Pricing Advice That Keeps You Stuck

I read an article this week arguing that the smart way to price is to start low, then raise prices slowly over time as you learn the demand curve.

In theory, that may sound disciplined. In real everyday business life, this approach can be terrible pricing advice, especially for consultants, coaches, attorneys, CPAs, and other expert-service professionals.

Price discovery cannot substitute for value discovery.

Economists call it price discovery. In real life, “price discovery” is something altogether different. It is a professional service provider, a consultant, coach, or fractional executive, underpriced to begin with, fearfully nudging up their fee, white-knuckled while waiting for the reaction, hoping they do not “lose all their clients,” and ready to back down instantly at the first objection, no matter how mild that objection might be.

That is no way to price.

This Pricing Advice Comes from the Wrong World

To be fair, the research in question, written by Suraj Malladi, is trying to explain behavior. It is offering an economic explanation, an academic one at that, for why some firms raise prices gradually under uncertainty.

Such research is a valid academic exercise. But explaining a behavior is not the same as providing practical advice to an underpriced expert service professional trying to get unstuck from the growth plateau they’ve encountered.

The article focuses on businesses that sell standardized products in broad markets. In that world, maybe it makes sense to start low, raise prices gradually, and learn from the market's response over time.

Such a strategy might be effective if you are pricing dog food.

It is a lot less useful when you are pricing your judgment as a consultant or the strategic insight you offer as a fractional executive.

Your work is not a commodity. Clients do not hire you the way they buy canned dog food or some other mass-produced product. Each client values your work differently based on their unique situation and how they perceive the value you deliver.

Your value as a service provider is tied to context. What is at stake for this particular client? What risk are you reducing? What mistake are you helping them avoid? What confidence are you creating? What outcome are you making more likely? What are you enabling them to do that they couldn’t before?

That is why the comparison breaks down. A consultant’s value to a specific client in a particular situation is not a demand curve. It is a conversation.

While expert-service professionals do learn from the market, that is different from letting it teach you your price. If “the market” in your field defaults to hourly billing, following it blindly can leave you with a pricing model that understates your value from the start.

In expert services, value is client-specific, contextual, and discovered in conversation with real clients. Notably, this article doesn’t even use the word "value" until the very end, and just one time, after an exploration of concepts like demand, elasticity, sequencing, and profit guarantees.

If you’re a professional service provider, that’s like pulling out a slide rule when a client asks how you price your service.

The Danger for Underpriced Experts

What the article really does is hand anxious professionals a more sophisticated way to stay anxious. It tells them to inch forward, keep watching the market, and wait for permission. For underpriced experts, that is not caution or even sensible.

It is a trap.

Many service providers already bring too much fear into pricing conversations. They worry they are asking for too much. They worry a proposal will scare someone off. They worry one higher fee will cause word to get around that they are “too expensive” and their pipeline will empty forever.

Then along comes a model like this, which makes fear sound intelligent.

Now the hesitation feels smart. The underpricing feels methodical. Now the waiting feels strategic.

It is none of those things.

Often, the problem is not that you have failed to test “the market” carefully enough. What that means, in real terms, is that you haven’t had enough effective value conversations with your potential clients. The problem is that you still have not fully understood, named, and leaned on the client-perceived value of the transformation you deliver.

That is especially true for people who left corporate and started a firm later in life. Some are in their 50s or beyond. If that describes you, you don’t have endless time to meander your way toward confidence.

You cannot spend years gently testing whether the market might tolerate another 6.35 percent on your fee.

You need to get to clarity faster than that.

You need to understand what your work makes possible for a client. You need to see where you reduce risk, create confidence, and improve outcomes. In most cases, your clients already see more of that value than you do. You can’t see it because you haven’t asked.

That is why so many experts stay underpriced for too long. Not because the market has issued a final verdict on their fee, but because they are still pricing based on uncertainty instead of the confidence that comes from an effective value conversation with a client.

Lean on Value, Not Fear

There’s nothing to fear when you lean on value.

The time to fear is when you lean on trial-and-error pricing.

If your whole pricing method is based on nudging upward and watching for resistance, you are already reacting to the market instead of leading from an understanding of the value you create.

Price discovery cannot substitute for value discovery.

Until you stop confusing the two, you will keep fearfully asking the market for permission to charge what your value already justifies.

_____________________

I’m John Ray, author of The Generosity Mindset. I help expert-service professionals communicate value, attract best-fit clients, and price their work more confidently, without confusing generosity with giving everything away. If you’d like to start a conversation or join the list from my Sunday morning email newsletter, send me a DM.