#015: Ilise Benun Reveals a 3-Tier Pricing Strategy That Works Like Crazy

Summary: In this episode of Smarter freelancing podcast Ed talks with Ilise Benun on a 3-Tier Pricing Strategy That Works Like Crazy.

Do you typically quote prospects exactly what they ask for?

Most freelancers do.

But what if you gave your prospect more options?

What if you proposed two or three variations on the original scope of work? Would that just create confusion? Or could it present an opportunity to serve the prospect better while potentially increasing your income on that project?

In today's show, Ilise Benun talks in detail about a 3-tier pricing strategy that's working like gangbusters for freelancers who are using it strategically.

The notes that follow are a very basic, unedited summary of the show. There’s a lot more detail in the audio version. You can listen to the show using the audio player below. Or you can subscribe in iTunes or Stitcher to get this show delivered straight to the Podcasts app on your smart phone, tablet or iPod.

Tell us about yourself

Ilise Benun’s business is Marketing Mentor, a coaching and consulting practice. She helps people grow their businesses through marketing. Recently, she’s expanded into business coaching.

What's this three-tier pricing technique about?

Ilise credits Jason Blumer, a CPA and business coach, with introducing her to the three-tier pricing concept. He briefly covered it during a presentation at the 2014 Creative Freelancer Business Conference.

The concept is this: Instead of quoting prospects one price, you give a range of three prices for prospects to choose from. Each price includes a different set of services, ranging from “bare bones” to “the whole enchilada.”

With this approach, prospects aren’t choosing whether or not work with you. They’re choosing how to work with you.

Client feels in control because they get to choose the package they want. It’s not all or nothing.

What are some of the other benefits of using this technique?

It gives you the opportunity to describe the difference between high- and low-priced options, which educates prospects and helps them better understand what you do.

Many freelancers worry that if they quote too high, they’ll lose clients. With this technique, prospects will often choose the higher or middle price option. Prospects know that they get what they pay for, and they don’t want to be cheap or perceived as cheap. This technique has a psychological element. It shifts the anchor price.

Often you don’t really know what clients are looking for until you get into the project. Offering your pricing in this way helps you understand what clients want sooner.

You can offer this as three pre-defined packages or three custom options based on what clients tell you.

Typically, the middle option is what clients have asked for. The higher option is what clients asked for plus additional services.

What's the best way to present these options in a quote or proposal?

Start with the highest, then middle, then lowest. This makes the lowest option seem not so high.

You can use this technique to upsell (offer a better version of what they asked for) and cross sell (offer complementary options to what they asked for).

This technique gives you one more reason to have a conversation with clients about your proposal, instead of just sending it off.

You can set the groundwork in advance by letting clients know that you’ll be giving them three options.

What do you think about including a higher end option that’s a little “out there”?

You don’t know what clients can afford. One way to find out is to put an expensive option in front of them and see how they respond. Sometimes, they say “yes”!

Do you recommend giving each option a name or label?

Copywriters should. Designers don’t have to, but it helps. Context helps to anchor your prices.

Psychologically, it helps if you say “premium” version instead of “expensive” version.

One school of thought claims that giving clients more than one choice causes confusion and indecision. What are your thoughts on that?

It depends on the situation and the prospect. You don’t want too many options—no more than three. It also helps if you take the time to explain the differences between the three options.

Any parting thoughts?

When it comes to pricing, ask about the prospect’s price and budget as soon as appropriate. You don’t want to waste time doing proposals for people who can’t afford you.

Again, three-tier pricing can facilitate that conversation. At the beginning, you can say “Okay, I’m going to give you three prices, spanning this range. Does that work for you?” It’s a way to get immediate feedback.

Where can listeners connect with you?

Ilise Benun website: http://marketing-mentor.com

Twitter: @MMToolbox

Also, check out Ilise's copywriter and designer proposal samples available for sale. Each of these proposal "bundles" below includes multiple sample proposals, plus detailed advice and strategies on how to use them effectively.

NOTE: As one of my readers and listeners, you can get $10 off any of these packages by using promo code SAVE10 on the checkout page.

marketing mentor                  proposal bundle for copywriters

  • The price strategy your describing can not fool anyone. Any educated prospect will know that your trying to trick them into buying. If you start high and the lowest price is close to the highest price, this itself is deceiving. Instead of all this, better to ask for the budget and work with that. If they don't want to disclose their budget, then move on.

    Wine is a commodity not design. So the example of the wine bottle does not work with selling custom design work.

  • Guest

    Very interesting--thanks for bringing up this topic!!

    • edgandia

      Thanks for checking it out! Glad you found it helpful.

  • Erik Mason

    I didn't even realize I was doing this, but in a slightly different way.

    I create a scope of work outline and assign percentages to individual buckets based on the total price (e.g. PR = 40% of X total, Social Media = 30% of X total, Events Management = 30% of X total), which puts the "premium" option on the table up front.

    Simultaneously, this method lets the client shape the scope of work based on their available budget by allowing them to remove some items they might not be able to take on at that point in time. This also helps build trust by making the client feel like they're more in control, when in reality you're upselling without them realizing it.

    I've found this approach lowers the barrier for client entry, while giving a roadmap of other projects to take on at a later date.

    • edgandia

      Love this, Erik! Thanks for sharing and for checking out the show.