True Pricing Power with Casey Brown

I'm going to bring on Casey Brown. Casey is an expert in pricing. She's a TED talker, she's a speaker, she's an author. She's a founder of a company called Boost Pricing that helps over a thousand companies generate more than a billion dollars in profits, helping them to figure out how to boost the prices and whatever they need to do. So welcome to the show, Casey.

Thanks so much, Bill. I'm excited to be speaking with you.

Yeah, it's glad to have you here. Well, before we get into all the business matters, I understand you're also a volunteer and that you volunteer all over the world. Where have you been that's been the coolest or most recently for you. What kind of work were you doing?

Thank you. For the. For the past several years, I've been especially focused on cleft lip and cleft palate repair surgery work in Latin America. And I've spent a lot of time in Guatemala, where, which is a hotspot for cleft lip and palate and so changing care to babies and children in Guatemala, that's where I've been spending an awful lot of time in the last few years.

Oh, that's really cool. One of our companies has a team, significant team in Guatemala. So it's cool to hear someone doing that. Have you been there a lot? What's it like down there? I haven't been.

Yeah, I have been there a lot. I love it. So I originally got involved with this particular charity work because I speak Spanish, and they were looking for some volunteers that would translate for the American medical teams to the local hospital staff and then the families of the children and whatnot. And it was really just a way to bring a skill I had to bear to help, you know, make a difference in the world, which is really important to me. And so I really didn't have any particular history or connection to Guatemala. It was really just that Spanish skill that took me there in the first place. But now that I've been there a couple dozen times, I have really fallen in love with the country and the people. It's a. It's a fascinating culture because there is still so much of the country that is so rural, and the primary language spoken in those rural areas is a Mayan dialect. So kiche, kichi, pokti, mom, tutsuhil. There's a, I think, 16 Mayan dialects. And so it presents a really unique translation challenge because for many of those folks, Spanish is not their primary language. They may speak really little Spanish. I speak Spanish and English, but I don't speak heal. So it's been a really cool thing to understand and get kind of embedded in some of the culture there and go out into the, into these tiny Mayan villages and find families that need our help.

It's interesting you mentioned the different dialects and languages and that kind of thing. We think of things as well, those are Spanish speaking. And it's true you can get by there, but there's so much. I encountered some women recently whose. Who seem to be speaking Spanish and something else. And I'm like, what is that? Like, I, I understand quite a bit of Spanish, but they're like, oh, we speak mom. And I'm like, oh, it's. You talk. You're speaking what your mom talked. No, no, no, mom is a language like, oh.

Yeah, yeah. And it's, it really presented a really unique challenge because many of the fathers of the families, the men, had been to some school, but the mothers had not. And the mothers are so. So the fathers had more Spanish than the mothers, but the mothers were by and large the primary caregiver of the baby post surgery. And so there was this like, kind of game of telephone where the surgeon would tell me something, I would tell the father something in Spanish and then he would turn to the mother and speak to her and mom or kiche and explain it. And so it was really challenging because there's, you know, we wanted to make sure nothing was lost in translation because we're talking about wound care and really, you know, critical care for the baby.

Let me just probe something kind of unplanned here with the show, but when did you first travel to a country other than the United States and what took you there?

I believe I might have been to somewhere in North America with my parents when I was very small. But I think my first travel abroad was when I moved to Spain in college to study for a semester there in Spain.

And were you excited for that trip when you went abroad? I imagine you were going off to school.

Yes, but I didn't know what I was get. Get myself into. So my undergraduate degrees are in Spanish and engineering. I was a chemical engineering student primarily, and I had, for, you know, reasons not important to the podcast, an extra semester available because I had done a co op and it kind of messed up my order of courses. So I had a semester and I thought, this is possibly the only time in my life I'll be able to do something quite so capricious and exciting as move abroad for no particular reason other than I have interest in the culture and in the language. And so I took on some student loans and got myself to Spain. And I was super excited about it, but I didn't speak much Spanish when I, when I was on my way and started out with, I have six months to learn Spanish. And then it was, I have three months to learn Spanish. And then it was, I have a month. And then it was like, I have three days to learn Spanish. And so I got there speaking very little Spanish, living with a family that didn't speak any English. So it was, it was a rough go at the beginning, but one of the most beneficial decisions I've made in my entire lifetime in terms of the richness that has unfolded in my life because of that, in terms of the relationships, but also just this conversation we're having about Guatemala. None of that would have been possible without the Spanish language skills I gained by moving there. So it's been incredibly valuable.

So as you got ready to move, you were anxious, maybe even fearful about not knowing enough Spanish. Did you have any other anxieties or fears about your trip that you can.

