argument in this one, cause it can work either ways.
if you're on a fixed price and you keep it to the minimum, then people are always going to come to you because. They'll probably still need these things, but maybe they won't, maybe they will hold off in this session as well. So maybe either models are not
Nathan Wrigley: [00:25:17] resectable. Oh, that's a good point. Yeah.
Yeah. I was assuming that some things needed to be pushed forward regardless. we need a website. We absolutely just need it. We're starting a new business or our website has just been knocked off the Google rankings because I don't know for reasons, maybe it's not. mobile responsive or something like that.
It's got to be updated. Otherwise we're gonna go, I wonder. And so we need, it just fails, especially with local businesses who I deal with the bottom line, frankly, is the money, and that is the question which often leads. The whole discussion is how much will it cost? that's the first thing that comes out of their mouth.
I want a word. I want a website. I know you do websites. I need it to have five pages. So you managed to get a few questions out before they finally say yeah. how much do you think this will be? Sorry. Okay. Yeah. it's pretty clear at that point, the value prices would tell you, look, this is toxic.
This is a client just step away at that point, run for the Hills and tell them that this is not the kind of business that you're interested in working with. But, it works both ways, a recession and maybe you're in need of money as much as they are in need of a website. And so you get into a price war with those people around you.
And again, this is the stuff which the value pricing model would tell you absolutely to steer clear of. Don't get into a price, war, value price, stick to it, show your worth and all of that. But maybe you're not lucky enough to be in that position. And so having a fixed price, which is affordable, but can keep you afloat is a good thing.
David Waumsley: [00:26:48] Yeah. that's the hard bit, the reason why I'm not is because it
Nathan Wrigley: [00:26:52] I've
David Waumsley: [00:26:53] never really wanted to be bothered with going out, looking for work, which I think you need to, as a need to purport in that effort in, so I'm too lazy. So I don't want to turn away any work which we need to do as a value pricer, but there is another argument, from the value prices.
Point of view is the fact that in the recession where people are talking about the budgets, remember in our kind of value price in what we're trying to do is to explore how we might give them some extra value things they haven't thought about. So we might be able to lead with the recession. So say this is a really great opportunity to get, you're going to need to get ahead of your competitors in this period.
do the work with us and we'll be delivering more than what your competitors deliver because they. Don't go for the little extra things that you might think about with a website that will increase it's. conversion rates and things like that. So it could work in our favor as well.
Nathan Wrigley: [00:27:42] Yeah. So was a point and you're quite right to draw that parallel. there's obviously people and even in these trying times where this totally works for them, it does seem interesting though. I guess the conundrum is if, especially if you're a freelancer, if you work for an agency, this model just seems like.
So you can be absolutely sure that you're going to knock it out the park in every scenario, because there's a. Total expert. Whereas if you're a freelancer and there's literally just, you, not only have you got to be building these websites, but you've got to be keeping up with the latest trends, you've got to be firmly committed to finding out what WordPress is now possible, what it's possible to do within your constraints.
can you code a solution? Can you buy a solution? Is there a plugin for that you can have, you gotta be spending all this time and then you've got to figure out what that would be worth to somebody. and it makes the job of it just makes you into a Jack of all trades and it's difficult to become an expert in these areas, And, and also I feel that the difficulty for the freelancer, with the value pricing is knowing what the value is. like literally in terms of pounds or dollars or whatever. So you're working and how do you know, how do you, how, what is the model? How do you sit down and say, okay, so if I implement, let's say for the sake of it, you put, I don't know, some sort of funnel together.
That seems to be the, a popular thing at the moment, put together this funnel. And, you are. Probably going to have to make up some numbers of conversions and how it might work. And, you've done it in the past and you can see that this kind of stuff works or maybe it's split testing, whatever.
how do you know, how do you know what number is in the end? Aren't you just using fixed rates for other things? Aren't you just making up a number of saying, my fixed rate for adding in funnels is this, we're not here talking about, I'll take 10% of. Whatever you generate, I presume. Cause nobody's gonna bite your hand off for that.
So you are basically saying here's a load of other stuff that I can do for you. it will make your business 20% more profitable. So I'm going to ratchet up my prices by 20% to justify that and so on. So it's a difficult one.
David Waumsley: [00:30:08] yeah, some of the, I guess they would class themselves as value prices.
They will literally be doing that. They'll be looking at a company won't they'll be saying, let's say I'm doing your marketing through the website and then there's other things with it. And let's say on average, they've got by then a seven. Is there a, of their turnover is, or profitability is what they will put into that kind of advertising budget.
They you've got the budget. And I think, the argument, we got value pricing being so popular thinking courses and events is because in our industry, that was at least a problem in the sense that most people started websites, but the clients couldn't control what was going. They set a price.
