Pricing Creativity

Blair talks about his new book, Pricing Creativity: A Guide to Profit Beyond the Billable Hour, and the process it took to write it. David gets him to share three of the main rules laid out in the book that firms should apply in order to see significant increases in profit.

Transcript

DAVID C. BAKER: Blair, today we are going to talk about a major milestone in your life. I'm going to start crying right now.

BLAIR ENNS: Yes, we are. The day is finally here, we're finally doing this.

DAVID: We need to have more of these conversations. If you would get off your ass and do more writing-

BLAIR: I know.

DAVID: So this is about your book. The title is Pricing Creativity: A Guide to Profit Beyond the Billable Hour.

BLAIR: Yes.

DAVID: I am excited to see this, actually because I've read it, and it's an amazing book. To me it was sort of an onion. I read through it, I was like, "Oh, this is good." And then I read through it again and I see more and more and more, it's a very dense writing style. That's not exactly the way I mean it. I don't mean dense as in stupid, I mean dense as in very packed in there.

What made you write this book? Because you wrote another book that was ... It's still crazy, it's more popular than it ever has been. It's in its fourth printing or something like that.

BLAIR: Yeah.

DAVID: What made you write this book?

BLAIR: Yeah, this definitely is not the Win Without Pitching Manifesto, which ... That's a 24,000 word ... Well, it's a manifesto, and I refer to it as the "yes, you can" book. It's really meant to rally people, to inspire them to see that there's a better way to sell creative services. This is more of a, here's how to book. So you say, it's like a dense writing style.

I feel life I've inspired people with the manifesto. This is the roadmap. It's not detailed when it comes to selling, although it does navigate that intersection of selling, pricing, and negotiating. But it's really how to apply the principles or theme of the Win Without Pitching Manifesto to your pricing and proposals so that you can get more money.

So I think your question was the motivation. Yeah, it was a followup book. I really wanted to write a "here's how to" book, and on this subject matter in particular.

DAVID: So they're motivated to do great things, and that is what I hear universally after I read the Win Without Pitching Manifesto. And then they get this book and it's like, okay, now how do I do this? It's Monday. I read that Friday, I thought about it all weekend, the manifesto. Now it's Monday, how am I going to put this into practice?

So you wrote this book. Was it a painful process? I want to talk a little bit about ... 'Cause people, I think, are interested in the process of what an author goes through. What parts of this did you enjoy, and what parts of it did you just not enjoy, did you hate?

BLAIR: Yeah, this is timely because I have a daughter who's 20 years old and she's a practicing writer. She hasn't started to sell yet, but she just started her third novel, and she's going to be very successful. If she were a publicly traded corporation, I would buy stock in her. And we spent two hours in the car last night, and for part of that, we were talking about writing. And she was saying, "I don't understand why people say writing is painful." And I almost wept.

DAVID: Stop the car and put her on the road! This can't be my daughter!

BLAIR: And I said, "Well, my latest book project was very painful." And one of the reasons it was painful ... And she's in a groove right now, she's writing daily and she's writing for herself, she's not setting any deadlines. And I said, "The source of my pain was that to motivate myself and getting it done on time, I went public with deadlines, and I kept missing deadlines." And this book is two and a half years late. It was meant to come out over two years ago.

So at some point, I kept saying deadlines ... I didn't say them publicly, and then at some point I stopped. But the painful part was that I was trying to do this book while I was also trying to create or update a whole bunch of content in our training program, so I've been writing furiously for the last three years. Not just this book, but writing and rewriting curriculum.

So it has been a painful book, and I'll tell the real story. I said to my wife one day ... This is the real behind the scenes story on why this book exist. I said, "I think I'm going to get a Tesla."

DAVID: I can just see Colette just rolling her eyes, like, "Oh, here's Blair's idea this week."

BLAIR: She's like a judo master, because she recognizes now that I'm going to do what I want, but she does this little flip thing. So she thought, "Well, I'm not going to fight this, because he really wants to get this Tesla." So she says, "Okay, I'm sure you'll do it." And she said, "To pay for the Tesla, why don't you write that book that you were thinking of writing on pricing?" And I went, "Yeah, great idea!"

DAVID: She sounds a lot smarter than you are.

BLAIR: Oh my god.

DAVID: She knows how to motivate you to get these things done. So you're thinking about a Tesla, right?

BLAIR: Yeah, so this was about 10 months before my 50th birthday, or a little bit longer than that. I thought, "Okay, I'll write the book and I'll get the car as a gift for myself on my 50th birthday." And she even said, "It won't be that hard, 'cause you've actually written a lot. You've done a lot of webcasts on pricing. You can just pull from the existing resources and put a book together fairly quickly." And I thought, "Yeah, that's what I'll do."

