Selling Salvation II: Setting a Price for Your Product

A glance at the comments on the previous post shows what a complex topic this is; it easily merits a follow-up.  For this article, I’m going to focus on the conundrum facing the individual who is trying to set a price for mediumship/life-coaching/therapy/etc.  The economics are much more interesting than selling physical commodities, or even regular services like lawn-mowing or waiting tables.

simplemagicWarning!  I’m not an economist; I’m just a thoughtful guy who’s interested in economics, and has read and thought a lot about this problem.  If you want to try out my advice here, I suggest doing it first in a small inconspicuous area where a permanent stain won’t show…

Selling Your Time?

Suppose you’re a life-coach/therapist/medium/reiki master, and you charge $50/hour.  From your point of view, you’re selling your time.  That’s a “scarce” resource, in the economic sense of not being unlimited and free.  You have to choose how you’re going to spend your limited time, and you have to get a good return on it.  You have to ask yourself, “Should I spend my time on being a life-coach/therapist/medium?  Or should I spend my time writing?  Or should I spend my time bagging groceries?”…

And of course, money is only one part of that equation; there are returns from the work that can’t be measured in dollars — the satisfaction of helping others, exercising your craft, and contributing to your own growth.  Nevertheless, if you’re trying to put food on the table, money is an essential part of the question.  You have to balance the kind of lifestyle you want to support and the satisfaction you get from your work and all sorts of other things.  And at the end of all your balancing, you have a number:  “If I charge any less than $50 for my work, it just isn’t worth my time.”

The Invisible Drag of the Market

But from the point of view of your customers — and this is a fascinating thing — everything is different.  You think you’re selling your time, but they don’t care one bit about your time!  If they could get the same information from a book, or a television show, or injected directly into their chakras, that would be great.  What is of value to them is the information.  From their point of view, paying for your time, effort, training, groceries, etc. is a transaction cost, an unavoidable cost of making the trade.

So if you’re a life-coach/therapist/medium, you’re competing against others who are charging a lower transaction cost (unless you differentiate yourself in some other way — via your style, the quality of your service, etc. — and that’s an important caveat I’ll return to).  Which means you’re trying to make a living competing against others who aren’t trying to make a living — who are doing it as a hobby, for example.  Or competing against others who are willing to settle for a lower standard of living.  In other words, their minimum charge is lower than yours, for whatever reason.  Maybe they charge $40, or $25, or $5.  And since what they’re charging has nothing to do with the quality of the information product (again, assuming you haven’t differentiated yourself), that produces an economic drag on the price you can charge.

Let’s face it.  Even if you’re just doing basic Tarot readings, the value of what you provide is HUGE — it’s potentially life-changing, life-transforming in a way that a boatload of bananas or golden apples or iPhones or yachts never can be.  A single reading frequently should cost a year’s salary, if we’re talking about pure value to the customer!  Relative to the value of your product, the amount you charge is actually very nearly zero.  That’s true even if you charge $500 an hour.  And this is because of all the hobbyists and non-professionals out there who are providing excellent readings for lower transaction costs.

You see, doctors and lawyers have got it figured out.  They have accreditation systems — internationally recognized medical and law schools and exams — to separate the professionals from the hobbyists.  By differentiating their products — certified information, not just information — they can charge a completely different pay scale.

This, then, is how you can justify a higher price:  differentiating your information product.  You can either provide a strikingly higher quality (like those incredible booklet-sized readings Slade does), or enhance your personal reputation (like the TV psychics), or work in a specialized framework.  Doing these things puts you in a different class from the hobbyists, and the economic drag disappears.

But of course, doing any of these things is incredibly difficult (at least as hard as passing a bar exam!).  Which means that the vast majority of life-coaches/therapists/mediums do not make anything near what they are really worth.

Beating the Market

Everything I’ve said so far is just economic reality; and it’s pretty bleak.  However, I think it’s possible that with the donation model I outlined in the previous post — that is, giving away everything for a donation of the customer’s choice — all of this could be turned on its head, and you might even make more money.  Here’s the theory.

