I’m enjoying Seth Godin‘s latest book, Linchpin: Are You Indispensable?. In his chapter on “Becoming the Linchpin”, he has a great diagram on page 52, which I’ve reproduced here. His linchpin discussion is a good illustration of the variance between price and value. I always cringe when a client reacts negatively to my billing rate (which is low for the industry). If they say, “I wish I could bill my time at that rate,” I know they haven’t got it and may never “get it.” I want to ask them what rate they pay their mechanic or their accountant. It’s a question of the value contributed, not the price paid. This is the problem with people who try to do too much tweaking on the product of a good designer… they don’t understand that they’re paying for expertise and then negating its value. Perhaps they’d rather have an expert at minimum wage?
Back in the early days of my business career, I used to prepare insurance proposals. Of course, we always wanted to know what price and coverages we were quoting against — it was natural to want to beat both so we would be in a good position to get the order for the policy. There were a few times when we couldn’t quite beat the price the client was paying elsewhere, and as I reviewed some of these proposals with the brokerage owner, I would ask if I should try to sharpen it further somehow. Sometimes we would try, but if the rates already looked reasonable to us, he’d say, “No–if you get it on price, you’ll lose it on price.”