So I hacked a book together. It took me a while. I involved some other people. And then I looked at the finished product and it was horrible. It was a hacked together book. So my 50th birthday approaches, and she says, "Why don't you just get the car anyway? You're still going to write the book, right?" Yeah, yeah. So I get the car and then I lose the motivation to write the book.

Oh my god. I can't believe we're going deep into this, but I lose the motivation, to get the car, and I'm sulking for a while. Not about the car, the car's fantastic. It's a magic car from the future. So I'm happy with the car, but I have this obligation. And she's not holding it over me, but I know I've made this commitment, I made the commitment to myself and mentally I've made it to my clients too.

So I took about six months of sulking and enjoying the car, then I thought, "Okay, let's throw that book out and let's start over." So I had to write 57,000 words, largely from scratch. There were a couple things I'd written before that I used as a starting point, but I wrote 57,000 words from scratch, at a time when I was writing about that much in content at the same time.

So it was a very difficult, painful process. And when I emailed you and said it's done, you sent me an article from the New York Times where they were interviewing writers about the writing process. And it was all stories of pain, and all these great metaphors for what it's like to write. And the one that stuck with me was somebody, I forget who the author was, said, "It's like being hunted by an animal." And I read that and I thought, "Yes." Because when I finally finished writing, I'd come home at night and I thought, "Oh my god. It's not there, it's not with me." I'm not saying I wrote every night, I didn't write. But every night when I wasn't writing, I felt like I should've been writing. So this thing stalked me.

So my young 20 year old daughter was saying, "I'm not sure why people say writing is painful. I'm really enjoying it." It's like, oh shoot! Oh, that's painful! So that's the story. It was painful. It was worth it, though. I remember when I wrote the manifesto, and I say this somewhere in the book in the acknowledgements somewhere, there were three different times I thought it was ready for publication and it wasn't, and I'm so glad ... I had a friend, a novelist, she's since passed away. She read an early version of it and she said to me, "Blair, you can't unpublish." And her story, she published a novel and then six months later, she showed up on my doorstep. She rewrote it, re-edited it, retitled it, reprinted it with her own money, a bare cover, and she handed it to me and she'd printed about 50 or so for friends. And she said, "This is the novel I meant to write."

So she was scarred by publishing too early, and I learned the lesson with the Win Without Pitching Manifesto, don't publish too early. We could've published earlier versions of this, but I read it now, and have had other people read it now, and I'm actually ... I don't know if you're allowed to say this. I'm actually quite proud of this book, and I'm pretty okay now with all of the missed deadlines.

DAVID: Every time you write a good book, you're closer to saying, "If I die tomorrow, I'm okay with it." It's not that not that many people write good books, it's not that. It's more like, you poured yourself into something really deep, and even if people don't read the whole thing or read it the way you want them to, you have stared a subject in the face for so long.

If I think about ... If I didn't have a job, and I was writing a book with 57,000 words like you have, that would take me ... I know what the formula is for myself. That would be about a seven or eight month project if I was doing nothing else. And to think about pausing your life that long a time and just pouring yourself into something that's really worthwhile, there's just something that happens in your soul. It's a really cool thing.

Now, before we talk about some of the contents of the book, I want to just ask. Have you tied how the book will be sold and marketed into the theme of the book?

BLAIR: Yeah, good question.

DAVID: So from a pricing standpoint, is this a traditional book? Here it is, here's the price, or are there some other options around this?

BLAIR: So when I started writing it, I thought it would be a mainstream book. You charge $25 or $40, published either through RockBench, your publishing company, or through ... I was actually thinking of going to a mainstream publisher. I've got a couple publishers who reach out to me every six week or so and say, "Hey, got a new book yet?" And I told a couple that I was writing this, and said, "I'm not sure how I'm going to publish it yet."

And one of our core values at Win Without Pitching is do what we say. So we sell sales training, so when we're selling our program, it's vital that we need to sell the way that we advocate that our clients sell. And there's some differences between our business and our clients' businesses, so it's not exactly the same. Ours is a product [inaudible 00:09:46] service business. But it's vitally important that we demonstrate that these approaches to selling are valid, and we demonstrate that by using them.

So as I was writing the book, I realized there's no pricing book in the world that I know of that is priced based on the principles in this book, and one of our core values is that we do what we say. I thought, there's no other way I can do this. Plus it's the only way I could get enough money to pay for a Tesla. So this book is priced based on the principles in the book, and so there's three different options. If you think of it as a book, it's not an inexpensive book. If you think of it as training, and I considered actually putting all of this into a training program, for which we would charge many thousands of dollars, then it's inexpensive training.

