Comment by crispyambulance
7 years ago
My parents had been running their own tailor shop in the 80's, barely making ends meet, pulling in less than $20K a year.
It wasn't for lack of business, father was a master tailor trained in Italy and capable of elite bespoke craftsmanship. They had as much business as they could handle. The problem was that they were charging what they thought the work was worth rather than what their customers were willing to pay.
At some point, during the Reagan years, my mother had an epiphany and jacked up the prices massively, far beyond what my father thought was remotely reasonable. The result? Even more business, more pressure, more return customers. That put me and my brother through an expensive college.
There's something about high rates that makes customers feel more important, it's a status-thing and it also propels them to take you more seriously even if they have you do low-value stuff.
This reminds me one of my favorite comments of patio11 https://news.ycombinator.com/item?id=4477088
>> Frew, who apprenticed with a Savile Row tailor, can — all by himself, and almost all by hand — create a pattern, cut fabric and expertly construct a suit that, for about $4,000, perfectly molds to its owner’s body. In a city filled with very rich people, he quickly had all the orders he could handle.
> You don't have to be Wall Street to figure out the bleedingly obvious solution to being a starving artist who has so much work they have to turn work away. Raise the prices. Then raise the prices. Then when you're done with that, raise the prices.
> At some point you'll be too expensive for the typical businessman, which will make you absolutely crack for a certain type of person common in New York, thus defeating all efforts at being less busy. So it goes. I guess you will have to raise prices.
I wonder if it's sustainable though. If you keep raising the prices and people buy what you're selling, and then eventually realize the quality isn't up to par of what they're paying for.
No matter what you think you are selling, you are always selling the buyer's experience. And for some work, framed the right way, high prices improve the experience.
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> then eventually realize the quality isn't up to par of what they're paying for
Will they?
https://www.washingtonpost.com/news/morning-mix/wp/2017/04/2...
> Nordstrom is selling “mud-stained” jeans to the tune of $425. They’re called the “Barracuda Straight Leg Jeans” and come with some sort of fake mud substance caked all over them. (It’s not clear what that substance is.) The knees, pockets and crotch of the jeans appear bear most of the faux brown muck.
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Eventually you become a Veblen good. Or you finally get to work less hours.
There were mentioned studies in the book "Influence: The Psychology of Persuasion" that mirrored what your parents experienced.
Long story short, a jeweler was trying to move some turquoise and told an assistant to sell them at half price while she was gone. The assistant accidentally doubled the price, but the stones still sold immediately.
Turns out there's a phenomenon where humans automatically associate price to quality. So getting charged more means we think we're getting better quality, regardless of the actual quality
Same for brown diamonds.
Honestly, you don't even need to specify 'brown', regular diamonds would apply. DeBeers has some awesome marketing, diamonds are one of the least beautiful gemstones.
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s/brown/"chocolate"/
black pearls too no?
This is a classic example of a Veblen good [1].
"Veblen goods are types of luxury goods for which the quantity demanded increases as the price increases, an apparent contradiction of the law of demand, resulting in an upward-sloping demand curve. Some goods become more desirable because of their high prices."
The suits are expensive, so they must be good. It's also a status signal to others that you can afford such goods. (Edit minor typo).
[1] https://en.wikipedia.org/wiki/Veblen_good
As the Director of Technology at a non-profit organization, how am I supposed to staff software engineering resources when these pricing practices like these are commonplace in the for-profit world? How am I supposed to make an argument to the board that a single technology staff member, let alone a working team, is 5x-10x more valuable than the rest of the workforce? I'm going to admit it - it's hard to see stuff like this and not be extremely frustrated. Tech is already one of the largest cost centers in an enterprise, and it's proving to be nearly impossible to find any tech staff willing to work for, admittedly, crumbs.
Don't compete on the price then. Compete on something else, like the working conditions.
The author describes how they had to drive 50 miles every day, use the corporate laptop (or install shady software on their own one), not get a response for many days. Basically, their rate (and the total cost) covers not just the work they do, but all the frustration that comes with the work.
Now, if you treat your staff better than that — remove all the hurdles, answer their emails promptly etc. — then there will be many talented people who'd prefer it over a meaningless-but-highly-paid alternative.
If your tech function is being judged by cost, rather than value, you're always going to have problems.
Have you heard of freecodecamp? The idea is for non-profits to work with currently self-teaching devs.
Non-profits get free labor and the devs get real world experience.
