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New way to charge for service

Discussion in 'Marketing mastery' started by wfdTamar, Aug 19, 2013.

  1. wfdTamar

    wfdTamar Member

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    What amount is correct to charge? I've come up with a new method and just started using it (yet to see how it works out).

    I've always had problems determining the amount to charge for my work (I.T. Support).

    I get jobs ranging from a one mouse click fix (or the "oh, it didn't work before you came") to some that stretch over days and require many revisits. For the former I don't have the hutspah to charge my minimum fee, and the latter I never charge near the real time it takes.

    The other problem I have is I never employ any trades or services, so I have no real idea of what a current rate for various types of jobs is. The last time I worked for a wage was the early '80's.

    Most of my jobs require two return trips to the clients premises - to get the computer, then return it (so up to 2 hours travelling before I charge extra for travel), plus a minimum of an hours work. So I charge $100 for the first hour, then $50 per hour. I think that first $100 sounds a lot to people, particularly if they have a regular job and their hourly rate of pay is a lot lower.

    I mostly bring the computers home to work on them (as it's cheaper for the client and nicer for me) and although a computer might take a day or two, it's not like I'm sitting in front of it the whole time. I can do other on site calls and even non computer related things while it may be downloading or scanning.

    Inevitably there will be times I undercharge, or others where the client feels I charged too much. Hard to get a situation where both parties feel ok about it, you retain clients and both parties are happy.

    So to try to get to the point - I decided to let the clients determine what they pay me!

    Attached is a handout I give to clients as I explain it (this is a quick first draft - needs work). I let them ponder it over a few days.

    Issues -
    Explaining it.
    It's tricky. Hard to explain and hard for clients to grasp. That's why I leave the printout with them as well (and may later put it all on a web site). It may be difficult with clients that want to pay straight away, as I'd prefer they think about it before arriving at a figure. I might give the option for them to revert to the conventional method - where I determine a figure.

    Being underpaid.
    Very well could happen. If it's just a bit I don't mind as it probably means they'll keep using me and perhaps I can drop a hint that they need to increase the figure. If it's very low, it's an indication of the type of client I don't want as their expectations of what they receive don't match what they expect to pay and that's always a recipe for disatisfaction and pain.

    Being overpaid.
    Well, is that a problem? Actually very unlikely I think. If it's just a bit, fine, the client will still be happy with it. If it's a lot I may return some, or just use it as 'Robin Hoodism'.

    Attached Files:

    Last edited: Aug 20, 2013
    1 person likes this.
  2. MatthewKeath

    MatthewKeath Renowned Member

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    Hi,

    Really interesting idea.

    There are some popup restaurants here in Melbourne that charge whatever people feel the food is worth.

    There are some problems with doing it though.

    1. As a customer getting their computer fixed - I would like to know how much it would cost.

    2. I would feel under pressure to ensure that you got paid enough, but I only paid what the job is worth. I would not like that feeling.

    3. What happens when someone decided they only want to pay 20c? Do you then argue with them?

    4. What about parts?

    5. What happens if I decided it was worth $500 then later on I heard that it should have only cost $100. I would be resentful, and would not want to use you again.

    To be frank, if I contacted you and another provider, you said paid what you want, and someone else said $150 I would go with the firm quote.

    It's a really interesting idea and I look forward to some feedback about how it goes.

    Cheers,

    Matt
    wfdTamar likes this.
  3. BlackCoffeeComms

    BlackCoffeeComms Active Member

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    I'm with Matthew...not a fan of "pay what you think it's worth", as it brings out all sorts of guilty feelings about money - what's enough, what's too much etc etc.
    I would expect to pay good money for an IT person, and would prefer a firm quote.
    I would NEVER do it myself, cos people already think writing is a soft skill :)
    But I, too, would be interested to know if it works.
    wfdTamar likes this.
  4. Divert To Mobile

    Divert To Mobile Renowned Member

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    Like Matthew Ive heard of restaurants doing it and again like Matthew Im not sure how it will go in the IT field. I would expect after a hearty meal there would be certain emotional weight to a decission on how much to pay. There would also be time to compare the current experience to previous experience, service levels etc.
    I dont think you have those advantages when using that payment model for an IT service. Again like Matthew I am also interested to hear first hand how effective that payment strategy works. So please stay with us and keep us posted.

    Steve
  5. wfdTamar

    wfdTamar Member

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    Yes, it will be interesting to see how it goes. There may be too many problems for it to work. A lot of it may be in the art of explaining it so it may not suit new client phone enquiries. Perhaps only introduce it to people after they've used me a few times ( I have a lot of repeat clients).

