It was my mum’s birthday last week.  She was seventy.

Three months ago, my sister and I had a meeting to decide what we should do to celebrate this special day.  Long story short, we decided that the right present for my mum would be to make a photo book of her life.  We figured she’d really appreciate this and if we did a proper job it would become a real family heirloom.  We divided out the jobs – my sister’s role was to find all the pictures, so she burgled my parents’ house when they were away one weekend (!), scavenged through the loft and spoke with all my mum’s family and friends to collect as many photos, especially old photos, as she could.

My job was to get the pictures scanned and then laid out properly in one of these great printed photo books that have become available over the last couple of years (my personal favourite is Bobbooks – www.bobbooks.com – they really are fantastic).

However, before I could put the photos into the software, I had to get them scanned and the situation was made doubly difficult because half the pictures that my sister was able to find were slides (remember them?) from the 1960s and 70s

I did a search online and found three or four companies actively promoting their services at scanning images like this, however, a little bit more research showed me that scanning slides was a real specialism and they have to be done at particularly high resolution if you’re going to be able to blow the pictures up to any kind of sensible size.  The number of companies able to scan slides at sufficient resolution was now down to only two that I could find online.

I called the first one and I got no reply (by the way why would you spend all that money marketing yourself online and then not answer the phone?) when I called the second guy, he picked up and what became clear was that he was in fact a one-man-band operating from his house in Greater Manchester.

I asked him how much it would cost to scan three hundred images, including a hundred and fifty slides, all at high resolution and get them back to me on a DVD.  Time was of the essence because I had to allow time for the printing of the book and my mum’s birthday was now looming large on the calendar.

I was dumbstruck when he told me it would cost £180 and that this would include individual touching up of the images in Photoshop prior to the DVD being sent to me.

Was this guy for real?

Here is a man, in business, who has no idea whatsoever of the value of the service he is providing.

His pricing is based entirely on some flawed thinking around what his time is worth.  He is basically putting his time out there at something like ninety pounds a day, working from home, and he feels that’s a reasonable return.  He is, I’m afraid, completely stupid and destined to always be poor.

Think about this for a moment.  What my sister and I are compiling here is, frankly, priceless to our family.  It’s an heirloom, something of immense value and great posterity and it is impossible for us to put it together without this guy’s help.

If he’d told me the cost was £5000 I would have paid it without blinking.

What I had in mind was my mum’s face on that Sunday morning when we gave her the book.  I really wanted to make this happen and the value to me of the service he was providing far, far outweighed the cost of his time.

It taught me a really valuable lesson.

You see, too many people in business base their pricing on cost.

They look at what the cost is of the goods or service they are providing and then add some margin on top for their profit.  The only thing you can guarantee if you adopt this approach is that you will never ever be wealthy.  Price is all about the value to the customer.

In truth, what this guy should have done is offered me three prices, he could have had a basic price where he scanned the pictures and sent them back to me (without any Photoshop touching up for instance), and he could easily have priced that at several hundred pounds – he’s one of only two in the country that I could easily find online, don’t forget, who could do these slides at the resolution required and the job was reasonably time critical so I couldn’t afford to wait three months for this to happen.

He could then have had a middle type service where I got the Photoshop facility and that might have cost £1500 or £2000 say, and then, if he’d offered me his platinum royal service or something similar whereby he came and collected the images, delivered them back to me, maybe even ordered them chronologically or did something around the naming of the files, there are other parts of value he could have added that wouldn’t have taken him much time or cost him much money but which would have been worth a great deal to me. He could easily charge £5000 for that sort of service and some people would pay it..me for one!

You see, here’s the thing, in pretty much any market, there’s a group of your customer base, around 20%, in my experience, who will willingly pay more for what you do if you give them the opportunity to do so. Just give them the choice and some will pay the higher price because they appreciate the perceived higher value.

When we introduced My Little Wrapper a couple of years ago we only had one product.  After three months, we introduced a “Professional” pack which gave people quite a bit more stuff.  It added about £300 to the cost (to us) of the product, but we added £1000 to the price so every time we sold a professional pack our margin was increased by £700.  Consistently, over two years, 22% of customers buy that Professional Pack – and that’s an awful lot of £700 I can tell you. (Just having that higher price option available has been worth well over £60,000 PROFIT to my business in two years)

So what my mother’s 70^th birthday taught me about business is that there are still too many businesspeople in the UK who don’t understand pricing and its importance in building a successful business.

Please don’t be a business buffoon like my photo scanning guy – get smart, put your prices up.

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