Not particularly. I've always been sort of, you know, maybe foolishly bold. I got, I was just really excited for something new and, and, and fun and interesting and challenging. I underestimated how hard that was going to be to be living with a family I couldn't communicate with. But, you know, they say that necessity is the mother of invention. So I got good at Spanish really quickly because I had to. But no, I didn't enter that experience with a whole lot of trepidation. Probably not as much as I should have.

Yeah. So the reason I probe that is I think that when I think about our work with companies and their pricing, the thing that comes up again and again is the fear of going into uncharted territory. Well, if we raise prices, you know, will we not be competitive and will stop losing business? Will customers leave us.

Us?

Right. There's a great deal of fear about making the move, which I think is interesting, how people deal with fear and something that, when they, when they realize how important it is.

That's right. You know, I've been a pricing geek for 25 years, and I started my pricing career at General Electric, and, and then I went on to do that work at other Fortune 500 companies and in these giant corporations, the pricing work, very analytical and very, you know, we were doing segmentation analysis and, and elasticity calculations and things like that. And when I started my, my firm, I had the idea of bringing that kind of analytical expertise to the medium and smaller companies in the market. But what I very quickly discovered was the biggest problem and the biggest obstacle, I guess I would say, to making more money with pricing isn't better calculations or, you know, really rigorous cost analysis or, you know, it's nothing that you can find in a spreadsheet. It's all between the of the seller or the decision maker, whether that be the entrepreneur, the leader, a salesperson, a sales leader, that most pricing decisions are made from a place of fear, not from a place of confidence. We're mostly pricing in this very defensive way, like, what's it going to take not to lose the work versus pricing to win confidently rooted in our true value.

Yeah, really, really, really interesting. I think that comes up again and again in conversations. People are not thinking about the value and the competitive landscape so much as it's like if we raise it and salespeople are telling you like, oh, we've got to drop the price. And market makers of one kind or another are focused on moving prices, the only lever they've got and missing out on maybe we didn't need to do that price. I think we've all had that moment where you threw out a price and somebody said yes really quickly and then you're like, ah, shoot, priced higher, leaving.

Money on the table. I call those auto yeses when you say a number and somebody just says yes to it and there's not a negotiation back and forth. That's an auto yes. And most organizations get those on some frequency, maybe even quite a lot. But we tend to ignore that kind of quote unquote good data or the data we get from our customers that our pricing is fair or maybe even too low. We pay too much attention to the data that we get from customers that our prices are too high, which is all the customers complaining, complaining, complaining us up. And I will tell you, customers complaining isn't actually data. It's noise. The only data is did they buy, did they not buy? And we are afflicted. And there's lots of reasons for this. And mindset and psychology is a big part of what I find fascinating about pricing because it's the biggest problem. One of the things that gets in our road is something called a negativity bias, which is, you know, we retain recall negative events with greater frequency and intensity than positive events. So you could hear, you could get 20 auto yeses in a row and one customer, you know, punches you in the face about pricing. And you know, sales reps are running back into the boss saying our prices are too high. You know, we can't get that. So we tend to overreact to the negative and, and ignore all that data we get from our customers that our pricing is fair or on or too low.

So you've spent 25 years in pricing. What got you started or interested in pricing at ge way back. Was it an accident or was it deliberate?

Nothing particularly deliberate in terms of how I ended up in pricing. And I would say that some of that has to do with. I had no idea this was a career. I had no idea this was a business area. And I will tell you, I meet a lot of business owners and leaders today that still don't know that there's pricing consulting or pricing training like that. They don't even know that exists. So, you know, I had career day and it was locked. Doctor, lawyer, you know, teacher, artist. So I was good at math and science, and I started my career as an engineer. Um, and, but I was very interested in the customers and what do they care about in the commercial side of the business. And the best way for me to get closer to the customer as an engineer at GE was to enter the program they were investing a lot of time and resources in at that time, which is GE's Six Sigma program. So I became a Six Sigma black belt, one of the early black belts at ge, and did rotations in a bunch of different areas. And one of those areas was pricing. And I just kind of fell in love. I, I love the, the fact that it's an intersection of art and of people and process, of data and psychology on, on paper. In theory, if you ever read a, you know, a textbook about pricing or maybe an econ book or something, there's this supply, demand curve. It's this really simple mathematical relationship between what you charge and what you know, what you sell. But in the real world, it's a lot less new, It's a lot less black and white. It's a lot more gray. There's a lot more bluffing. I. Can I compare pricing to poker? You know, it's like you're looking at the strength of your own hand. You're trying to judge the strength of your opponent's hand. Everybody's bluffing. Buyers are trying to hide how much they're willing to pay. Sellers are trying to hide how little they're willing to accept. And there's a lot more nuance to the, and mystery and obfuscation to the game of pricing in the real world than this very simple mathematical relationship. And I just, I got very interested in the challenge that that presents for sellers because we're often operating from fear. We buy the buff that the bluff that the buyers give us and we underprice.