Let’s look at the economics purely from the customer’s point of view.  How much money do they have available for life-coaching/therapy/mediums?  It’s a balance of their financial situation, their personal desperation or difficulties, their confidence in the information product, etc.  They have an amount they’re willing/able to pay:  call it $X (per hour, per download, whatever).

Under the standard fixed-price model, you have set a price of, say, $50.  If the customer’s $X is greater than or equal to $50, you have a sale.  If their $X is less than $50, there is no sale.  And the value of the sale is always $50.  Pretty simple.

Under the donation model, however, there is no price $50.  Your price is zero. So there is ALWAYS a sale, regardless of the size of $X.  $X is always greater than or equal to zero!

And sometimes $X is smaller than $50.  But sometimes it’s larger.

Now, most economists would assume that since your price is zero, the customer’s $X will be reduced to zero, also, and people will just take your stuff for free.  And if we were selling bananas, maybe that would be true.  But in my experience so far, that is totally not the case!  Sometimes $X is rather small, it’s true; but sometimes it’s unexpectedly large.  And in no cases has anyone taken my services for free.

NOW How Much Would You Pay?

Think of it this way.  Imagine you have a potential customer base of 100 people.  How much will each customer be willing to pay for your product?  Well, we don’t know; it could be all over the place.  Let’s give it an even distribution:  customer One is willing to pay $1; customer Two is willing to pay $2; customer Three is willing to pay $3; all the way up to the last person who is willing to pay $100.

Under the standard fixed-price model, how much money do you make?  It depends what you set your price at.  If you set your price at $50, then everyone who’s willing to pay less than $50 will give you nothing at all; and everyone who’s willing to pay $50 or more will give you $50.  In other words, you make $50 * 51 people, which is $2550.  If you set it lower or higher, you don’t make as much money — setting it at $25, for example, will net you $1900, and $75 will net you $1950.

Under the donation model, how much do you make?  In this case, you make 100 sales; and the total is $100 + $99 + $98 + $97…  By the time you reach the $73 person, you’ve made $2580 already!  The grand total of the 100 sales is $5050.

In other words, you’ve made twice as much money, and no one has paid more than they’re comfortable with, and you’ve turned no one away, and you’ve reached twice as many individuals.

Stingy People

Now, perhaps people will pay less than they’re actually willing to pay if you make it known you’re willing to accept less than that.  In other words, maybe Mr. Burns up at the factory would grudgingly pay as much as $100 under a fixed price model, but since you’re just taking donations, he pays less than that.  Fine — even if he only pays $50 — even if everyone pays just 50% of what they would have  — you’re still making $2025 — 80% as much as you would with the fixed-price model.

Market Forces?  What Market Forces?

A final couple of points.  This model applies to physical products and services as well as pure information (like downloads).  Everything I’ve said above is really about revenue (the amount of money coming in), not profit (revenue minus your own expenses/time); but if I’m right, the revenue should be about the same or more than you would get under the fixed-price model.  That is, even though you will lose money on some sales, that should be more than offset by the people who donate far more than your cost.

Also note:  since you’re not setting an hourly rate in this model, your hourly rate is not dragged down by lower-priced competition or lower transaction costs or anything else.  The only variable in the equation is $X — what the consumer is willing to pay.  So you can theoretically do quite well even if you haven’t managed to differentiate your product based on quality, reputation, or whatever.

It’s My Playground

Maybe this is all codswallop.  I’ve never heard of any studies being done on this kind of thing. But since I have a Day Job, I have the luxury of being able to play around with it and see what happens; and I have the enormous satisfaction of not having to turn anyone away.  I’ll let you know how it goes…

sellingsalvationii

Comments

  1. Consider also that the economics of salvation may depend on whether or not you can lose yours once you’ve bought it.

    In Christianity, for instance, some sects believe: “Once saved, always saved” (the most common colloquial way for their rank-and-file members to express what their theologians call “perseverance of the saints.”) According to this: if you ever accept Jesus as your personal Lord and Savior (even for a nanosecond), Jesus saves you permanently and you will eventually go to Heaven no matter what ghastly forbidden things you have ended up doing/believing between the moment you accepted Jesus and the moment you die.
    (If I correctly recall one of the arguments justifying this: at the moment that Jesus died to forgive sins, your sins had not yet happened — this includes all your future sins, as well as all of your past and present sins — and therefore Jesus forgave the whole lot in advance: it didn’t matter to him whether you did something bad in 1978, 2008, or 2038 because all of those actions lay futureward of Jesus’ own action.)