Have you considered training internal people to do what you need?
> it's hard to see stuff like this and not be extremely frustrated.
I guess you are frustrated because your company doesn't make much money on technology. If the company has a positive ROI on tech, then you wouldn't be frustrated, because more you invest, more you get out. Most companies doesn't need made-to-measure technology solutions.
As a freelance dev I've worked with a ngo where they paid me to get their junior to create an application. Then another. Then later just to help him with some new concept. I'm not freelance any more (yet) but if you just wanna chat about it, I'd be happy to relay my experience.
My sister works for a non-profit, and we've discussed tech projects there a few times. I think the issue from a business perspective is on the demand side of things. The problem is that the market rate is set by the companies that are in a position to pay it. Everyone else has no say, they're just shut out. You're competing for staff with startups and enterprises that are capturing enormous value.
There's no easy solution, in market terms at least. Maybe you get lucky and catch someone who doesn't need the money and thinks your cause is good enough to put effort towards, but that's not reliable. I wish I had a better answer. Upskilling someone else is potentially viable, depending on what exactly you need. The problem is that things such as static sites and basic sysadmin stuff that are (relatively) easy to skill up in, are also quite cheap in the marketplace for that exact reason. So I'm guessing that's not exactly what you're talking about.
There's quite a bit of effort these days towards upskilling people into more web app developer roles. Lots of bootcamp graduates and a few self taughts floating around. And in my last hiring exercise I found there's quite a large pool (in my area, ymmv) of devs looking for their first real FE/BE job. There's probably some real good value there but the trick is in sifting through the mud. The quality varies wildly, and some of it is shocking. You could get lucky though. I think the go is university graduates, but I hear a lot about grads in the US going straight into high-ish paying jobs so that may be area-specific advice. I was on $45k my first job out, which I thought was fair at the time. But now that I understand the market better and can see just how sub-par a lot of the work out there is, it's obvious that that was a bargain.
The other problem with that is that you're at a big disadvantage when building a team from scratch. A lot of the new devs coming in that will accept lower wages will turn out to be great coders and deliver great value, but a much smaller subset is going to be able to do that on their own with no guidance. That's part of the reason I suggest looking for graduates. I know it's an unpopular opinion here but I think a strong theoretical understanding of software development will help a self-starter more than the equivalent practical knowledge, since without a lot of mentorship they're going to get much more of the practical side from working for you. My first job was straight in the deep end, full responsibility for everything and very little help (one back-end dev who was in the same position with only a tiny bit more experience). I'm super greatful for it, and I think it made me a far better dev than I would have been if I went with a different (bigger) company. Maybe that could be a selling point?
tl;dr if you can't compete with the market then you need an edge that gives you more value than you'd otherwise get. That means people that aren't in it for the money (needle in a haystack, as I'm sure you know, given your position), and people that will rapidly (and successfully) upskill above what the market expects.
Maybe, but not necessarily.
When I price out eg contractors, I know roughly what a senior SE should cost. Where I live, that's $150/hour.
If you come in at $75, I don't assume you're a bargain. I assume there's something wrong with you. Either you're not good, or are just starting out, or whatever the case may be.
In this case, just like I bet the tailor, the point isn't paying more for status. The point is that a service should cost X, so someone going way under cost worries the buyer.
For anyone interested, I highly recommend _Theory of the Leisure Class_, in which Veblen developed the notion:
http://moglen.law.columbia.edu/LCS/theoryleisureclass.pdf
It's worth asking if most of what society is doing is prestige-seeking?
Conspicuous consumption is undeniable when looking at some goods and services, but what about the ordinary, say university?
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I've a friend who has run his own small IT business for a bit over a decade. When I talk to him and he mentions how much he charges, I always tell him it is far too low. He sees it as being easy for him, so he doesn't think he should charge much. I've tried to explain to him that when the plumber comes over, you're not loading that guy down with quantum physics work... he knows how to unclog your drain or run a new water line. That's easy for him. He charges a high amount because his services are valuable. And I, for one, am happy to pay that plumber the high amount. It saves me having to invest far larger amounts in learning and tooling up to do it myself.
I've worked alongside him a few times on projects that his clients had which required coding work alongside the hardware and sysadmin stuff, and each time I've had to badger him into charging double or more than what he wanted to charge. And of course the customers paid for it, because it was still a good deal and I could show them a conservative estimate that said the system would pay for itself in savings in under 2 years. When freelancing, those are my favorite contracts. Where you can show to the customer up-front that you will be saving them money in the long run. It's always much easier to sell them at that point, and I think the amount its going to save is a pretty good proxy for the value of the work.
