A Man Charged $10,000 To Draw a Line with Chalk. You Should Too.


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.

Placing value

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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Showing 9 comments
  • Megan Winter

    Loved this article Lucinda. Will be sharing it for sure.

    • Lucinda

      Thank you so much, Megan! I’m glad you liked it. Let me know if you make money drawing with chalk. 😉

  • Sharon Chisholm

    More brilliance from you Lucinda. This is particularly appropriate for me right now and something I’m looking at within my own business. I know a number of other business owners who will find this very interesting, so will be sharing with them.

    • Lucinda

      Thanks so much for your kind words, Sharon, and for sharing! I’m glad this article has come just at the right time for you. Good luck with your pricing. Once you see your own services as an investment, not a cost, everything changes for the better. 🙂

  • Michael Hanrahan

    Great article and a very good reminder to properly value your own skills. Thanks Lucinda.

    • Lucinda

      Thanks so much for your comment, Michael! 😀

  • Roland Hanekroot

    Great article Lucinda,
    It’s an interesting topic though… I totally get the concept of selling against the value you provide… Am accountant who saves a client $10K in tax, and does so in an hour’s work… How much should that accountant charge for the work… Her normal hourly rate of $250 or maybe 10% of the tax savings, or 25%, or why not 50%?, $5K?
    I myself charge a fixed monthly fee to my clients, that when translated into an actual hourly rate seems steep, and it’s certainly the case that some people shy away from engaging me, because they believe I charge too much money. At the same time I have been keen to increase the fee I charge for a while, but I find it difficult to do so.
    When in discussions with my clients about fees, I usually tell them that it’s undoubtedly true that they aren’t charging enough money to their clients and that their service or product is worth more, nothing is going to happen unless and until they feel comfortable, deep down, to charge more.
    I would like to charge more than I do at the moment, but I’ll not manage to do so until I feel 100% comfortable to quote new fee I want to charge… that may take a little while yet… maybe a year or 2? Who knows… but until I really feel comfortable asking for it, I won’t get it.
    And I think that’s where the value based pricing model gets stuck… It’s like the plumber I worked with… he’s created and uses a price book with flat fee prices for a whole bunch of regular recurring jobs at people’s homes… “want to replace a tap washer, that $75… blocked toilet… $237… etc.
    In the book he’s also got an item called: “The Soapy water test”… it’s what you do wen you are trying to trace a gas leak, you get a plant sprayer with water and dishwasher detergent in it and you spray the soapy water along the copper pipe… and voila where there is a gas leak, the soapy water starts bubbling…. cost of equipment: negligible… time: no more than it takes to fill up the plant sprayer… benefit to the client: potentially limitless if we think about gas explosions etc… so his standard price book, the one provided for him by his association or somesuch suggests to charge $160 for a soapy water test…
    makes sense, right?… except my client has never been able to charge it, because he just can’t do so with a straight face, and I acknowledge him for it… If a plumber was going to charge me $160 for a soapy water test… i’d never use him again, I’d actively tell my friends not to use him and I’d probably make fun of him on Facebook…
    My rule?
    If it feels right… It is right
    long winded comment really… hope you don’t mind, it’s a bug bear of mine…I might actually write an article about it for Smallville, what do you reckon?

    • Lucinda

      Hi Roland

      I read your meaty comment with great interest. Thank you for taking the time to share your experiences, stories and thoughts – most interesting!

      I like this line: “If it feels right… It is right”. I’ve been told my many people to raise my prices, however, my current pricing just ‘feels’ right to me, particularly for my target market.

      I think a big factor in successfully raising prices is in educating clients about the difference between an investment and a cost. In your case, if you can show solid examples of people saving and/or making money as a result of your services, and you provide some excellent written and video testimonials – you’ll increase your chances of retaining and attracting more clients.

      Again, thank you for taking the time to comment so thoroughly!
      Lucinda 🙂

  • Roland Hanekroot

    Amen that that Lucinda 🙂

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