We’ve been through a lot of changes in pricing over the past couple of years. In particular, talent scarcity has driven up labor prices. This has caused a lot of folks to reset their labor prices to better match the market, which meant moving more of their margins into the talent side of the business and away from equipment.

All this was done intentionally to make businesses consistently profitable and more scalable. But it’s also led to some customer pushback.

Why? So many businesses still present pricing the way they did before the pandemic. The old line-item pricing: here’s a position, here’s the price.

When clients look at these line items, where a technical director now costs $1,400 a day, they freak out because they’re used to a much lower rate — maybe $700 or $800 a day.

And then there are clients who have no reason to know better. They have no history looking at these kinds of quotes, but they push back anyway. What do you do?

A Real-World Example

I recently had a client lament about how much pushback he’s getting on labor pricing. He described an institutional customer who needed an LED wall for a short event. After seeing the line-items for the event, the customer was shocked and concerned at being charged $1,400 a day for technicians.

The odd thing is this customer had nothing to compare the pricing to. He didn’t know a thing about the old pricing. This was the first time he’d ever needed this kind of job done. But he was still upset that a little $25,000 gig had personnel at $1,400 a day.

In conversation with me, my client took the situation as a reason to say, “Our labor pricing is too high. We need to pull back.”

As I listened to the story, all I could think was, Why did your client, who isn’t an industry buyer and isn’t educated about pricing, get a quote with detailed line-item pricing, specifically on labor?

All the customer needed to hear was, “We can give you the LED wall and take care of everything for $25,000.” The client would have bought it in a heartbeat, which is exactly what he did. He bought a $25,000 gig and only got upset when he later saw the details of what he’d agreed to.

When I pointed this out, my client saw the mistake. But he also asked about certain other customers, ones he has to show detailed pricing. He was talking about agency clients with their own spreadsheets who needed to see his numbers — and who didn’t like them.

They like the numbers they used to have when they were in control.

Show Them the Numbers

My response? Go ahead and show them the numbers. Just move the money around.

Tell them you’re charging them $900 a day for labor, but put the actual amount you need somewhere else. Tell them you can’t give them as much of a discount this time, or raise your equipment prices across the board. Charge more for travel. Add a pre-production number you just made up.

Here’s the point: Are they pushing back on the cost for the entire show, or are they just pushing back on the price of an individual item?

In these situations, they’re happy with the overall cost. It’s the details that trip them up. But they don’t need to micromanage the details. That’s not their job; it’s yours.

And if they must have line-item pricing, simply move the numbers around to keep them happy.

Prices Have Always Been Made Up

Like my client, you might be shocked at this approach: “Are you telling me pricing is just a shell game?”

Yes, I am. Pricing has always been a shell game. You know this if you’ve ever bought a car.

The pandemic has brought us into a situation where we need to change pricing. The market conditions dictate it. There’s no way around it.

But you’ve trained your customers to look at prices in a certain way. That, too, was a shell game. You told them you could discount equipment but not labor. It looked like you made all your money on the equipment when in fact you were making money on everything you touched.

Prices are made up. You taught your clients to believe in your old prices; you now have to teach them to believe in your new prices. Use that power to present them with the numbers and explain how they benefit the customer.

Ethics and the Shell Game

The fact of the matter is this: Your job is only worth what the customer is willing to pay for it.

If you can get better at helping customers understand the value of what you do, they’ll be willing to pay for that value. You get to do a good show, they get a good show, and everybody wins. That’s not deceptive or unethical.

If the customer isn’t willing to pay for something, then you can’t include it. But that means the show won’t go as well.

If a customer won’t pay $1,400 a day for labor and tells you to find someone for $700 — and you agree to it — then you’re stuck finding someone who will work for that amount in this market. You’re compromising the show. That’s unethical.

Show the customer there are decisions they don’t need to make. This allows you to deliver them a better show because they’re not micromanaging it. The show benefits, the customer benefits, and you benefit. Everybody wins. That’s ethical.

Conclusion

Every owner knows they have a fiscal responsibility to their own business. If you don’t make enough money, then your customers miss out and your employees aren’t employed. It’s your job to protect your margins so you can continue doing the work you do so well.

But when owners let their emotional responsibility to their customer overtake their fiscal responsibility to the business, bad things happen. Margins shrink, and the ability to deliver good service diminishes.

You start doing bad work and lose the very customers you were trying to keep by cutting prices, slashing margins, and making compromises. You’re basically taking money out of your own pocket and handing it to the customer. To continue doing the good work you do, you need to get a fair return.

Quit apologizing for making money. You’re doing something for your customer they can’t do for themselves. That has value.

You’re worth it.