Steer him to /r/msp or to Karl Palachuk's books.
If his prices are that low he could likely increase by 25% or more and not lose any clients - and even if he did lose some odds are good that they'd be his cheapest and worst ones.
If you double your rates and lose half your customers, congratulations! Now you have the same revenue plus available time to go find more customers fine with the higher rate.
Bravo, but the article was about being placed at a typical rate on a 20 hour job that became a 300 hour job. Here's an article about what you're talking about: https://hbr.org/2017/10/why-you-should-charge-clients-more-t...
I'm not sure this is totally applicable to say a tailor shop, but I do wish more craftspeople would try charging more money for quality work.
For example say I want some shelves built. If my shelf-builder charges $X that's fine, but what if I would happily pay $2X?
On the one hand, I might be personally miffed to know I'm paying 2X instead of the X someone else is paying. On the other hand, I'd probably be the more satisfied customer if I don't know (or have the discipline to ignore) the price gap, because the shelf-builder is probably going to give extra effort in hope of getting more jobs from the 2X clientele.
It would be interesting to explore what would make your 2X client feel good even if they know they are paying double. And would that scale to 4X or 40X clients?
There must also be the satisfaction derived from keeping a quality craftsperson in business, in face of the cheap-shot mass manufacture that seems to happen everywhere.
I met a welder who had hourly prices above work samples.
The $300h one looked like a piece of art. The $20h looked like sea gull crap landing randomly around the piece.
But also, charge accordingly, if you don't have to post your prices (as your parents probably did). A lawyer is likely willing to pay a lot more for the same website than a tailor shop, and I'll gladly take both of their money.
Yes, "charge accordingly" means different things to different customers.
My parents never advertised their tailor shop, it was all "word-of-mouth" business. After the pricing jack-up, every customer got charged what my mother felt they could pay (with a very loose regard for consistency and some allowance for negotiation).
I used to think that was sketchy. It wasn't until much later that I realized that B2B enterprise sales people do that stuff ALL THE TIME even with their onerous kpi's, forecasting and fiscal quarter expectations!
> I used to think that was sketchy. It wasn't until much later that I realized that B2B enterprise sales people do that stuff ALL THE TIME even with their onerous kpi's, forecasting and fiscal quarter expectations!
Depending on how it's done, it still is, and enterprise salesmen doing it doesn't make it less so. As a customer, I don't necessarily seek absolute minimum price, but I want it to be a fair price that I can agree on voluntarily - that means, I don't want to be subject of a bunch of manipulative sales techniques during pricing negotiations. Moreover, individual pricing used at scale makes it impossible to compare prices, or even develop a sense of what price is fair price. I actively prefer buying from vendors who list prices publicly, so by going the individual price route, you might be losing business of me and people like me.
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That big business does something isn't and indicator of whether it's sketchy or not. I wouldn't even say the comparison maps 1:1 anyways.
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> every customer got charged what my mother felt they could pay
I suspect with advertising profiles and amazon purchase histories (and possibly amazon visa card applications requiring household income)... this wonderful "service" previously only available to the rich will be democratized for everyone!
The term is price discrimination.
Offering coupons through the mail, online ad codes etc. You are reaching out to different demos using different marketing techniques and offering or not offering discounts accordingly.
Or just show different prices to different users. Iphone users usually pay more.
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It is a rule of thumb in any client or contact work that the less you are charging them, the more difficult and demanding the customer will be.
One day randomly in the 80s IIRC, Rolex tripled their prices, and they haven't lowered them since. The same watch cost three times as much at retail one day than it did the day prior.
According to ABlogToWatch, you're completely incorrect.
https://www.ablogtowatch.com/rolex-prices-past-60-years-reve...
It's a pretty stable increase, and adjusting for inflation it's actually a fairly low increase for a product that has improved over time.
Thanks, my bad.
If you respect yourself, then you'll respect your work.
"I don't want some small-time amatuer working on my $5000 power suit!"
That's no amateur, that's an artisan. A craftsman. Your personal tailor.
Are there any examples of this but with virtual things? Sites, apps, digital goods? Some status thing?
I can understand when it comes to physical goods.
Its not the same customers.
Welcome to marketing!
If you want to be paid more: ask for more. It is astonishing how few people do.