Pay as you perceive

I was known to be a good negotiator (with vendors), when I was at my previous company (my boss thought so  but my wife disagrees).  The key was my patience – I was prepared to wait, for longer than most others, till the vendors brought down their price within our budget. A willingness to explore alternatives and compromise on the peripheral items also helped. Despite my so-called negotiation skills, I always had the grudge that we were paying our vendors a lot more than the value that we got. There is a huge premium paid for the brand name, most often, defying rational thinking.

When I started my own venture, offering leadership training based on Thirukkural, I decided to do away with this endless cycle of negotiation. I did not want to put a price tag on myself. I did not want to get paid only for my brand and pedigree – my college; my past experience; the positions that I held earlier.  Of course, the brand and pedigree help to establish my credibility with strangers; but I did not want those to dictate how much I was worth NOW. I felt that the only thing that mattered was what I was offering now and what value is seen by the customer.

I decided to go with a ‘pay as you perceive’ model of pricing. I asked my customers, to pay me based on their affordability and the value that they perceived. I, naively, thought that customers will feel most comfortable with such an approach. On the contrary, most of them felt uneasy at the beginning; some of them doubted if it was yet another fake sales ploy, similar to that of a friendly neighborhood plumber or an electrician who initially leaves the amount to our choice, and later, scratches his head expecting more; some of them insisted on a quote from me; a sympathetic customer even said he will help me find some smart MBA who will work out a pricing model for me.  I gave in the first time and submitted a quote but accepted the price offered without a debate;  started giving a benchmark later on; and nowadays, mostly, avoid giving any price.

It is not an entirely original thought. While there are numerous precedents in the ancient world and is in line with the thoughts of Thirukkural, there are those who have done it in the modern business environment too. I had been to Hotel Annalakshmi at Coimbatore, 10 years ago. They had done away with standard pricing and gave a blank book without a bill at the end of the meal. I paid the market price plus tips. There is also a wonderful short story in Tamil by Jeyamohan (சோற்றுக்கணக்கு), which narrates the tale of Kethel Saheb, and his restaurant at Trivandrum, where the hospitality remained the same irrespective of whether the customer paid nothing or a stash of money.

My early lessons, from my limited experience so far : people will not pay a premium but are always looking to pay a fair price (in their view). This approach has removed the price equation from the negotiations. Now it is all about whether they see value in the training that I am offering, whether they have the bandwidth to run a training program at that point of time, how much value they perceive and how much they can afford.

I do not view this as a smart marketing strategy. It does not open doors for me that would otherwise have been shut. I have to work as hard as other business ventures to get opportunities to train. But I know for sure that I will never lose a customer because they can’t afford me.

 

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3 Responses to Pay as you perceive

  1. KarthikStorm says:

    What you are doing is an inspiration to those like me who keep checking if the water is cold. You’ve gone ahead and taken the full plunge. I hope you succeed in your endeavour and prove that business isn’t completely about money. You are 50 years ahead of most people, coming out with this model. Revolutionary, to say the least.

  2. Ravi says:

    You may be interested in this Ted Talk: http://www.youtube.com/watch?v=kpyc84kamhw

    Here’s my thought – put a price based on the value that you think they may receive if they got more than 50% of your content. Also consider the fact how much do you NEED ! But if you do specify a value – it makes it easier on your clients – they need to spend less time on the price and focus on the content 🙂 You can certainly can discount the price based on the target.

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