Yeah, it's interesting. I worked at Sprint years ago and I'm reminded that I started a part of their business that we grew and became very, very, very profitable part of the business for a period. And I had pricing policy, but we had a whole pricing department. So for my area I had like, you know, what are we going to charge and what's the general strategy? But our pricing strategy is what I had. But they would run all the numbers and the scenarios and, and break things out and create the tariff tables and things like that. But, but I was supposed to make the call on like what, you know, where are we going to come in relative to our competition? How do we think we should be on this versus something else? And I think again and again it was kind of the doom of that business. Not my part of it so much, but the as a whole, that bit of telecom, is that it? They were just, they were only mostly using price. They'd go after other things but then in the end it would be like, well, let's be a penny less than. Let's be 10 less.

Yeah, yeah.

And that's such a losing game, right? A race to the bottom is for sure.

Unfortunately, and especially if you are and whether, you know, I don't. There's a breadth of businesses probably listen to this podcast. So you've got things, you know, manufacturers, professional services firms, distributors, construction companies, software companies. It does not matter what you sell or who you sell it to. There are, if you have some advantage, if you have some value prop that makes you just a hair better than the other guy. You know, you are getting constantly compared against inferior competition and getting downward price pressure from your customers. But the, the be it penny cheaper, it just gives up. It abdicates the opportunity or the responsibility, I would say, to be paid for the value you create. And it just, it leans into, okay, we're just a commodity. We're just like everyone else. And the reality is that, that, that you're not. There's something different, special, unique, valuable about you. And then we've got to make A, understand it, B, articulate it and C, convince the customers of it. And when we do those things, we can get paid for the value we really deserve.

Well, let's have you share some of your stories of working with the clients. You worked with so many companies over the years. Why don't you start with furniture companies? You've worked with a group of furniture companies. A number of them talk about that work as a whole.

Sure. So the furniture industry is a very regional, regionally dominated industry. So city by city by city there may be 4, 5, 6 dominant dealers that represent furniture lines of the 4, 5, 6 major manufacturers and their competing locally for all the work of, you know, somebody's renovating an office building or upgrading their facility. And, and so they, it's a very insular industry. So they're constantly hiring each other salespeople, they're constantly hiring each other's designers. They're always at the same bid tables. So they know each other and they're always paying attention to what each other are doing. So because of that we have ended up being an industry, we do a lot of work in that industry. So once somebody that's an all steel dealer hires us in Tulsa, then they're going to tell their all steel buddy in, in Boston or Steelcase or, or, you know, so, so we ended up pervading a lot of this industry, doing work with a lot of companies in that space. Now why, you know, why the story that I'm about to tell I think is, really, is really important is that, you know, understanding that that's this really insular world. So in this one city that we did work, we were hired by the four largest dealers, furniture dealers in that space over the course of about 16 months. So we had four clients. These were the big dogs in the industry and together they had about 80% of the market share. So in essence they were the market. Right. We did training programs with each of their teams and each of their teams separately told us they were the most expensive in that city, that they were consistently and constantly the most expensive and getting compared against the other guys that were cheaper. And we're listening to this and of course we're honor bound by our confidentiality agreement not to disclose that. All their peers said the same dang thing. But as a pricing consultant, as a, as a person who's very interested in the psychology and the, the mindset of pricing, I was, you know, fascinated by this. And so I'm on this fact finding mission. And I said, guys, you seem quite sure of this. How do you know that's true? What is the data you have to support this? Why do you believe it? And they said, and you will know what they said, Bill? They said, the customers told us, right? The customer said, I, you know, so then I say no, no, no, guys, we, a little bit, yeah, yeah. I said, guys, no. Remember we've been talking about this all day. Buyers are liars. You can't believe the stuff your customers said. They're, you know, so we're. No, no, no. They wanted to tell me about the, the quotes they had seen or the stack of invoices that their customer had shown them. You know, they wanted to talk about when they were in the buyer's office and they, and they proved it. I said, yeah, the top, the top inch of that stack is where you were the most expensive. The 2 inch stack where you were the cheapest he left in his office. And the other five inches of that stack are grandma's recipes. Like stop believing the customer's story to you about your pricing. In the marketplace, it is in the customer's best interest to at best curate and only share the portion of the story that's the most helpful. At the worst, at the less ethical, less honest end of the spectrum, you might be being outright lied to or being showed fabricated quotes and invoices. They do not have it in their best interest even if they're upstanding business leaders or buyers to tell you the whole story and trot their pricing power out and put it on your plate. So you're getting curated information, you're believing it and it's causing you to underprice.

