What is web analytics worth? Love thyself! Please.

A few months ago, I was riding to the airport from SMX/eMetrics Toronto with one of the most talented web analytics implementation people on the planet, and he told me a story I’ve used about a dozen times since. It’s not that he beat up Chuck Norris or anything crazy like that, it was just a simple story about losing business based on price. In this story, he had a prospect on the line for quite a long time, fleshing out ideas and getting to know each other, only to have the deal go south almost instantly after pricing was named.

My friend later found out that a competitor of his (who no doubt knows about 5% of what my buddy knows about Google Analytics) had also been in communication with this prospect, laying out this offer: I’ll charge exactly $1,000 less than whatever they quote.

And they won the business.

Stories like this make me upset with our peers, sometimes. Our industry is rife with under-cutters, and it’s frustrating. But more than anything, it’s sad…

Before rejoining my childhood sweetheart, the Internet, I spent time in the world of finance, capital markets, trading…money. The place where experienced analysts get multi-million dollar bonuses and tiny bits of research result in billions of dollars changing hands. And aside from the wide-eyed wonder about how much money there really is out there, it taught me one very important lesson: know what you’re worth. Not in an arrogant way, but just have some confidence in your value.

In banking and finance, knowing what you are worth is often wrapped up nicely in the concept of “alpha,” which is a measure of how much value decision-making prowess creates, beyond the norm. Fund managers with high alpha are the ones that consistently beat the market (and their peers) because they have better insight and instincts, and know when to pull the trigger. The same concept of alpha can be taken all over the business landscape and applied to managers knowing how to treat their financial and human capital resources, marketers knowing where and when to spend money for the greatest return, and of course, web site owners knowing where to focus attention and resources to the greatest effect.

Business is a simple formula of invest and receive, with myriad complicated tactics that sit in between. It is both the decision to execute (investment), and the execution itself (tactics) that decide what a business receives (mixed with a healthy dose of reality, of course — nobody’s going to become a billionaire advertising on the back side of billboards, no matter how well they execute). Typically, investment can (and usually should) be a bit higher where execution is best, where talent is highest, and where ROI can be demonstrated. When allocating marketing budget, for example, this is pretty straightforward: you have some idea of ROI by medium, campaign, etc. But when allocating budget against something like web analytics, usability, information architecture, SEO, and online business strategy and consulting, it can be a little more difficult to decide what to invest. But when it’s clear who the best are, it shouldn’t ever be difficult to figure out who to invest with.

There is a select group of people in web analytics, SEO, paid search, display, email, social, etc. who really get it. They really know what they are doing. And they charge a pretty good price for it. But they don’t charge nearly what they are worth because there are other people out there charging $500 a month for social media strategy. They are charging $2,500 to implement a web analytics tool on a complex e-commerce site. $1,000 to do SEO for a site in a competitive market.

And what’s so stupid is that the social media strategy is worth $10,000 a month (if not 10-20x that – just throwing a random number out there)! So, not only is the social media expert losing the deal and the revenue, the one who won the work is now making $9,500 less than they should, and their business will suck by its very nature.

Here’s an idea for the under-cutters. Double your revenue. Charge more. Don’t come in and cut market values in half. Come in and keep them stable. If you’re good enough to do the work, charge what the market demands for it, and get rich doing it. You’re worth it. We all know that business is going to be lost, it is a part of reality. But business should never be lost for less than that business is worth. A falling tide lowers all boats. Personally, I don’t want anyone to make less than they should, especially my competitors. The better everyone does, the higher the standards go up, etc. – I see all of that as a positive for myself, the industry, and the clients. It’s easy to cheat someone out of $500/month, and most of those businesses are built entirely around that idea. It’s hard to cheat a client who pays you what the work is worth.

Don’t let the industry suffer because you don’t have a sense of how valuable your knowledge is. Low-priced operations can literally cost the industry jobs: appropriate fees go a long way toward businesses growing and hiring so they can do fantastic work for their clients. And thank yourself for the potholes you drive over on the way home. The lost tax revenue that would have fixed them is your fault, too. 🙂

Martha Stuart is the best cooker/cleaner/herb dryer/storer of random things on the planet. And she’s a billionaire (although she tries very hard to go to jail sometimes). She doesn’t make a dime for anyone who uses her knowledge. The people who read her magazines and watch her shows only find ways to polish the veneer on their lives, throw better children’s birthday parties, set a table better, or keep a damn honeybee farm in their backyard (who in their right mind would do that?!?). If anything, Martha costs everyone money. But she’s the best. So she gets paid.

Why is it so hard for us to understand what we are worth, sometimes? We make businesses money. That money makes jobs. Those jobs feed and house families. We are empire builders. Love yourself, and make what you’re worth.

And when you have it, give it back. Pick charities, do whatever makes you happy when you can help people. And do give it away, because every $1 you give away is probably worth $200 that you give to uncle Sam in social impact.

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  1. Kraig

    Great Post. Absolutely agree that if you under cut your value, your work and your clients results will only suffer.

    Posted August 5, 2010 at 12:27 pm | Permalink
  2. Well said Evan. I’ve found in my past that chasing the deal, no matter the price, only results in a lot more work for a lot less money.

    Only recently have I started saying no to low revenue work. I have fewer clients, more revenue and actually more time to get better.

    Your post is inspirational!

    Posted August 20, 2010 at 1:11 pm | Permalink