But they can't control the client and they find they've got no wriggle room and they're putting in so many hours and not really getting paid because the price in it basically. How they could do a site for themselves if all went well. So I think the thing is about the value pricing. It's solving a fixed pricing issue.
That's always been there with underpricing and giving yourself some more wiggle room. Yeah. But also if the clients don't know what they are buying for, and they've got these budgets that say they have got this kind of 7%. That's going into the advertising and that could be very independent on the client.
Then you've got that time to be able to make more money. So I think there's good sense to it. I think where I have an issue is the side of the fact that a lot of people are, like you say, making up a value and all they're saying you will have better conversions or better traffic, or that this will lead you to so many customers in the marketing, but they wouldn't.
Put their money where their mouth is and guarantee these things. So that's the downside of it. I think so I can see your point.
Nathan Wrigley: [00:31:51] Yeah. essentially it could be construed as the value pricing is basically just upselling stuff. you are, you're just adding in some of the things, you're adding in things which could revolutionize their business or at least make that claim and then charging, basically an upsell for something like that, which is quite interesting.
but yeah, the other thing that I wanted to mention was the idea of value pricing, when it was initially put into the WordPress space, you've got some leading lights who began to talk about this and began to sell the message, through courses and online videos. And so on that this was something that you could do and, demonstrate how it could be done.
so it was in, it was new and innovative. And so there was very few people out there actually doing it. But as more time goes by, we'll flip over to this value pricing model. Aren't we in aren't we in the end all just doing the same thing. So how do you do differentiate yourself if everybody's doing value pricing?
I'm you know, I'm not really making a point about fixed pricing, just more a point against a value pricing. Yeah,
David Waumsley: [00:32:55] you mean 80% of us are going after the 5% of the time.
Nathan Wrigley: [00:32:58] Exactly. these clients, who've got deep pockets. They're the ones where you can go to them and they've got all these marketing departments and they've got all these people and they're willing to shell out, but we're, like you say, 80% of us are going after these few websites.
Whereas five years ago, very few people had got themselves to the point where they were even thinking about these. It was just a fixed fee for our website now. Loads of us have been through these courses. We've all thought about different ways to add on value and so on and refactor our business and yeah, exactly that or we're all of us going after the tiny amount of people, you can afford this stuff.
When I say tiny amount, I don't know if it's 5% or 30% or whatever, but more people going after the same clients with the same exact ideas of how you can improve the value of the website.
David Waumsley: [00:33:43] Yeah, it's hard. Cause that's part of the reason why I don't do the value pricing, but I think I can make the value price.
Argument is the fact that maybe if we stop considering it has been in competition against each other for these clients, but we're actually in competition to get the clients to value what a website can do for them, where it is along the lines of upselling. But maybe not even if you would just say a company wants a static website.
And that's it. There's no real extra functionality. they haven't got any necessarily sort of business goals with it. You could still upsell in that, how you build that site will depend on how much you're going to charge for. Anyway, I think so, if you did say AB testing on it to see how well it worked or, you did.
Certain amount of revisions, having more time to be able to I'm making your case with this one, having better quality, So even if you're not working, you know what, when you build or design a site, if you've got quite a number of months to spend time thinking about that one, and you're probably going to come up with a better solution than you would, if you had to rush it out in a day.
And I think, with value pricing, you get a bit more wriggle room for the designers. Someone's going to pay a bit more. They're going to get a better result in the end, something that's going to be nicer to them. potential visitors. I think so trying to up sell people, you will have a slight, because they don't know that I'm in all the processes that potentially goes into making a website or the different aspects of it.
I don't think even the largest client really has. A clue about all that can go into it. so my point about the competition is that you're not competing necessarily against each other, after a market. You're actually competing to get the client to see the value in what it is that we do.
Nathan Wrigley: [00:35:34] I wonder if, when I say these words, how many people will identify with it.
And obviously I would imagine a certain proportion wouldn't other people to say, no. We're well away from that model. But, the idea being that. You really, you and I've mentioned it before your clients just they've got this. Lowered lowering expectation in terms of the cost of a website over the last, let's say five years, these tools have come along, most notably in the WordPress space page builders.
And obviously now we have the advent of a page builder, which is going to be free in core. We're not there yet, but it's. It's on, it's calming and it will be really decent. And being able to put somebody within your business to one side who could maybe work with a designer or work with somebody to put the website together.
In other words, they now know the cat is out the bag. If you give. Squarespace a few quid or Wix, a few quick wordpress.com a few quid. They know that they can achieve most of what they want. Yeah. Without needing to hire somebody expensive. And I know this is the reason why value pricing has come around because we're.
We're fearful that the industry, as we've known it, where you needed an actual level of technical expertise to make a website, which was beyond most people. that's evaporating before our eyes, now most people, I would say given a sufficient amount of time and the ability to, to.