Yeah, that, you know, I've had that come up where people are telling you this or that and I've learned to answer for my own company and others. Yeah, we're probably more expensive in that category. If that's what you're looking for, you should look somewhere else. I'm not interested in, in being the low cost provider. And if I'm in a discount, you're going to give up something.

Yeah. Well, there's a really interesting lesson inside. Oops. I apologize, Bill. I think there was a small delay. Can you repeat that?

No, no, no, I just said I, you know, if you want a discount on my thing, you're going to give up something as well. You know, know it's going to be an exchange of some kind.

That's a really important part of game.

And I think that's a useful.

There's a couple things that are really important about what you just said. One is the whole gift to get, like what I call gift to get. In other words, if I'm changing something about the price, I have to change something about the scope. That's super important not only for maintaining profitability, but I think there's an even more important reason that the give to get is critical and it's really to maintain trust with your client. Clients. If they say, let's say you quoted them $40,000 for XYZ and they say, oh, our budget's 30, and you say, oh, I can do it for 30, then you're sending the message that you were trying to fleece them or get away with something or, you know, see how much they would pay. But that's not necessarily rooted in what it's worth. If you change the price without changing the offering, it hurts trust, it hurts the trust, it hurts the price integrity of the deal with the customer. And I use integrity here not so much in a moral sense as in a structural sense. Like if this something takes, comes out of this side, something has to come out of this side. Otherwise the house tips over we've got to change something to maintain the trust with the customers. The other thing, I wanted to circle back on your answer to that. If like, you know, kind of saying, hey, you know, maybe, you know, if you're looking for the cheapest option, maybe that's not going to be us because we, we probably are more expensive because we do xyz. I think being confident and comfortable to be the premium player is a really important thing that many sellers, even in best in class and better in class, companies struggle with because they're used to pulling the easiest, most seductive lever to win the business, which is price. And I would say it's, it is the easiest. But if you're winning business on price, you're not selling, you're order taking. And we have to ask for more and better from our sales force than just taking orders. That's a piece of cake. If we want to be paid for the value we really deserve, then we've got to be able to take the price objection from the customer and, and turn that into opportunity. And, and I will say one more thing about this. When somebody says so and so down the street is cheaper, you know, the, the hidden message underneath that is they're cheaper, you're better. Because if they were cheaper and better, I wouldn't even be talking to you. I wouldn't be in your office. We wouldn't be on zoom. We would not be changing email. They'd have my order. I'm telling you, so and so down the street is cheaper because I want to buy from you. And too often sellers make the mistake of diving right into addressing the price problem there. They get very transactional on the topic of price and they skip over the compliment that precedes it, which is the buying signal of I want You, I want your products and services, I don't want theirs. And so let's focus on that for a minute rather than diving into price. Or are these two proposals apples to apples or whatever? Like, an example is like, oh, so and so down the street's cheaper. You can say something on the order of, okay, let's just imagine. Let's just, you know, imagine we could erase the price difference between us and those guys if those prices were exactly the same. Magically, we have a magic wand. And who would you choose? And they say, I'd go with you, by the way. If they don't say that, you don't have a price problem, you have a different problem. But if they say, I'd go with you, then you say, okay, so that when I come back to you with a revised proposal, I want to make sure I don't take out anything that's critical to you. Can you tell me what it is about what we've proposed or our team or our company or our process, our products, our services that has you say, we'd be the choice if price were not the difference? Because I want to understand what's really, really important to you. And then shut up and listen to that answer for a while. And then you can usually tease out of that information that gives you something to stand on with respect to pushing back on that price. Objection.

Yeah, it's. I've asked, like, a variation on that, which could sound a little bit confident. It's like, okay, so they're cheaper. So why are we still talking? Like, what is it over here that you like? And then probe the same kind of thing like, so, you know, why don't you just go with them? And I think they'll often.

Yeah, I think there's personality and style that. Yeah. Then you're in a position of having them sell you almost, because then, you know, and I, I do the same thing. And I think some of that depends on the style and personality of the seller. It can be a little bit tongue in cheek, but I really like that approach of like, okay, if there is a cheaper option, that's a good fit for you. I don't think you should overspend either. Maybe we aren't the right fit. You know, we do, you know, we got bells and whistles you don't care about. Go with that. But if what we're doing is really what you want, then I hope you'll understand. That's why many of our clients are happy to pay 10% more than those other guys charge, because they care about that stuff too.

So what happened with the furniture companies? What did they do after realizing that maybe their self assessment was wrong?