    In response to Mathews points:
    1. Currently (under a conventional system) whenever anyone asks up front what it will cost I try to avoid giving a fixed figure as it always backfires. Whenever I have it's always ended up taking longer or otherwise being more involved. (up till now) I do give my hourly rates and 'best case - worst case' figures which seems to help most people that ask. I would be suspicious of anyone that did quote a fixed figure for computer work as either they are overcharging (to cover the worst cases), or doing an inferior job to meet the price point. Or they try dodgy upselling techniques (like below).

    What I don't do is advertise in the local paper $50 fixed price 'fix any problem' deals, then tell the client the computer is going to die very soon so might as well buy a new one (and we just happen to have one here). People are only too ready to believe they need a new computer whens it shows signs of problems. As a client of mine found recently (luckily he thought to ask me and I found it just needed virus removal and tidying). I saved him spending $800+ so it'll be interesting to see what he thinks my work was worth.

    2. Not sure I get that one. 'Enough' is whatever the job is worth. It's sort of like a tip for the whole job - it ensures that I work fairly for the job.

    3. I wonder if this will happen? I intend payment to be made after I have left, so no face to face arguement. If they 'underpay' I will just accept it in hopes of more work (if a small amount), try to get the message across that they need to raise it (if slightly under), or straight out fire them as a client (if it is the 20 cents) - can I be that brutal :) I probably need to give feedback on the amount that is paid. Like send a receipt with 'there you go you miserable sod' scrawled on it for the 20 center :)

    4. Parts, software, anything that costs me, I just charge them for it.

    5. Clients can't compare their job with someone elses job now (under a fixed hourly rate system) as each job is different. If they do really pay $500 for a $100 job I would say so and return some. If it was more like $150 for a $100 job then maybe I'm undercharging now. Also some jobs may not take a long time but if they're vital maybe that is worth more (though I don't charge more now for that - only if I drop everything to do it).

    One of the hardest things is to get across that this is not 'pay what you want' or 'pay what you can afford'. It's pay what it's worth. That may very well be more than you would like to pay, or more than you can afford, but the same can be said for many services. Are you happy to pay a plumber $xxx to unblock the toilet on a Sunday? Or what that solicitor cost to handle that simple legal matter? Probably not, but that's what it's worth.
    Last edited: Aug 20, 2013
  6. The Copy Chick

    The Copy Chick Renowned Member

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    Interesting concept. How would it work for those clients who need to raise purchase orders for the work and need an invoice before they can pay?

    I'm also curious if you have many repeat clients or lots of one-off type queries. For repeat work it might be worth considering monthly packages which could include a certain allowance for travel and support. For one-offs, perhaps a minimum call-out fee and then say the first X minutes free at $Y after that (which could also be employed for support via phone). That way if you feel bad about charging for 5 minutes work, you can absorb it in other areas.

    While it's a lovely idea, I think many people would feel a bit freaked out about trying to figure out what your work is 'worth',decide it's all too hard and go elsewhere. If they know up front what they can expect to pay, then they'll pay what you ask.

    Like everyone else, I'll be curious to see how you go and wish you every success!
  7. wfdTamar

    wfdTamar Member

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    The other thing that's hard is explaining or getting across the costs to set up for this business, as the client doesn't see evidence of it - I don't have a ute full of complex tools - it's all at home.
  8. MatthewKeath

    MatthewKeath Renowned Member

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    I didn't explain myself very well. What I meant to say is that I would not like having to decide how much the job was worth. I wouldn't know what to pay, and would most likely give more than it was worth, and next time go to someone else whom can give me a solid bill.

    This explains it much better:

  9. wfdTamar

    wfdTamar Member

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    If they need invoices they just let me know how much for, I send it then they pay. Most of my work is for home users and a few small businesses. Once I have a client I tend to keep them (except for those that are never happy or have unrealistic expectations). I also try to set them up so they don't need to call on me endlessly - I think that's part of good IT support - make the client as self sufficent as they would like to be and their setup as reliable and fault free as possible.

    I don't have many clients that a package would be suitable. Because of that it would be hard for me to work out a suitable rate.

    For quick jobs (previous to this deal) - I either don't charge much (particularly if they're close or a regular), or if they're new I have yet to find a new clients computer that doesn't benefit from at least an hour of attention.

    So my previous charging scale was a minimum of one hour at $100 (includes up to 30 mins travel each way - often twice), then $50 per hour after that. 25% extra after hours. Excess travel charged at the $50 per hour rate. Remote support something like $60 per hour, but no real minimum (well, maybe $15). Tend not to charge for remote as it's usually little things and I only do it for regular good clients whose computers I know.