    Similarly, some Buddhist sects believe that, if you say the name of their sect’s particular favorite Buddha even once, you automatically get reborn in the Pure Land no matter how much bad karma you may have accumulated either before or after saying the sacred name.

    On the other hand … some sects (in Christianity and Buddhism and presumably in other religions) believe that you can lose your salvation and need to get it back (These sects presumably make a lot of their business out of repeat sales and/or salvation “tech support” — “Uh-oh, you sinned and lost your salvation: no problem, just do this ritual/say this prayer/perform this worthy action and now you’re saved again.”)

    So, how do the “once saved, always saved” religions keep in business? Why don’t people just run off and do whatever the heck they want with their lives after just once saying the magic words (or whatever else the religion offers as a permanent “salvation unlock-code”)? Simple: the “once saved, always saved” guys sell upgrades. It works like this:

    SUZY SEEKER (calling the local salvation hot-line) — Hello, this is Suzy Seeker. I’ve just met with one of your field representatives and spoken The Magic Permanent Unlock-Code For Eternal Salvation. Is it true that I am now Eternally Saved?

    TECH SUPPORT — Yes, Suzy, you are Eternally Saved. However, you are saved only to the lowest level of Heaven, and/or for you to enter this level there may be a post-death wait-time ranging from one year to ninety zillion eternities. During your time on hold, you may experience various forms of torture, chastisement, simple boredom, or other unpleasant experiences. To reduce or remove your wait time, and to access higher and more rewarding levels of heaven, we strongly recommend that you upgrade from Basic Salvation to Salvation Pro. That will cost you a $50 initial donation, subsequent monthly donations of $15 each to keep your Salvation Pro account active, plus regular use of our other services such as our weekly Salvation Pro defragmentation meetings and join our Pro User Group to keep current with all future upgrades …

    SUZY: Okay, I definitely want all that Salvation Pro has to offer. Here’s my credit card number …

    TECH SUPPORT: Thanks and congratulations. Your Salvation Pro account will be activated as soon as you perform your first mandatory ritual by taking a few moments right now to hear about Salvation Platinum …

  2. Jeff Lilly says:

    Kate, I can’t decide if that’s hilarious or heartbreaking… 🙂

  3. Sarah Watts says:

    Hello Jeff,

    This entry touches me deeply on so many levels. Sometimes I wish the world worked from this model in so many other areas. I have alife coach down here, and I’d like to be able to go to her, but her sessions are 200 dollars each. That’s nearly a third of my fixed income check- I litterally wouldn’t be able to buy anything else that month! Especially now that I have volunteered to help my parents with daycare expenses for my little nephew.

    However, if they were cheeper- say about half that price, or even 75 dollars, I would be more willing to pay that, because that is much more doable for me, and I would still feel like I’m paying enough for the person to feel confident that I would use the information they gave me. I would feel I needed to; it’s that whole putting your money where your mouth is sort of thing, I guess. And, here’s another thing for you to think about. If the person charges too much for their services, are they really doing it because they enjoy it, or is it a popularity thing now? Oh, most certainly some are, but now that the life coaching thing is “in” are some doing it because they know they can make big money from it, or is it truly the helping of people they’re doing it for? If they worked under the donation model, I’d feel a lot better going to them, because I’m almost positive then that they would do it regardless of the money amount they get. There are some (like the life coach down here) that I would go to because I know their stuff works, but I’ve heard of others who have less successful cases.