It invited them to, to take a more granular and less black and white approach to pricing. And by that I mean their belief when I walked in the door that day was they're the most expensive, so there's nowhere to go but down, like. And they were doing that quite a bit. And when I was able to help them see that sometimes, surely they were the most expensive, but sometimes they were the middle of the pack and sometimes they were the cheapest, that invited a more granular approach to pricing. So instead of looking at how they could go down everywhere to win, they were looking then subsequently at where could they go up, what were the products or services around the fringes of the business where maybe it wasn't, you know, that's an industry very governed by gross profit. So they'll talk about a 20hp, a 15hp at 25. There's these rules of thumb stuck in their head and they're those rules for them, were they a ceiling? And so after that conversation and after helping them see that their belief about with their place in the market wasn't necessarily true all the time everywhere that invited them to look at where they could get a 30 margin or a 35, where something else was possible for them and that generated a substantial amount of profit increase for all four of them. That takes the whole market up.

Yeah, you talk about this idea of pricing different things differently. And we had a restaurant some years ago, it was operated by a friend of mine and he was complaining to me. It wasn't like a regular coaching client, but he was complaining to me that their costs in where they were were about to go up because of some tax and regulatory changes that were going to hit the whole sector. And they're like, I don't know what we could do and that kind of thing. And people are really sensitive. We raise price, people are just going to stay home, which I, I doubt, like, you know, a few percent here and there. So we said, okay, what do they really pay attention to? And he identified a few menu items where there was a lot of price sensitivity about like, well, that place has it last. We're like, okay, so leave those alone. Let's say, then what are all the things nobody thinks about? And then so we went ahead and they got nearly a 10% effective average price increase by just raising prices up to 20% on a whole bunch of things that people weren't really focused on.

You know, that's right.

Things that had been.

Yeah, that, that you. That is a very central thing that we teach folks, which is this idea that, that we've got to get ever more granular in our approach to pricing. The more one size fits all we are, the less money we make because our decision making centers around those restaurant items that everybody's going to freak out about. Our decision making centers around the customers that are the most price sensitive. We tend to focus. It's back to that negativity bias where we will get pain and problems is what drives our decision when we're one size fits all. And so the more granular we become, the more money we make. As I say, the riches are in the niches. So you know, if these, if these five entrees are going to be where the most sensitivity is, then leave those alone. But then let's make the cheesecake 50 cents more or whatever. Right. I don't know the, the restaurant specific example that you're talking about, but we see that in industry after industry after industry. You can leave the center point of your business alone or largely alone and price in the fringes of the business a little bit more aggressively and pick up a NET get to 5, 10 more percent increase by focusing where people are paying less attention.

Years ago with a software business, I had a client that the initial work with them had been fairly price had been a significant piece of it. Not the only driver but a significant piece. And they were balancing their budget and competition, that kind of thing. So we went around. So we won the business. We did the business. Now we were a trusted partner and they came to us with some work that we didn't want to do that wasn't in our core. They really wanted us to do it. And I'm like, well okay, if we do that, it's going to be 150 an hour on that kind of work. And I don't know how long it'll take but we'll do a few and you could decide. So we ended up doing a lot of work for them at that price point for and for which I said listen, we're like you could do this yourself, you could hire somebody low cost to do this. I really didn't want to do it. So I did. I hired somebody inexpensive to do it. We made a massive profit on the thing and but I had been really straight about it. So I didn't have any guilt about over profiting network. Right. They really wanted me to do it. I quoted the price, I said you could do it. Also for less, like, and anyway, we made a ton on that, right? And it was an example of that. Like having not everything priced with the same margin markup kind of conversation and just driving to whatever. I see this again and again, especially companies in professional services, engineering contractors who want to establish a certain markup and then just, like, do that forever. Like, like that's a painful place to play.

Well, that same store, that same one of those same office furniture clients, we had that exact thing. And I, I, I smile when you said the word over profit. Because there is a lot of sellers that have in their head some kind of idea of what's fair. And then as soon as you go outside the boundaries of that, they start to feel like they're greedy, they're gouging, they're taking advantage of someone. And that line is in different place for you, different sellers. But an example and a story from that. One of those office furniture dealers, we were talking about this cubicle system that sold for $3,000 and how that was the, you know, one of those very sensitive products that people paid a lot of attention to. But alongside this, this cubicle system, there was this proprietary bracket, this piece of hardware that you had to buy. And it was like 97 cents. I said, guys, why 97? Like, this is a perfect example of some things we, you know, why not a $90? Why not 297, why not $3.47? And one of the guys in the room said, we could never charge that. That's 90% GP. I said, customers do not know or care about your gross profit. They don't know or care about. They aren't paying any attention to that dang bracket. 90% is not too much. When they're buying a $3,000 cubicle system and beating your heads in and you're struggling to get 15%, you've got to find the nooks and crannies of the business that wrap around it to make it up. But in this guy's mind, and this is what we see a lot with clients is this sort of there's, you know, competitive, there's great above that. And then somewhere north of that is this number that if you charge more than it, you're somehow, you're somehow breaking the rules. And I would say the rules of our, of our own devising, and they're constraining us and creating a ceiling of our own limitation. And we could break our own rules and inspect and interrogate our own thought processes and our ruts that we operate in and Make a heck of a lot more money.

