Pricing Resentment

But you know what's interesting to me about this topic, and I read your article, and listeners, this is based on an article called Is Your Pricing Creating Resentment? As I read through this, I thought, "Wait a second.

I thought that performance-based pricing wouldn't create resentment," 'cause people hate getting- paying for something that doesn't bring them results.

So if we say, "Okay, you're only gonna pay for results," how in the world could that build resentment? It was just interesting to see how those two things kind of collided in my head.

Yeah.

The impetus for this was I got a, a note from a colleague who was running the idea past me of an advisory relationship where they would get paid a percentage of the revenue that they helped create over the course of the year, and my initial reaction was, "That's too long."

Hmm.

He said, "Well, why is it too long?" And I had to think through it.

I knew it in my gut, but I hadn't fully articulated it.

As is my need, I had to write about it for me to understand-

[laughs]

... why I knew it was wrong.

Mm-hmm.

And it wasn't until I wrote through it that I fully understand that the bottom line is the performance pay can work great, but I've seen cases, including some of my own engagements, not very many, but some of them where the way the deal is structured, if you do your job, you get paid a lot of money initially, and the client's generally happy to pay you that money, a lot of money initially.

But as things keep going, they kind of forget the situation they were in before you arrived and saved them or took them to a new level of revenue, and then that creates all kinds of problems, including sometimes legal problems, or the client just not paying.

There, that's basically the episode.