    Also being blind sometimes makes it harder to find such people, especially when said people’s sites are so totally inaccessible to us that it should be against the d**-sorry, I get a bit passionat about this-law! I’m thanking the gods that your site isn’t that way, it’s actually rather easy to find things here. But warning; if you do go flash, put regular links under flash media; screen readers and flash do not play nice with each other. I digress, though. It’s very hard to get around a site, that even just to enter you have to go through hoops because the very button you need to press is flash-based, and there’s no other way to get to it, and your text to speech program doesn’t even recognize that there is a button there. Roar!

    Then there are those, like you, whose sites make me jump for joy; those who have enter buttons, if they are set up that way, that the screen reader can actually pick up and recognize. No matter how good or bad the coach is; the easier their site is to get in to, the mor probable it will be to seak them out, either by phone or email, and inquire further about their services.

    I actually like the donation model better; I feel mor comfortable and confident that I will get *what* I pay for at the price I can aford, than *who* I pay for at a price I *can’t* aford- or can’t afford without saving up for three months, anyway, and by then, I’m so close to the $2000 mark that I’m sweating that they’ll call me any day saying that I either need to spend this money or I’m being dropped… 🙂 I’m not saying that the fixed priced model is wrong; just that right now it doesn’t work for *me.*
    I’d say I’m rambling: but I’m an amiture writer, and I’m trying to get away from saying that, because then I make it sound like my words arn’t worth the person’s reading time, and I truly believe these are, so, I’ll just say that I’m done now. 🙂

    Sarah

  4. Jeff Lilly says:

    Sarah, thanks for your heartfelt words! I really don’t think I have the economic knowledge or the moral authority to say that everyone should use the donation model. I think there’s way too much variation in people’s circumstances for me to put out a blanket statement. At the same time, I certainly see where you’re coming from…!

  5. Jeff,

    I am really loving these articles. For a long time I’ve felt that the economic models taught at school and uni are inherently flawed because they are based primarily on the notion of “scarcity” – and if anyone has ever seen for example how many seeds one coriander plant provides… it’s easy to see that nature is NOT scarce, but inherently abundant.

    It’s too much to go into in a comment, but basically, if our external world reflects our internal thoughts/concepts then isn’t it about time that we thought up a new economic model that would better serve us?

    And I think that this is what you are doing here.

    You’re bringing faith to the process – i.e. your faith that by making your services “free” you will still create plenty of inward flow.

    This is huge.

    Most economic transactions are governed by the expectation that given the opportunity, people will pay as little as possible for a product or service.

    You’re also bringing love to the process, in that, you love what you do. You’re not providing these services “to make money”, but to offer a service that you enjoy.

    If we all came from this perspective – ‘how can I be of service?’, and did it with faith… how would our world be transformed?

    So I LOVE the way you think your way through economics in these posts and provide alternative models for buying/selling and markets.

    Surely it’s time for a brand new economic way of seeing the world?

    A way that matches what we want to create, rather then proscribes what we end up with?

    Bring it on!!!

  6. Jeff Lilly says:

    Thanks for the encouragement, KL!! It’s really amazing how intuitively satisfying this feels. It also feels empowering in a strange way… Before, I was always wondering whether I was charging too much, charging too little, and trying to strike a balance between setting a “fair” price (whatever that means! How can the same price be “fair” for everybody’s unique financial situation?) and reaching as many people as possible. Now I’ve released all that… And this gives me a lot more mental energy for other things. 🙂

  7. You’ve definitely inspired me to test out your theory when I get the opportunity…

    I teach yoga, and when I run my own classes, have charged a set fee (Usually t$10 – $15 a class). However, yoga was traditionally taught by donation, or given away. I hate to think that the price of the class is a barrier to people doing yoga. I want everyone to be able to participate.

    So, next time I launch classes like that, I’m considering doing them by donation – that way everyone who wants to can come… I suspect I’ll get larger classes, so reach more people with the magic of yoga. Only time will tell how it translates… I”ll keep you posted!