I think there's like this arbitrary moralism that's behind it. Right. And then there's the fear and insecurity. Like it all seems psychological. I had a company, a friend actually came to me years ago. He's like, I'm sick and tired of these people charging me and quoting 175 an hour for this long time ago. That same kind of work we were talking about would have been more, a lot more today. But Anyway, he's like, 175 is just outrageous. And. And I'm like, we don't price that way at all. We price by project. And I'm like, what do you want to get done? And he described this thing and the time frame and the requirements. He laid it all out. And I said, okay, good, and what do you think you should pay for that? And he said, I forget the number now, but $60,000, let's say. And I'm like, okay, great, let me see what I could do. And we're not going to talk about 175 an hour, 150, 125, anything like that. We're just going to try to what you want done at your budget level. So I went to my subcontractors and my team and we reverse engineered the whole thing. And I'm like, okay, we could get that done for you with these constraints. Right. So we had some constraints on the process, on the deliverables and things like that, and then some contingency things written in and it's very simple agreement. And we got it done and then we went on to do quite a bit more. We probably did a million dollars of work for them over the next period. Period of little bit. From that initial thing. Right. In the process, my effective rate was actually more like from anywhere from five to seven hundred dollars an hour.

Right, right, right.

And, but look. And I didn't have any. I. I mean, I was. I'm amused at that today. I. And he was a friend and I. And he's still a friend today. I. I didn't feel bad at all about that because I was focused on a different thing. I'm delivering the value I' with his terms in his way. And you know, we delivered work that worked on time, on budget. Like he named the price I just delivered to him and did I mind making a profit on it? No, like, that's my. That. All that risk and all that management, our teams.

Right, right. There's so much I love about that story. I don't even know where to start. But I will start with the another psychological concept because, you know, you're hearing this in every answer I give. The problem is generally not a math problem. It's a, it's a psychological problem, a belief problem, a behavioral economics problem. And so for example, you mentioned sort of arbitrary moralism. He had some hang up about 1:75 an hour. It's like. And people make arbitrary comparisons to what they pay their attorney or their accountant or what they made when they were, you know, a 16 year old kid working at a McDonald's, whatever. There is a number in their head and it has the fairness switch got triggered by that. Why? I don't know. Other people might get tripped at fifty dollars an hour, other people might get tripped at fifteen hundred dollars an hour. But there was a number that was uncomfortable for him. It's one of the many reasons I find hourly pricing, generally speaking, a real mistake for companies. And I have a video I made about the 12 things I hate about time and materials, but I won't go deep into that. But the other thing that's really interesting to me about that story, free, and I see this over and over again, is people are more price sensitive about the unpredictable than they are the predictable. And so it's one of the reasons I like fixed fee over hourly for professional services firms. Because $60,000, he can build that in his budget. He knows what he's going to get, he knows what he's going to spend. There's no guesswork around it. It's a. We are much more price sensitive about the, the unpredictable. And I will give you a simple example that every single listener to this podcast can relate to. I am old enough to remember when you used to pay for cell phone coverage by the minute, right? You'd have the number of minutes you talked and then it was free nights and weekends. So you'd wait to call your grandma after 9pm because she's a talker, right? You pay by the text, individually by the text. Right now everything's all unlimited. You can get. But in those days, you would open your bill and you would look and you'll be like, how did I spend that many minutes? And you'd be scanning through. I was on the phone for 47 minutes. We don't pay that way anymore. Now, by every measure, even inflation adjusted, we all spend way, way, way more for our cell coverage than we did in those in the 90s and early 2000s. But we are less sensitive to it. Why? Because it's the same bill every month. And so predictability reduces price sensitivity. Unpredictability increases it. People will be objectively willing to pay a higher price tag, but because it's predictable. So how do we acknowledge these psychological ways people make decisions and build that into our pricing strategy and our pricing structures that allow the customer to get what they want and are thrilled by, like your friend did, and allow you to make five to 700 an hour and not feel guilty about it because you're solving his problem. Thanks for coming to my TED Talk. I'll get off my soapbox now.