And what I'm doing now is, I'm framing, before I tell you what the price is, I'm framing it against training rather than a book. I'm telling you that it's expensive. And then when people buy the book, and I'll tell you what that's going to look like, I want them to go back and look at the pricing page. The page on the website where they bought it. And I want them to see how many of the pricing principles in the book that I used to price and communicate value about this book.

So there are three different ways you can buy this. There's what we call the total package. It contains all three versions. There's the ebook that you can get in an instant download as soon as you buy it. There's the manual, which is ... I see it, I really wrote this as a manual. I saw it as a desk reference, something that would sit on the corner of your desk or on your bookshelf, and you would ... After you read it through once, you would pull it out next time you had to create a proposal or set a price, and you would skim some parts of it, review some key stuff, and then flip to the back section, because in the manual, there's a fourth section that's added in the manual. It's called tools, where you flip to the back and you would use the tools section to actually complete your next proposal.

And then there's also four hours of video support. I've essentially taken the whole book and I've done basically four essentially webcasts, but they haven't been published, of me breaking down the four different sections of the book. So there's four hours of video support, five videos over four hours.

So the total package costs $320, and you can get all three formats. And then you can get just the ebook and just the manual for $199. And you can get just the ebook without the tools section, instant download, for $100. So there's three different ways to buy it. They're packaged up differently, they're priced differently, and anybody who's familiar with some of the principles of pricing ... You look at those three different options, you look at the way they're priced, you look at what I've added, and you'll see some pricing principles in there.

And I'll also point out that each of these options is fully guaranteed. So if you buy at any level and for whatever reason you feel like you didn't get your money's worth, whatever, send it back. We'll send you all your money back.

DAVID: Wow, that's interesting. Can we dive a little bit more into what you have in the book? First of all, the chapters are numbered consecutively like you would guess, but they're divided into really interesting groups. So after we get through the acknowledgements and preface and so on, there are four principles, and you're urging people to understand these. And then there are six rules, you have to live by these. And then there's three tips, you would use these in specific situations, and so on.

BLAIR: There's three sections of tips. There's actually more like 20-some tips, broken down into three sections, yeah.

DAVID: Oh, that's right, yeah. Constructing your proposals, pricing models, and so on. So you want people to start from the beginning, I would guess. But what's the best way to whet people's appetites for this? Maybe a couple of the rules, can you talk about that a little bit?

BLAIR: Yeah, let me just talk about the format, because there are a lot of great pricing books out there. And I say in the preface, I think ... When I started to learn about ... I went from knowing nothing about pricing, maybe about five years ago, to reading the entire canon of literature on it, and all kinds of related stuff. I've read dozens of books on pricing and behavioral economics and even some micro and macroeconomics. And I even went down this rabbit hole on the physics of time. I own four books on the physics of time. And there's only one paragraph in there on the physics of time, and it's not entirely accurate, but it's in there anyway.

So I absorbed a lot of information on this. There are some great pricing books out there. I'm a huge fan of Ron Baker and his books, and he's written a great blurb for the book. He's been a great supporter of the project, as has Tim Williams and yourself and others who work in the pricing space. So Ron's written a couple of great books on pricing, Pricing on Purpose and then Implementing Value Pricing.

So to me, those are the standards. And I wrote this book because a friend of mine said, "You should write a book on pricing." And I said, "There's some great books on pricing out there." He said, "Your clients aren't going to read those books." And I thought, he's right. They're not going to read those books. My clients need a little bit less theory, so just enough theory. That's why I have the principles section. I want to lay a bedrock of pricing theory. And then they want to know, what do you do?

So I identified six things you need to always do, and that's the rules, and there's even a rules checklist in the tools. Have you done these six things? So these are the six things you must do in any pricing situation. So make sure you're always doing them. And then the rest are tips for specific situation guidance.

So I imagine that people are going the read the principles and read the rules, and they might skim through the tips. And then when it comes time to write the next proposal, they're going to come back, maybe remind themselves of some of the rules. Then they're going to look at the tips that are specific to that situation. So is it about retainers, or is it about the final negotiations with procurement? Or is it about how to craft your high-priced anchor option or the many different ways that you could arrive at the middle-priced option?

So that's the kind of format that I was reaching for, and the format that I was reaching for was driven by the books that were out that that I thought, they're great books, I love them. But I didn't think my clients would read them.