  8. Quick note – in this article from Steve Pavlina (down in the last few paragraphs), he talks about the opposite problem that his wife is having with her readings – demand is so high she has to keep upping her rate to keep waiting times down….

    http://www.stevepavlina.com/blog/2008/07/july-2008-update/

    What’s the solution to that one?????

  9. About selling salvation: does the economic picture change if the purchaser can — and routinely does — buy a “salvation package” for users other than him/herself?

    E.g., at many (perhaps most) “salvation dealerships” the purchaser will routinely buy — in fact, the seller may *require* the purchaser to buy — “salvation packages” for his/her spouse (if the spouse doesn’t already have the same dealer’s package) as well as for all of their children (including infant/unborn/as-yet-unconceived children). Some “salvation dealerships” have a rule whereby the children of a customer automatically receive a package upon birth (perhaps with no way to return it if it doesn’t “fit”) and therefore have to pay for it sooner or later.

    The above sorts of arrangements become more likely, I think, if using the “package” requires intensive study/practice/”homework” of some kind: just as one more easily learns a language in childhood, so (probably) childhood makes a better time than adulthood for absorbing/internalizing/feeling at home with (and in*) many other complex sets of behaviors … as well as the (often equally complex) mind-sets that underpin them.

    Salvation dealerships with labor-intensive, highly detailed “packages” — of the variety where participation requires thoroughly a set of complex ritual/story cycles, and/or must master and always use an equally complex and demanding language/dress code/cuisine/etc./etc./etc — therefore will have a strong incentive to sell their product on the “womb-to-tomb” plan — enrolling children, by selling the product to entire families and (if possible) to entire cultures — rather than selling only to individuals (or only to adults).
    So I’d *love* to see a thoughtful Druid dad comment on the implications of the above …

  10. Jeff Lilly says:

    KL — the basic problem is simply put: what do you do if you can’t keep up with demand? The answer is that you have to either figure out some way to increase your output, or else start turning people away.

    If you opt to turn people away, you have to decide which ones you turn away. Erin has chosen the capitalist way: turn away the poorest people. (Which is a really callous way of putting it, but I know that Erin is only doing this because she sees no other option.) You can imagine other ways of doing it: for example, you might randomly choose, each day, which customers get served — a lottery. If you didn’t get in today, hey! Try again tomorrow… Or you could ask your guides to help you choose the neediest people.

    You could also try experimenting with ways to increase your output. For example, you could hold classes to teach other people to do what you do, and then refer your overflow customers to your proteges. Kind of like franchises. 🙂

    Any other ideas?

  11. Jeff Lilly says:

    Kate, regarding salvation-sellers that require you to purchase additional packages for your family and children: frankly I think this is rather icky, and reminds me a lot of pyramid schemes. It is true that rich, detailed belief systems are frequently best learned when young, and personally I think it’s much better to raise children with such a system than without one, particularly if the system is child-friendly. However, I think this should be the choice of the parents, not required for religious membership.

  12. Thanks for your comments; from what I know, the Abrahamic religions *all* operate on the sign-up-your-children plan (and, most of them, on the sign-up-your-spouse-too plan if the spouse doesn’t already belong: at least, many sects make conversion of the non-member partner a pre-condition for getting married in the faith. (Islam, as you may know, has a *very* one-sided take on this: in most Islamic sects, as I recall, a Muslim man may have a non-Muslim wife or concubine — e.g., many harems included non-Muslims — but a Muslim woman cannot marry a non-Muslim man unless he converts to Islam before the wedding.)\

    However — again, from what little I know — not only the Abrahamic sects go in for making sure that the kids believe the same way as the parents. At least, from what I know of (some) members of Asatru (the modern revival of ancient Scandinavian spirituality), they would feel very upset indeed (perhaps outraged?) if any of their kids grew up to choose some other path.

Trackbacks

  1. […] Quite apart from that, I argued that a free market in religious ideas (or any kind of information) tends to drive prices down to zero.  I decided that it was not only probably immoral to sell information; it was, in the long run, almost impossible.  Therefore, immediately, I started offering everything on my site for free. […]

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