Differentiating Between Price and Value

Guest post by: James Chan
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The "C-H-I-N-A" formula for selling services or products to China - By James Chan

Setting prices that really reflect the value of your services takes discipline and courage. And as Fran McElroy, who runs a video production firm, has discovered, the toughest people to charge are often those you admire the most.

Fran went independent after two distinct careers. The first was as a staffer for Senator Edward Kennedy, which she recalls as a time of idealism and youthful enthusiasm. The second was as a program developer for a public television station, where, she feels, her anti-authoritarian attitude made her a prime candidate for downsizing.

When she set up her business, her goal was, in a sense, to combine her liberal political philosophy with the skills that she had acquired in television. She incorporated her business as a nonprofit. Its intent is to serve other nonprofit organizations, particularly charities and cultural institutions, by making educational films, fundraising videos, public service announcements, and documentary films.

Television and film production is expensive by nature, and Fran is very proud of the results she has achieved on tiny budgets. ~{!0~}They have no money, yet they want all the bells and whistles,~{!1~} she says of her nonprofit clients, ~{!0~}and often I~{!/~}m able to oblige.~{!1~} One way she does this is by convincing her contractors and suppliers of the worthiness of the cause so that they are willing to settle for lower fees than they usually charge. The other way she does it is pay herself next to nothing.

~{!0~}It~{!/~}s just my liberal guilt,~{!1~} Fran says. ~{!0~}Something inside tells me that I shouldn~{!/~}t take money from organizations that serve the homebound elderly and the homeless.~{!1~}

Recently, after one of her videos won a national award from an association of philanthropists, Fran realized that she was placing too low a value on what she does~{!*~}not only in the prices she quotes, but in the way she thinks about her work. In imagining that she was taking food from the mouths of the homeless, she was forgetting that her videos serve the organizations for which she works and, by assisting their public awareness and fundraising, help to keep them in business.

~{!0~}Any charity has to find the money to get its message out,~{!1~} she says. As a consequence, she has decided that she has to charge enough to ensure the future of her own business. Fran doesn~{!/~}t intend to gouge the poor, merely to compensate herself fairly.

She recently made a proposal whose costs reflected this new, realistic attitude. ~{!0~}They said yes, and I was absolutely shocked,~{!1~} says Fran. ~{!0~}I~{!/~}m learning.~{!1~}

Like Fran, most entrepreneurs grapple daily with the tangled issues of pricing and self-esteem. And her dilemma demonstrates that having admirable, even saintly, customers~{!*~}a problem most of us don~{!/~}t face~{!*~}doesn~{!/~}t make running your business any easier.

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The "C-H-I-N-A" formula for selling services or products to China - By James Chan

About the Author: James Chan

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James Chan, Ph.D., is president of Asia Marketing and Management (AMM), a Philadelphia-based consultancy specialized in advising U.S. firms on exporting American-made products and services to China and forging business relationships there. Since he founded his practice in 1983, James Chan has advised more than 100 U.S. companies in expanding their businesses in Asia. To view his background online, go to AsiaMarketingManagement.com. He is author of the book, Spare Room Tycoon at SpareRoomTycoon.com. Dr. Chan is the expert interviewed by three financial managers in the 60-minute DVD titled "Secrets of Business Success in China." The 60-minute DVD is a teaching tool for business schools and international executives. It is available on Amazon.com here.
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