A Man Charged $10,000 To Draw a Line with Chalk. You Should Too.
This is a story about value-based pricing that comes straight to you from the 1800’s. Yup, they agonised and argued over pricing back then too.
Value-based pricing from the 1800’s
A mathematician and engineer by the name of Charles Steinmetz worked for General Electric. He was a genius who hobnobbed with the likes of Albert Einstein, Thomas Edison and Nikola Tesla. He was a giant in his field despite being only four feet tall.
Anyway, the car manufacturer, Henry Ford, was having some trouble with a large generator in his plant. His engineers didn’t know how to fix it so Ford hired General Electric to resolve the issue.
As the story goes, Charles Steinmetz arrived at the plant and worked alone for two days, studying the generators and taking notes. On the second night he climbed a ladder and marked a line with chalk, advising the engineers to remove a plate and replace some windings exactly at the marked point. (I have no idea what a winding is, by the way, but it sounds silverish).
The engineers were highly sceptical. How could just a couple of tweaks fix a problem that collectively and consistently stumped them?
But they did as Charles asked and the generator purred perfectly back into action.
Henry Ford was happy.
Henry Ford got the invoice.
Henry Ford was no longer happy.
It’s all fun and games till you’re invoiced for $10,000
I’m not sure what sort of expletives they used back then, but Henry Ford probably let rip with some colourful windings. He demanded an itemised breakdown of the invoice.
Steinmetz personally itemised the invoice for Ford:
Making chalk mark on generator: $1
Knowing where to make mark: $9,999
Telling this story like a MasterCard commercial: Priceless.
This story illustrates how one man placed a dollar value on the importance of his service, despite how quickly or easily it seemed to be delivered.
Henry Ford paid the itemised invoice because he understood the logic and importance of value-based pricing (the perceived value placed on a product or service). In this case, the perceived value was huge because the potential loss was even bigger. If the plant shut down as a result of generator failures, then $10,000 was a miniscule investment.
Where do you make your mark?
The title of this article is of course figurative rather than literal. I’m not suggesting we all buy chalk, waltz into car manufacturing plants, randomly scribble on their equipment, utter the word ‘windings’, and then invoice handsomely. (Though if you do follow this business model, and the client pays, please provide us with the exact geo-coordinates of the plant.)
The question is, where do you make your (figurative chalk) mark? What’s your niche? What’s your area of specialisation? Do your products and services help customers make more money, save more money; enjoy more time, happiness and/or freedom? And if so, are you placing enough value on your offerings?
For your particular target market, maybe you are.
But maybe you aren’t. And if you aren’t, perhaps it’s time to take another look at your pricing.
Here’s how I address pricing in my copywriting quotes and proposals.
Value for money, not cheap copy.
I’m certainly not the most expensive website copywriter in town, but I’m definitely not the cheapest, and nor do I want to be. Good, persuasive copy takes time to write. It’s also an investment that can generate many thousands of dollars over the life of your business. If you need a budget copywriter, I’m not the copywriter for you.
Charles Steinmetz wasn’t just brilliant at maths, engineering and windings, he was also brilliant at understanding the importance of value-based pricing. He knew that charging for his time made less ‘cents’ than charging for his talent.
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