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Make More Money as a Freelancer Using Basic Psychology

Make More Money as a Freelancer Using Basic Psychology

When your client doesn't know what your work is worth, you have an opportunity to shape their perception of its value.

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When you're selling a freelance service like web development, design, copywriting, etc., you will often encounter potential customers who have no clue 🤔 how much they should expect to pay for your work.

You might see this as a liability:

"When they find out how much I charge, they're going to be shocked!" ☠️

In reality, this is a powerful position for you to be in, because you have the opportunity to shape the client's perception 👀 of the value of your services.

This is what's called ⚓︎ anchoring, and it's put to use everywhere you go to persuade you that you're getting a good deal and making an informed decision in the process.

A Simple Example of Anchoring

Consider a TV priced at $599, but marked down to $399. In this case, $599 is the anchor, and it frames your perception of the actual price—$399.

If you believe that the TV is worth $599, then you'll feel like you're making a smart decision by purchasing it for $200 less.

But what if you had previously seen this same TV for $299 at a different store?

In that case, $299 would be your anchor—and by comparison, you'd feel like you were getting ripped off if you paid $399.

And to extend the example further: if the next TV you looked at cost $149, you'd probably assume it must be low-quality—after all, the price is so much lower than the price of the mid-range models.

How can you put this concept into practice as a freelancer?

Let's consider a simple website for a local business.

How to Anchor the Value of Your Services

You've successfully convinced Mom & Pop's Pet Store on Main St. that they need a new site, and they have no idea what it's worth.

They've asked you to write up a proposal.

You know you'd like to get paid at least $2,000, but you're afraid they might think that's too high.

And you're pretty sure that no matter what price you give them, they are probably going to try to negotiate down—that's just what people do in the these situations.

The solution is to offer them 3 options, in this order:

⚓︎ The Anchor: $4,000

🎯 The Target: $2,000

🗑 The Throwaway: $1,000

Let's look at these in more detail.

⚓︎ The Anchor: $4,000

This is the high-end, luxury, all-inclusive, bells & whistles model.

If you're selling websites, your high-end version might include extra SEO configuration, a marketing package, detailed analytics, premium plugins, content management, etc.

The purpose is not necessarily to sell this option (though it would be nice), but rather to frame the relative value of your services in the eyes of the customer—to "anchor" the price.

Occasionally some customers will purchase at this price point. Great! But the real reason for the anchor is to show your prospective clients the potential value of your work.

All subsequent prices will be compared against this baseline.

If clients often accept the anchor price without hesitation, that's a good sign that you need to raise your rates across the board. The anchor should be rejected most of the time.

🎯 The Target: $2,000

This is your standard-issue, middle-of-the-road option—and the one you expect most customers to purchase.

It should include all the key benefits of your services, because it's important that this is not seen as a "stripped down" version of the anchor. No frills, but it will get the job done nicely.

Think of the anchor as the shiny red sports car parked in the front of the used-car lot. When your mind is primed with the $50,000 price tag on that first car that caught your eye, you'll feel a lot more comfortable spending $20,000 on the family-friendly sedan—the target, in this case—that you actually came for.

Notice that the price of the anchor is significantly higher than the target. This is crucial in establishing the perception that the target is a really good deal.

🗑 The Throwaway: $1,000

Junk! Trash! You might as well put a label on this one that says "don't bother." 😜

While your target option should be fully functional, it's ok for your throwaway to be obviously inferior or missing key benefits that the client would expect.

As the nickname implies, this option is primarily to show the customer what they'd get if they tried to lowball you.

And guess what?

It kind of sucks.

They won't want to buy it. 🤷‍♂️

What happens if they do want the throwaway package? You have 3 options in this situation:

  1. Make sure the price is high enough and the scope is minimal enough that you still make good money relative to your time investment
  2. Try to persuade the client that although it is an option, you would not recommend it for their particular case
  3. Tell 'em sorry, but you just realized you're actually way too busy for the foreseeable future 😅

Summary

When your customer doesn't have a clear idea of what your product/service is worth, you have a powerful opportunity to anchor their perception of the price.

When presented with the most expensive option first, the majority of customers will purchase the middle-of-the-road option—and feel that they are getting a good deal.

⚓︎ The anchor is the luxury package

🎯 The target includes all the key benefits

🗑 The throwaway is clearly inferior

The example here illustrated a 4-2-1 ratio which is a common pattern. You might also consider 15-5-3.

I hope you found this helpful! The examples were drawn from my own experiences but the text was heavily derived from a chapter in The Psychology of Price by Leigh Caldwell. Highly recommended reading!


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How to Set Your Price as a Freelancer

Looking for more guidance on determining your rates for freelance projects? Check out this related article from my Freelancing Series: How to Set Your Rates as a Freelancer.

Interested in reading more such articles from Sam Sycamore?

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