Taking information from videos and reading books and what have, you could probably put something half decent out. And so it's a more difficult proposition than ever. So it's more of the 80% chasing the 5% and clients coming to you, literally safe in the knowledge that they can get a half decent website for $29 a month, on a recurring fee to a SAS platform.
So I feel that. Whilst maybe that means that the value pricing for those that can pull it off will get even better. It also, I feel means that there'll be, it'll be more difficult for the people who, who can't pull those kinds of things off. And who've got clients coming to them within their local area, whatever it is that you're working on.
yeah, I was simply saying, This is all that we can afford. And we know that we can get it for them $30 a month over there. So unless you can match that, we'll give you a thousand dollars. Cause we know that's probably about the lifetime of the website before we'll need to do it again, $30.
Each month for a few years, that kind of thing, you know where I'm going with this. absolutely. And of course the value process will tell you, that's the exact reason to get out of the, the fixed rate game, because you're up against these cheap solutions, but also they're becoming more and more of the market.
Are they? I think.
David Waumsley: [00:38:11] Yeah, absolutely. And I, and it's the way I'm going with stuff. So I'm, you've convinced me because of that the people I can get as easy clients
Nathan Wrigley: [00:38:20] who,
David Waumsley: [00:38:21] the other side, I'm making your point now is the fact that. Largely, I want clients for life through the other things.
So if they, if I'm seen to be given them a very good cost all the time and not value pricing, I've got that long term trust. So I go that route, but I do think, and you've said the van and the prices will argue another thing. And I think there is something important about distinguishing yourself in the marketplace.
Anyway. who would believe that we will, I wouldn't have done as a kid, when used to buy donuts, that used to be these cheap things that you would get. From the bakers along with something else, then we ended up with Dunkin donuts and lots of other rivals to them making the humble, cheap donut into something, which people will pay really good.
Good money for.
Nathan Wrigley: [00:39:03] Yeah. Yeah.
David Waumsley: [00:39:05] and I think that's always the thing, isn't it? Is there a way. I've been able to distinguish yourself cause that's the value prices, argument, isn't it? The race to the bottom to go again?
Nathan Wrigley: [00:39:15] Yeah. I think that the truth of this debate is that really, if you can pull off value pricing and if it's something that your business can cope with and you've got the time to.
Invested in figuring out what it is that you're going to be offering pricing against and you can charge these higher fees. There's literally no reason not to do it. You'd just be mad not to charge an additional amount if the client can bear it. But also, I don't think we should be beating ourselves up, beating ourselves over the head because we just haven't succeeded at doing it that way.
if your model is stacked and your business works because of fixed pricing and it's traditionally worked and you feel that you're secure in the future, as you said, you've built up a nice, healthy cohorts of clients who trust you because you've offered, an economical and reliable solution in the past equally.
That's fine as well. Yeah. I don't think we should be. I don't think we should be having a debate about it.
David Waumsley: [00:40:11] No, you're absolutely right. And I think the important thing is to pick where you are. I think it's personalities and that's why we were both. really towards the fixed side of things, because it's the kind of way we are.
probably even from where we grew up and that's, we maybe we're too old to want to be different people really, or pretend to be different people. So I'm very much like that. I'm a kind of cheap Charlie and everything that I buy and like kind of relate to people who are like me as well.
And I like it that way. Yeah.
Nathan Wrigley: [00:40:39] Yeah. I think we should probably knock it on the head that I'd be interested to know. if you've tried out fixed pricing and it's worked best for you, or if you've tried value pricing and that's worked for you or the flip side, if you've tried value pricing and it's been a complete and utter disaster for you, and you've lost loads of bids because you just didn't quite get it, Yeah. Yeah. I'd be interested to know, we've always got a, just in the Facebook group, WP Builds.com forward slash Facebook, or just, in the show notes at the bottom of the post, on the website, I'd be really interested to know what people think about this. Feel like it's a fairly political debate with people shouting loudly, both sides.
yeah. Thank you, David. That was fun.
David Waumsley: [00:41:16] Yeah, even, sorry, just before I go, it's actually even gets Marvel. This one, doesn't it? Where either sides, people think it's a very moral thing to, they go value or fixed price. It's interesting. Yeah. Anyway. Yeah, no,
Nathan Wrigley: [00:41:30] let's knock it on the head. Take it easy.
David Waumsley: [00:41:32] Bye. Bye.
Nathan Wrigley: [00:41:34] I hope you enjoyed that episode. It's always fun chatting to David about these things. Perhaps you've got an opinion on it. Maybe you've moved over to value pricing and it's working out really well for you, perhaps you've tried it and it didn't, and you're back to fixed pricing, or perhaps you've just stuck with fixed pricing all along.
Go over to WP Builds.com and find the thread and give us some comments or head over to our Facebook group. WP builts.com forward slash Facebook. And you could let us know in the comments over there, what your thoughts are. Let's keep the conversation going. The WP Builds podcast was brought to you today by the page builder summit.
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