    However the fixed rate system is structured I never actualy stick to it. I'm always reducing it and knocking some off because I don't think I'd like to pay that amount. Problem with that is I'm very self reliant and capable. I think 'I wouldn't pay someone to do that I'd just do it myself'. Therefore I think 'why should they pay $xxx? I wouldn't'. So I'd rather leave that internal dialogue to the client and see if it gives a better result - for both parties.
  10. wfdTamar

    wfdTamar Member

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    Ok, I'll have to ask people after a while what they think of the idea. Maybe have an anonymous survey so they feel able to honestly give their opinion.
    Last edited: Aug 20, 2013
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  11. The Copy Chick

    The Copy Chick Renowned Member

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    It's interesting that you are questioning your own estimation of what your work is worth... but it also highlights how different people will value how different things are worth.

    In my line of work, for instance, someone who is good at English and is just too busy to be bothered writing their own copy may not feel the work I produce for them is worth as much as someone who struggles to put two sentences together would think it is worth.

    And would either of them include into their evaluation the years of experience and ongoing training I have to produce a great result for them, as well as the difference it can make to the effectiveness of their communication... or do they look at 3 pages of carefully crafted, well-researched copy and think "Well how long can it take to write 3 pages?"

    And why should they worry about the bills I have to pay such as internet, phone, office overheads, PAYG, insurances, etc.? These are the very real expenses I need to cover, but they're not the client's concern. However, all these things help determine what I need to charge to be able to offer the service I do.

    As you mentioned, there are things that go on behind the scenes that clients are probably not aware of when it comes to estimating 'worth', which is why it's likely to lead to some very different outcomes.

    But... who knows... maybe it will work. You never know unless you give it a go, right? ;)
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  12. wfdTamar

    wfdTamar Member

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    I had a go at a survey to send to clients after they pay.

    Attached Files:

    Last edited: Aug 20, 2013
  13. JodieH

    JodieH Member

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    Interesting concept.

    I think when it comes to tech the average user doesn't have a complete understanding of what it takes. I do tutoring and support for computer and mobile devices. I've had customers ask me a single question in a single sentence but got frustrated when the answer/solution was harder than they thought... ie getting an attachment off an email. Simple right? not if you are a complete novice and don't realise you are using the browser to access webmail and the attachment is a photo inside a zip folder.

    I'd be interested to see how you go with this. I've saved your pdf and your contact info. You can email me at [email protected] if you want
  14. wfdTamar

    wfdTamar Member

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    Yes, you get people under estimating the work involved, or they think all kinds of work are only ever as difficult as what they do (these tend to be the blowhard kind of bloke - hmm, might have just described myself there).

    I find more often they over estimate the difficulty. However that could be me under estimating my own skills and worth. After all I didn't learn how to do what I do over night.

    This new system does require a full explanation of what was involved for the job. Before I would explain enough to (I think) justify the charge. A lot of people don't want to hear it all anyway.
    Last edited: Aug 20, 2013
  15. eWAY

    eWAY Active Member

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    I'm looking at this from a different angle.

    I think you really need to sort out your minimum charges etc. You mentioned that the $100 first hour can be a sore point for your customers. If you started charging a minimum of $25 for a 'small job' you could absorb the additional $50 charge with a couple of smaller jobs (or make $50 extra!) Or at least have the option of dropping the $50 if they balk at it and knowing you've made that money up elsewhere.

    Do you offer a service where they drop off to you? Whilst you're picking up a job you're not making any money, especially if the $100 is a problem. a 5-10 minute drop-off will cost you a lot less time/money/fuel etc.

    It sounds like to some of your customers you've become the computer literate friend rather than the professional IT service that you were originally and are therefore cheating yourself out of income.

    Myself? I'd feel inclined to charge a travel fee @ time plus distance (to cover car costs and on the road time) Changing your pricing to a flat $75/hour (plus pickup/delivery) will help with that initial balk at $100 (dropping to $90 would help a lot as well, just get rid of that 3rd digit!) and depending on the average time on a job you'll make more money.

    Give them an estimate over for the phone with a minimum 'fault finding' charge. Call them after the charge with a closer or exact cost (including parts).

    The fact is, you're a business, not a friend. The people that are paying you wouldn't go to work for free so why should you?

