My business, BetterEdit.com, offers two services – essay editing and thesis editing. When I originally set up the business, which was nearly six years ago now, one of the hardest things to do was come up with pricing points.
Back then I wasn’t all that clued in to how important perceived value is and how closely pricing ties into you market targeting. My goal was simple, I just wanted to come up with a pricing point that met three conditions -
- I could pay editors to do the work
- Clients would pay the fee
- And of course, the business could make a profit from the transaction
If you think about it, those three conditions are the foundation for business. You need people to buy what you offer and you need to be able to produce the value at a profit. Back then it was simple maths and whether I could satisfy both groups of constituents, editors and clients, could only truly be determined by testing the market. So that’s exactly what I did – tested the market by setting up a website, hiring an editor and sticking up some prices.
How Did I Choose Test Prices?
I’d like to say I had some form of scientific method for coming up with my very first pricing scheme, but I didn’t. All I did was use some intuition and my own perception of the going rate of pay for contract editing work to come up with price. I figured that editors would be happy with anywhere from $15-$30 per hour and I hoped the market (the clients) were willing to pay more than that for the service.
I didn’t want to charge a “per hour” fee to clients because I knew that would get fiddly to negotiate and hinder sales. When a person comes to a website they want to know how much something costs immediately so they can make a value judgement instantly and not have to wait for a quote. You will lose customers if you force them to apply for a quote. Just knowing that they have to do something in order to find out a price is enough for a website visitor to surf away – remember that!
Whenever possible, if you can, come up with commoditized pricing for your products or services. By that I mean solid numbers you can display on a website pricing page. Some complex or high cost products and services must have a quoting process, including some form of contract, but if you can avoid these steps, do so. Certainly in my case with an editing service it should be possible to come up with a commoditized pricing structure…
…and you know what – I didn’t quite get it right first time. I had some good assumptions about not wanting to charge based on a per hour rate, but I still made it too difficult to calculate a price.
The first pricing structure I used was this -
$0.04 per word.
This meant that potential customers could calculate the price of their job by multiplying the number of words in their document by 0.04. This was still too many steps and I had created a sales barrier and made more customer support work for myself too, since I often had people emailing me for quotes because they didn’t understand how to calculate the price on their own or were too lazy to bother.
Nevertheless, for the first year or two of operations this pricing method was the foundation for the business. For the editors, how much they got paid depended on how quickly they could produce the service. If they were paid $50 for editing one essay and they could do it in one hour, clearly that was a good rate of pay. If it on the other hand they took four hours to do it, the rate of pay was not so good. Through the years we have had one or two editors drop out since it just wasn’t a profitable exercise for them.
Over time the best editors who worked quickly rose to the top. While not every job was ideal (every now and then a nightmare job came through which takes a long time to complete due to the very poor quality English), on average editors who were speedy and maintained a high level of quality could earn a good hourly rate. This would also result in greater client satisfaction because we could meet very tight deadlines and of course I was happy too, since the pricing structure was profitable.
The foundations for a business were laid and all I needed to do was increase the volume of work coming in and make sure there were always great editors available who were eager for the work.
The Pricing Structure Evolves
Over the next few years I played with the pricing structure by increasing or decreasing the per word rate based on the size of jobs and how quickly the client required the document back. However I was still doing too many quotes manually because many clients were confused, which wasn’t that surprising given most of the clients had English as a second language – hence they needed BetterEdit – but it also made it difficult for them to decipher the text on the website.
I knew if I was doing so many manual quotes there were probably other potential clients not even bothering to ask for a quote because they didn’t want to make the effort. People want instant gratification and having to wait for a quote to come back from an email address or even send an email or fill out a form in the first place is just too much to ask. You don’t have a very big window of opportunity when someone is in a buying mood so you must make sure the process is smooth, easy and as barrier-less as possible. In my case it had to be something that a ten year old could do given some of my clients had the equivalent level of English fluency.
The problem was when a person came to the pricing page they didn’t actually see prices, they only saw a formula for determining the price. That meant they had to do work. What I needed was an actual list of prices so it would take one glance to figure out how much the service costs.
Using a “per word” system was the best format because generally the amount of words in a document dictated the amount of time an editor had to work, so that wasn’t going to change, I just needed it to be easier to determine the price for a given document size. I used the same pricing system I had in place, broke down the job sizes into 500 word blocks and slapped a price on each “word bracket”.