DAVID: So if we imagine ... You talk about Blairtopia quite a bit. It's this fictional world that you live in and you wish everybody else lived in-

BLAIR: It's fictional to you.

DAVID: Yeah. I've tried Blairtopia and it just made me a little ill, so I stepped back out of the Blairtopia room. But pretending Blairtopia, and there's this agency, how do you see them using this book? Do you see them having a weekly little devotional around your bible around pricing and the conference room and talking about how they apply it, or do you see it as a reference manual? Or is it ... How do you actually visualize them using this in a very human way?

BLAIR: That's a good question. And my first book, the Win Without Pitching Manifesto, I know a lot of firms that do a book club on it. So they read one of the proclamations and they come together and talk about it over lunch. And they'll stretch it out over days or weeks, so it's interesting to bring that up, 'cause I've just been made aware ... probably a couple years ago, that there's a bunch of firms doing that.

This isn't that type of book. It really is meant to be a desk reference. You pointed out that the success of the Win Without Pitching Manifesto sales ... Seven and a half years later, sales just keep going up and up. And every year in the last few years, sales go up by 75% or something. Or 50%. So that's impressive.

But that's what I set out to do with that book. When I wrote that book, I wanted that book to outlive me, and I wanted it to be relevant forever, and I think that's the book ... I think I wrote the book that I succeed in writing.

In this book, I've attempted to write the book that will be on the desk or shelf of every creative person in every firm who sets or negotiates price. So I want it to be the standard go-to reference guide for pricing creative services around the planet in any creative firm, and if I go into a large firm that has dozens or hundreds of account people, or new business people, et cetera, I want to see that book in some form on everybody's shelf or everybody's computer.

DAVID: So maybe one option is they pay $20 and they just get a cover of the book, and they can just put it on the shelf as if [crosstalk 00:18:46] to make you happy.

BLAIR: I listed the prices, I do expect that we've got a note on the page that it's available in bulk orders. We've already had a bunch of firms reach out. Well, not a bunch, a few firms reach out to us about bulk orders.

And I've got some math. I wanted to talk to you about this, I know you wanted to talk more about the book. I want to talk more about my financial expectations for the book, because I've talked about ... I've bought a Tesla, I want to pay for the Tesla. A Tesla's only, in US dollars, it's only $100,000. I had a conversation when you and I were over in the UK recently doing some live podcasts, and I was telling somebody about the book, and they made this offhand comment, "When you write a book, it's not about the money." And I said, "No, this book will make me a lot of money." And they said, "Well, how much money do you expect to make off it?" I said, "I expect to earn $1 million dollars from this book."

And he looked at me, he just could not believe what he'd heard me say. And I said, "Well, let me do the math. I've essentially had a value conversation with the entire global creative community around this. I think in seven or eight years," and so I intend to update editions every 18-24 months. But I think in seven to eight years, I can sell 6,000-10,000 copies of this book. So the average is that there will be multiple copies sold within firms, so I think I'm imagining six, seven, eight years from now, there are 2,000 firms around the world that have copies of this book in their offices, based on the experience and evidence I've seen so far. I think on average, the average firm will add 5% profit margin to their bottom line from reading this book.

So if we take 2,000 firms at an average of $1 million in revenue or turnover, and that's a pretty small average, so there's going to be some really firms in there, there's going to be some smaller firms. It'll probably be larger than a million on average, but let's take two million firms at $1 million in average revenue or turnover. Adding 5% of that as bottom line profit, and that might sound high, it's really not. And I've got all kinds of stories of firms doing so much more than that. I think the average firm should increase their profit by 50%, but many will double their profit or more.

So 5% margin, additional margin, on $1 million, times 2,000 firms. That's $100 million in profit per year that I would help to create through this book. People might listen to this and go, "Oh, grandiose!" Just go with me on this. If I were to help create $100 million in profit across all these firms a year, what would fair compensation for that be?

So let's forget about a book. Let's pretend this is a consulting basis, and it's one company that I'm going into. And I say, "Okay, I'm going to create $100 million in excess, in new profit, per year for you in this consulting engagement. What do you think fair compensation is?" 1% of one year's additional profit, that's not even fair. If I earn $1 million from this book, relative to the impact I expect it to have, I am significantly underpaid. That's how I'm looking at it.

DAVID: Well, if you make that much money, you could almost afford to bring electricity to your little village in Canada-

BLAIR: So I could charge the car.

DAVID: Yes, you wouldn't have to drive back to civilization to charge your Tesla every time you want to go somewhere. Imagine the humanitarian advantages if you brought electricity to your village.