No, I think it's so great. Like, like, get out of that arbitrary psychology of how much money you should or should make. I had another guy working with more, more recently as a coach, and he had a $20 million company. He had a clear vision for taking it to 100 and beyond. And I'm like, great. But he had a business partner who was fighting him on it. I'm like, and I, as I understood the problem, I'm pretty sure I could help you solve that. So to get started, it's going to be 30 grand. And we're going to do a couple days and some pre and post work and that kind of thing. But I think he'll be happy, happy with it. In fact, I'm sure. So he paid me 30 grand, put on a credit card. I started doing the work with him. We did our first couple days. Then I came back, I did a little more work with him. I forget now, like, how much, but maybe we were into it. 60 grand. His partner wanted to essentially burn down the house, wanted to break up the company and sell off the stuff at the 20 million level, revenue level. And he had this vision for the $100 million, which was he went on to grow the company quite a bit. And I negotiated between the two. He said, wow, that was really artful work. I can't believe that you got us all on the same page. And now we have a plan we're executing and we did the following. He's like, I just, I, like, I, I think we need to continue. I don't. I, I'm so uncomfortable having paid you 60 grand or whatever. I'm like, what are we talking about? You're like, you, you were about to lose millions of dollars. I came in and, and fixed your little problem between you and your partner. Now I've got you working together. You're going to encounter more problems. If you're worried about every ten grand here and there, we've got a different problem. And I actually didn't keep working with them after a while, even though he cited that. And I'm very proud of that work because his psychology was fundamentally like, I can't be like, throwing money around to people. It was like a little too stingy about the whole thing. I'm like, yeah, you're not for me if you think that you should pay me. I think I should get a bonus for that work.

Well, I think it's very common in professional services space that people get real hung up on how long it takes you to do something. And so the idea of giving you 30 grand or 60 grand or 100 grand or 5 million, whatever it is, it's like, don't get hung up on how long it takes me get hung up on how much value it created for you. You. And that's another back to the kind of the time and materials billing. But it's essentially like I had this problem once I did a workshop with a company and they, you know, I had all this. There's stuff that wraps around it. But essentially I was coming in and what they were focused on was the four hours I was going to be with their people. And they started calculating. I give them the price. Oh, that's X per hour. That's crazy. And I said, no, you're not paying me for four hours. You're paying me for the 25 years I've been geeking out about this topic. And I can come into that room and in only four hours shift the mindset and skill set of your people so transformatively that you will make $4 million more incremental profit next year. If that's not worth the 25k, then don't hire me. But this isn't about 25k is X dollars per hour. It's about the 4 million bucks. And by the way, my fee is 100 money back guaranteed. And I've never been asked. So if you don't want the $4 million, by all means. But. But people get weird about it because it's like 25k for four, four hours, that that blows up, that breaks the circuits in their brains and smoke starts coming out of their ears. And then I've seen, and I've seen this plenty, people will cut off their nose despite their face and do something that is counter to their own interest because they have this weird fairness button that gets pushed. I also think that's an important thing to consider when we're building out our pricing strategy and our pricing models to consider that. And how do we make sure that we are not going to trigger that arbitrary fairness feeling. Break some arbitrary and invisible rule that this person is going to have about fairness and try to build that into our strategy as much as possible. Now at the end of the day, you're going to have some people that are going to be stingy and have the wrong mindset and they're not going to be the right customer for you. But the degree to which we can structure our pricing to avoid tripping that trigger for too many people, the better off we'll be.

Yeah, that's so brilliant. Like figure out what it is, focus on it and watch for your own right, what it is for the other person and then what's your personal. Because we all like you have the psychology on the other side, then you have your own. Let's talk about small changes. We were working with one of our clients and they were, had been thinking about a few percent price increase for a while, but they hadn't pursued it because it was only a few percent. And then when we ran the numbers for them with our tools, they realized that a 5% price increase was going to change, change everything. A couple other changes as well. But like their whole crisis was, was going to be averted with a 5% price change. And they were not doing, because it was only 5%. It didn't feel like it would make any difference. Small changes actually add up to a great deal. You talked about working with some jams and jelly, some kind of soft food company. Tell us about that company and the work you did.