While the prices have changed over the years the structure hasn’t and you can view it online here -
Thesis Editing – Higher Prices
While there have been numerous tweaks to the BetterEdit pricing system since then I have been very happy with how it functions. After I instigated the block prices I rarely received quote requests except for one situation – large thesis jobs. Thesis projects can cost anywhere from $500 to $1500 per job and as a result I originally thought it was necessary to have a quoting system in place.
Previously I listed on the website pricing page that clients need to send through a sample or their entire thesis if the word count was above 10,000 words so we could determine a quote. This system was working well enough and I didn’t have to do too many quotes because we simply didn’t get that many thesis jobs.
Over time I realized that generally there were two types of thesis clients -
- Those who wanted a quote because they were price sensitive. These clients almost never purchased the service.
- Clients who were willing to buy but since we didn’t have a set pricing structure they had to go through the quoting process because I forced them to. These clients almost always ended up purchasing and were not very price sensitive (within reason of course).
The obvious thing to do given this situation is create some concrete prices for thesis projects. Once the prices are solidified the price sensitive clients simply won’t buy and we won’t waste time doing quotes for them and the clients who are the right target won’t have any resistance to make a purchase. It seems so simple now!
I’ve only been able to do this in recent months because I have had data available on thesis job pricing from previous year’s work. With the experience under my belt I knew what pricing points worked for all the usual constituents – the editors (adequately paid), the clients (willing to pay for the perceived value) and BetterEdit (make a profit) – so I could come up with pricing brackets.
Nowadays we do more thesis work than ever before and it’s amazing to wake up to emails where a client has purchased thesis editing and sent through $900+ for a single project. Previously I thought spending that much money without at least asking a few questions over email to check out the business was not realistic. Of course, with a better understanding of perceived value it makes perfect sense, plus it certainly helps that 99% of thesis clients leave happy – it’s not *just* perceived value – providing real value does count as well, but doesn’t impact price as much as you would think.
If a person has been referred to our business by a friend or they have spent time reading the testimonials on our website or simply are comfortable spending money online for a service they need (or any other justification within the client’s perception), there is no difference between a person spending $100 or $1000 on our service. It all comes down to perceived value and target markets.
With hindsight this all seems very obvious to me now, but it took over five years of running the business, tweaking the pricing system, interacting with clients and editors and coming to understand the supply and demand marketplace for academic editing services, to reach this point.
Lessons For You About Pricing
The main lessons I want to get across to you are the following:
- Don’t make it difficult to determine a price, especially if it’s not a complex service or product. Reduce the number of steps to finding a price to 1 – a single page/mechanism for prices, if possible.
- When you attract the right target market to your website and you have the appropriate sales techniques/psychological triggers in place (testimonials, direct response copy, sales funnel, etc) then pricing is not an issue. Of course you need to be aware of market conditions (supply and demand) for your industry but in general if you have a niche and you position yourself well and your pricing reflects this, your clients will pay whatever you charge (within reason).
- If you are just starting a new business and you don’t know how much to charge start by looking at what the competition charges, assess their strengths and then use that data as the basis for your pricing. Don’t replicate the competition – be different – but use their experience in the marketplace to start with since it’s the only guide you have until you make your first sales.
Ultimately the only way I knew how much to charge was to do some basic maths. The end result of this pricing structure was a system that worked and could produce a profit, however it was not necessarily the best system and certainly not the most profitable. That’s okay during the early stages when perhaps you are still figuring out exactly what your niche and positioning are (teething process). Over time you will have a better understanding of how much you can charge. The only way to find out initially is to start charging.
- Perceived value will determine price. Perceived value is a perception – it is not reality (but what is reality?) – you can make this stuff up! By that I mean if you can establish the perceptions in your prospect’s mind and at least deliver enough value to meet needs, distinguish yourself from the competition and have barriers to replication in place, then you have the formula for a highly profitable business.
- Experiment with your pricing structure. Try raising your prices and see what happens. I’ve raised prices as much as 20% in one go and noticed no decrease in sales volume. Sometimes my sales actually increase after raising prices and I have less “problem clients” because they aren’t as price sensitive or likely to expect miracles.
Pricing is an interesting topic because it crosses over two distinctly different disciplines. You have maths – the numbers – which never lie and are straightforward, and you have the psychology behind perceived value, which is by no means clear-cut – we are talking about human emotions after all. When you can work these two elements together the business potential is significant. There is not a single successful business operating today that doesn’t understand and leverage the delicate relationship between pricing, target markets and perceived value.