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What’s the difference between a $5000 consultant and a $10000 consultant?


Get it?  Most consultants don’t. 

Double your price and you’ll double your sales. 

Why? Companies want to hire the expert. They want the best. Nobody wants the affordable guy. If you charge too little, there’s no way you can be that good.  ("Why would we trust a consultant that only charges $5000? If he was any good, he’s cost MUCH more." or "Wow – he gets $20,000. He must be great.")

Example 2: I share a garage with my neighbor.  My Toyota is EXACTLY the same as their Lexus.  You don’t realize it until you park them side-by-side every day.  Why do people buy a Lexus?  Because it must be better if it costs more.

(This post will change the life of the 1% of freelance consultants who listen.)

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  1. Todd Defren January 9, 2008 at 8:15 am #

    That’s why I drive a VW Passat instead of an Audi. ;)

  2. stan January 9, 2008 at 9:23 am #

    Wow. This post was so far off the mark, I had to comment. Yes, price as proof of efficacy is an important factor, but it is not an absolute. The supersize price of a #2 at McDonald’s is the most expensive – it must be the best, right? Price your generic equivalent above the brand name – it must be better, right? My contractor is charging me twice as much as the others – good for me! You’ll find that most studies show people don’t want to pay the most for anything – or the least. They are more comfortable right in the middle. It feels safer. What you should be saying is not charge more – but know your market (and your position in the market). Then price accordingly.
    Andy -writing a blog like this is a responsibility. People look to you and you are not serving people well with posts like this.

  3. Andy Sernovitz January 9, 2008 at 9:57 am #

    Stan –
    No intent to offend! But there are a lot of hard-working folks out there who don’t get the pay they deserve because they just don’t ask for it.
    Pricing strategy is as important for professionals as products, and it’s so rarely discussed.

  4. Craig Rentmeester January 9, 2008 at 5:02 pm #

    Hi Andy,
    I do disagree with the point about doubling your price and doubling your sales as a result, but I liked where this post was heading, so I thought I’d dive into the subject.
    Economics would suggest that doubling your price will actually decrease the demand for you services, thereby allowing you to sell less units. (*Click on my name above to see this in graph form.)
    However, selling less units (hours in this case) is not necessarily a bad thing.
    In this case, the economic model refers to supply as the number of hours you’re able to charge for in given period of time rather than a supply of goods that may diminish in value over time.
    Thus, if you’re charging twice as much and able to bill out any more than half the hours that you did at your previous price, you end up better off. In addition, if you have a lower number of total clients, your costs of acquiring the same revenue would likely decrease, meaning greater profitability.
    Any surplus in this model is just time (hours, minutes, etc.), which isn’t really a negative thing if your bottom line isn’t affected.
    You might even be able to play more golf, spend more time with your family or travel.
    I can relate to this post. I am thinking about taking on marketing and web work this year in addition to my full-time job. As such, I am wondering how much I would be able to charge for my services.
    If you have any advice, let me know.
    Good post, Andy. Keep the ideas coming.

  5. Shama Hyder January 10, 2008 at 10:40 am #

    I like where this post is headed. Talented independent professionals often sell themselves short. One more reminder to take another look at their pricing structure won’t hurt.

  6. Andy Sernovitz January 10, 2008 at 11:30 am #

    I don’t think it’s so much a supply/demand question. There are a zillion consultants out there. It’s a branding question. Why are they going to hire you instead of someone else.
    When being chased by a bear, you don’t need to be faster than the bear … just faster than the guy behind you.

  7. rene January 11, 2008 at 12:32 am #

    isn’t that an old marketing adage?… “in the absence of other information, price will be used to indicate quality” or something like that – but then, good info is pretty easy to come by nowadays…

  8. Jake McKee January 13, 2008 at 4:24 pm #

    I’d just like to add to this conversation – I tend to agree with Andy. I’m not sure that double is the right answer (you have to find the right answer for yourself, your business, and your industry), but as a metaphor it’s spot on.
    Consulting is not Big Macs or any other tangible product. Knowledge-based consulting works differently. I’ve also found that the busier I am the more people want to work with me. It’s the velvet rope effect… the more difficult it is to get into the latest hot nightclub, the more you want in. Thing is, the club still has to be realistically accessible or you just write it off as “not my crowd”.

  9. Jeff Y. January 19, 2008 at 9:07 pm #

    Good post. I think that many independent professionals often overlook their “personal brand”, and as such, they don’t view price as a positioning tool. However, with the wealth of information now available, I think it’s becoming harder and harder to use price as a proxy for quality. With that said, if you provide premium services, you should definitely price at premium.
    As for the Lexus example, I think that it has less to do with a person’s own perception that a Lexus is better, and more to do with the prestige involved with owning a Lexus. Great job of branding by Toyota and differentiating Lexus as a luxury brand despite being 90% indentical to Toyota.

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