    And for what it's worth, the basic wage at Target or equivalent is about $25-$30 an hour (once you're in early/mid twenties) and the minimum charge for a mechanic is $100/hour. You should be somewhere in the middle and certainly much closer, to the mechanic than the Target cashier!

    Maclean
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  16. wfdTamar

    wfdTamar Member

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    My existing customers are ok with the $100 minimum. They know I'm worth it, or that if it's a quick thing I won't charge them $100.

    Can't work out your maths in the first bit sorry :) I get the idea though. I just wouldn't go to a job for $25 (unless for a good loyal, close by client).

    It's only some new customers balk at that figure (mostly new callers). They get it set in their head that it means $100 per hour for any number of hours (which it's not) or just think it's a lot. It's a psychological barrier (like $1 per litre was for petrol a few years ago). Pretty rich when you do compare it to that $100 per hour mechanic that has maybe the equivalent to 6 months full time study (there are some expensive tools involved, but they don't have to keep updating them).

    You might be right about $90. I did charge that and didn't have so many problems. Could easily make the same end amount by claiming more of the hours I do work (because its at home). Or a lower minimum, but add all travel.

    I can't really go much lower than that as I'm in the country and a lot of jobs are 20-30 minutes travel away. As there are two return trips for most jobs, $100 really can mean $33 per hour.

    I MUCH prefer going to clients premises for a number of reasons - I can get everything relevant to the job (laptop power supplys, installation CD's, etc), Gets me out of the house (some nice country driving around here). I know where they are if I need to chase money.

    I don't like clients coming to my house because - I'm part way through renovations and it doesn't give a good impression as it is. Once clients come to your house they think it's a drop in centre, unannounced any hour of the day (grrr). I hate waiting for clients to turn up - I can spend more time waiting for them than if I go to them. I do sometimes do it though (if they're miles away, coming past, or know me).

    However the point of this idea isn't to make more money, it's to make a fair amount of money - and hopefully for clients to feel better about what they've paid.
  17. wfdTamar

    wfdTamar Member

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    Some results so far:

    Job 1: (after I just thought of it), 20 minute close by job for nice, loyal client (mid '80's). I was thinking $25. He paid $30.

    Job 2: He wrote - 'It's a bit of a challenge. I had to work out an appropriate approx hourly rate (pretty much shooting in the dark) and then compromise between an amount to repair, or an estimate to replace - thus a new computer. This clearly puts a cap on it. I hope it came out OK for you.' (this was the client I saved from an unessecary $800+ replacement mentioned earlier). It did.

    Job 3: (new client) wrote - 'You have me beat on the amount to charge myself as I don't want to under charge you or over charge me. I have never paid for computer work in my life so have know idea where to start.' I might have to help her out for the first time ad either mention my old rate structure or send a bill. (about a week later - client paid waaay too much. Going to return some.)
    Last edited: Aug 23, 2013
  18. eWAY

    eWAY Active Member

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    Sorry Bill, I meant the odd jobs where you log in remotely and fix something. These jobs should have a minimum charge.

    My 'maths' was that if you started charging a minimum fee for the smaller jobs you normally do for free you could lower that charge that upfront charge that is costing you business.

    It all depends on how many jobs you do but if you did say, four little jobs a day that you started charging for this could be an extra $100 a day/$500 a week!

    Looks like your 'pay what you feel' idea is working out ok so far. Maybe you could include a 'suggested price'? That way, if you say $25 but they were thinking $30 they might pay you that anyway, but if they have no idea then you can give them a ballpark figure.

    Maclean
  19. wfdTamar

    wfdTamar Member

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    Oh right yes, the remote jobs. When I started doing them I was thinking minimum of $40, with an hourly rate of $60, but I don't do that much of it so it doesn't factor in to the whole equation much.

    I do need to come up with a way to help out people that have no idea, or really don't like it. I think I'll give them the conventional rates and let them work it out - or worst case just send a bill.
  20. Jenny Spring

    Jenny Spring Active Member

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    Hi Bill

    Just a couple of things I thought of when reading this --

    1. offer at least 2 different price points: one includes you picking up, one includes the client dropping off. Bundle in the time to fix based on a approximation of what you have found so far. i.e. if you find that it is an average of 5 days to fix something, then work on that.

    so you'll give 2 prices:

    1. you pick up, drop off, fix PC
    2. client picksup, drops off, you fix PC

    Also, I'd recommend you book a courier instead of doing it yourself. Paying a courier might sound 'expensive', but it will be a whole lot cheaper than your time spent on the road.

    If you'd like some more ideas around pricing, please see my blog and search on 'dumb pricing mistakes'.

    Jenny
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