Somebody buys this book, they read it. How quickly, and where, will the results show up first for them?

BLAIR: How quickly and where will the results-

DAVID: How quickly, and where will it show up first?

BLAIR: Let me drop some of the rules. So there are six main rules. I'm going to give you three rules, because we had a client in our program recently and I spent a few hours with their team not too long ago, and as I was leaving, the principal shared some numbers with me. He said, "You know, before your program, we were a $2 million firm at 4% margin. And then a year later, we're a $3.5 million firm at 45% margin." And he said, "At the end of this next year, we'll be a $5 million firm at 45% margin." That's going from $80,000 in profit to millions, in what is still a relatively small firm.

And then I said to him, "But how?" From my point of view, they weren't super engaged in the training program. It wasn't clear to me how much they were getting out of it. And he said, "Two things. Number one, we narrowed our focus." So, positioning. And I said to him, "Yeah, I'm not sure I would give you a passing grade on how well you did on that, but you did narrow your focus and it did have an impact." And he said, "The second thing is pricing. We did three things. We put forward one-page proposals with three options, three columns, and the third column is a high anchor. That's it."

So those are three of the rules. You limit your unpaid written proposals to one page. That's one rule. Another rule is you always offer options when you deliver a proposal to your clients, and there's some psychology behind it. There's actually some neurophysiology behind it. When you put a proposal with one option in front of a client, their brain isn't wired to answer the question that you're asking it to answer, which is, "Is this proposal worth $50,000," or whatever the price on it is.

The question the brain is wired to answer is, "Which of these is the best value?" Human beings cannot objectively perceive value of any kind, and all value is subjective. So for them to determine the value of your proposal, they need to make a comparison. And if you don't believe that statement, you'll believe it once you read the book, I prove it in the book. They need to make a comparison, so when you give them a proposal for one solution for $50,000, you're forcing them to go away, either mentally or actually physically, to compare this to a proposal from another firm, or to think about ... Well, what did I pay you before, or what else could I do with this $50,000?

So when you put three options, three or four ... I talk about three in the book. Three is always better than two. Four is just as good as three. When you put options in front of your client, you're changing the question from, "Is this worth $50,000 in value?" to the question the brain is wired to answer, which is, "Which of these is the best value?" And there are other reasons to provide options, but that's the big one.

And then anchoring, the full name is anchoring and adjusting, it preys upon this decision making heuristic that we all follow, which is with the first bit of information that we get on a subject, we engage what Daniel Kahneman and his partner Amos Tversky called System 1 in Kahneman's book Thinking, Fast and Slow. He talks about System 1 and System 2. System 1 is a very quick decision making system that jumps to conclusions very quickly, based on very little information.

So we get a piece of information on something, and in an anchor, it's like the highest price. You lead with your highest price option, and that becomes the anchor, so the client's mind makes some sort of adjustments. They take that price, and then they engage System 2, and they start to work that price down. They start to work out ... Well, that price is really high, but a more sensible price to me would be something lower.

And all of the science, so this is Nobel Prize winning science. All of the science says that the adjustment made from System 2, the more deliberate, analytical decision making system, never compensates for the initial assessment done against the high anchor. So the job of the anchor, which is the third or most expensive option on your one-page proposal, is not to be sold. It's not there to be sold. It's there to make the next highest priced option, the second option, if you're delivering three, to make it look more affordable. 

So those three principles, this one firm just applied those three principles along with focusing their firm. And again, I wouldn't give them an A on focusing or positioning of the firm, but they did narrow the focus of the firm, and they changed the way they delivered their proposals. They increased their prices. I'm not even sure that they actually moved to pure value-based pricing. They just delivered their proposals three options, one page, with a high anchor. And that led to more than an eleven-fold increase in profit, and a more than doubling of their revenue.

DAVID: Wow.

BLAIR: I bring that up 'cause that's the most recent one.

DAVID: And they didn't even read the pricing book.

BLAIR: I had a conversation with the client yesterday, who ... I'm not going to give away too many of the details, but just by doing one thing in the book, the price went from $65,000 to $167,000 in one conversation.

DAVID: Wow. So the book is out as you're listening to this podcast. Where can they get this book?

BLAIR: It's called Pricing Creativity. If you go to pricingcreativity.com, that will redirect you to a page on winwithoutpitching.com. So pricingcreativity.com will take you to the only place where you can buy the book. You can buy it in three different formats at three different prices. And they're all fully guaranteed.

DAVID: Thank you, Blair.

BLAIR: Thank you, David.

DAVID: It's a great book.

BLAIR: Thank you very much.