Sure, sure. So it's a really wonderful family owned business called Fisher and Weezer and they make the most delicious sauces, jams, jellies, really like high quality ingredients, incredible stuff. Once people buy it, they're addicted to it. So it's, it is phenomenal. And yet of course they're, you know, thinking about the other things available on the grocery shelf and that's creating fear around pricing. And but we, they, you know, we looked at this idea of more granular pricing and, and we don't have to take a huge increase and we don't have to take it on everything. What are the products where we've got a little less sensitivity and we can maybe make a difference. And they had, they had always another psychological barrier for a lot of folks is our brains are bad at very granular thinking. Our brains are very good at big chunks. So 5% off, 10% off. Raise price by 5%. 10%. We can do, you know, $100 off, $200 off. So they had always Ended all of their products, products in 95 cents. So this is 1.95, this is 12.95, this is 1445. Everything was in fives. And we said, well, what if you broke that history and that rule and started selling it at 99? Or, you know, just we don't have to go. These huge changes. Where can a little change make a big difference? And they changed a, a family of products from ending in the 95 to ending in the 99 saw no impact to volume. And that one family of products alone generated a hundred thousand dollars of incremental profitability from $0.04.4 cents on an individual bottle made no difference to the consumer's willingness to buy it or not buy it. But it added up to a hundred thousand dollars, which is, you know, an FTE or lots of other things that you can spend a hundred thousand dollars on. It's a big deal. The other thing that I think is really important narrative as you were leading into that question, is that, that people aren't very focused on it sometimes because a 1 or 2 or 5% doesn't feel worth it. But I think the other reality is that best in class and better in class companies are so focused on exceptional operational delivery that that gets all their attention and all their time. And they're busy selling and serving and selling and serving and selling and serving. And we get on this hamster wheel of generating demand and then fulfilling that demand with excellence that we don't slow down and ask ourselves, are we being paid excellently for this excellence we're delivering? And it gets the least amount of focus and attention. You combine those two things together and there is a, there are hundreds of thousands, if not millions of dollars on the table for most companies in unexercised pricing power.

Yeah, it's really a great insight. You know, we, we open the show with like, if you add a few percent, it's going to fall right to the bottom line. And you really want to get that clear, right? You add a little more volume, you've got something else to sell, buy, deliver all the costs and all the staff to hire possibly.

And all that hassle.

You bump up your price a little bit, boom, it's right there. It's cash, it's in your pocket. It's profit and cash and the same thing. I think to that extent, a little bit of cost reduction can make a big difference too, if you combine those two. It's off the topic of our show today, but those two things make a huge difference rather than focusing on what Staff to lay off or that kind of thing. If we could do a little bit of that, we'd be in a totally different position. And those few percent add up to a lot. It's interesting. I think there's, there's these continuing psychological patterns. I worked with some retailers in the past and some of them like to price 98 cents, some of them like to price 95 cents. Right. They all have kind of these different. They just like a habit, right? There's not like they're not. There might be research, but they're not operating on that research that says this or that is the right way to do it.

There's habit thing is such a big deal. I was working with a manufacturer of mulch mulch based products and they sold largely to the landscaping industry. And they did this big price increase every well, not big. They did their price increase every year, January 1st, January 1st. And it was a habit. It was what they had always done there what. And I said, guys, if you are doing your price increase in the middle of the winter when all of your customers are slow, they have plenty of time to negotiate with you. They have plenty of time to beat you up. They have plenty of time to stall and delay. They also have plenty of time to go shop your competitors now that you're raising prices. If you do your price increase in the middle of the busy season, they don't have time to worry about that or think about that. Then they're making money hand over fist and they're too busy out there landscaping to be shopping at a mulch competitor. Do it then. And then by the time they get around to slowing down in the wintertime time, by then they've been paying that higher price for six months. They're no longer, it's no longer a fresh wound, they're no longer angry about it. So. So what why I tell that story is what. Just what you said. This idea of it's a habit. We get in patterns, we get in ruts. And I am a really big fan of whether 98 cents or 95 is the right one to end on. I don't know for a particular business, but we should look at it, we should examine it, we should question it. I'm a big fan of. Question your own patterns around pricing because for most businesses, they're doing what they've always done. Maybe a little price increase every year, but they're not really interrogating the process enough.

Yeah, there's so much there. The, all the patterns that we have ourselves psychologically and that our and that our customers do. Right. You're, you're finessing that and forgetting all the other technical stuff stuff the, the thoughts and feelings that we have about it. Create a muddled world. That's very hard to do it but if you could, if you could increase that, it would make a massive difference to your company, the company. We've talked about so many good things today, but we are running out of time. The Casey's company is boostpricing.com we'll throw that up on there it is on the screen and we'll put it in the show notes as well. But you can remember boostpricing.com if you're you're doing your workout right now or driving or flying somewhere. Boostpricing.com is the URL to go look up and look at how to work with Casey or what else she's got to say about that. How could you boost your prices? Thank you Casey, so much for joining us today. And thank you to my friend and mentor Vern Harnish, who created the whole scaling up framework to the folks at store on Cameron, Seth, Crystel and the rest who helped reduce our show and get it out every week. If you'd like more information, like to know about Casey's work or any of our other shows on anything to do with growing, scaling your company, our workshops, coaching programs, that kind of thing. You'll find it at scalingcoach.com scalingcoach.com is the groovy place to go get what you need. Thanks everyone for watching for listening. We'll talk to you again next time. Keep scaling.