We don't live in a world of rational agents. And even if we did we don't live in a world where most business purchases are made with people's own money. People have complex and contradictory goals and in my experience pointing out the value customers get for the price they pay is the least effective sales strategy.
I offered a fixed-price "no win, no fee" rate equal to about a week of my normal hourly rate. I thought it was a great deal given how much they'd already spent, plus it gave some certainty to them around something could have been very messy and open-ended.
The client got hung up on, "What if Tom only takes an hour to solve it? What an expensive rate! What a rip-off!" They were more concerned with seeing me put in time and effort than actually getting results.
* Charge daily or weekly, not hourly.
* Don't anchor your results to "free" (this includes not getting paid unless specific results happen).
* If a customer has been repeatedly burned by other consultants and believes this problem could be solved in an hour, consider either 1) avoiding those customers or 2) working on an agreeable scope that precludes an absurd amount of time.
I'm not saying that will fix all your problems, but if it helps, I've never encountered this issue with this formula.
This can work for the provider of a service, in certain circumstances.
But my opinion is that it is always better to charge a price that reflects the value delivered, no matter how long it takes to deliver that value.
There is a (possibly apocryphal) anecdote I read once in which a consultant was brought in to service a machine with many parts. He replaced one part and invoiced (say) $10,000 for replacing a part worth $1. When asked why his bill was so high, he said: "I charge $1 for the replacement part. The other $9,999 is for knowing which part to replace."
As knowledge workers, those who are skilled must remember that "hours spent sitting in a seat" is not a valid measure of their productivity and should not permit clueless managers/clients from judging them in that way.
Anyway, I'm happy to say that I avoided this customer (and others that care excessively about timesheets) and I have no regrets.
Then why not raise your price to $99, and let them negotiate you down to... $35?
But on the other hand, again, when dealing with enterprise purchases, the purchases department needs to demonstrate that they bring value to the table by lowering costs. So it is typical to make what you suggest and account for a commercial discount of 3-10%,depending on purchase size, etc.
You need to fight for it, but you are safe to grant it in the end.
This might happen even if you don't know about it, if your boss sets the prices and you can request a special discount for special clients.
It was an interesting example of how it's best to not try and please everyone.
> spend 5k to make 50k
I'm sure it has nothing to do with people making numbers up.
Your customers' pride could be one reason why they refuse to spend that, but have you considered that this is an uncharitable perspective? Don't you think it could also be because they have honest reservations about your product or better alternatives for their business than that they are obstinately refusing to just hand over their money to make $50k?
I think it's much more likely that the situation is actually quite nuanced with competing incentives, priorities and perspectives on either side. An information asymmetry is not the same thing as irrationality.
2. There is both opportunity cost and hidden cost for trying your solution.
