The Zen of “Go Away” Rates

wine-label-324x205A friend of mine recently revealed a super, ninja-level consultant secret to me.

Whenever his work pipeline floweth over and an unknown client approaches him with a job, he quotes them a ridiculously high rate that he assumes they would never accept.

He calls it his “Go Away” rate.

The only problem is that these clients often do accept his proposal.

In fact, my friend admitted to me with a certain amount of amusement that he has noticed that clients are actually much less likely to balk and haggle over his “Go Away” rate than they are his normal, more reasonable hourly rate.

It reminds me of a recent wine tasting experiment that I read about where subjects did a taste test for a variety of wines and the only piece of information they were given was the price.

Not surprisingly, the subjects of the experiment overwhelmingly reported enjoying the pricier wines more even though the sneaky researchers often swapped the price labels between the cheap and expensive wines.

What is surprising, however, is that according to brain scans that were conducted by researchers during the experiment, people actually did experience more pleasure while drinking the cheap wines that they thought were pricier and not simply falsifying their answers to avoid looking uncultured.

In other words, the wine actually tasted better to them simply because they believed that the wine was higher quality.

While that improves the prospects for many consultants hoping to take that 4 week vacation to the Bahamas this year, what lesson can us poor salaried corporate slaves glean from this experience?

Although most developers don’t have the luxury of being able to quote a “Go Away” rate, they often do (at least on a subconscious level) have the option of giving a “Go-Away” estimate.

Don’t believe me? Consider the following scenario.

Your boss asks you how long it takes to code a CRM system from scratch using your dream technology stack. Do you actually sit down and give him the bad news, which is that the project probably won’t be finished until after he retires or is fired for incompetence or do you succumb to the typical developer’s hopeless optimism and mumble a couple of months?

Now, what if on the same day your boss asks you to give an estimate of how long it would take to change the color of some text on a legacy PowerBuilder app?

Just to make it interesting, let’s assume that the app in question is written using an unsupported version of PowerBuilder. Moreover, the data travels through no less than 6 rube goldbergian layers, the highpoint of which is an excel worksheet written by a disgruntled accountant and a 5000 line .bat file written by the network admin who just sent to prison for embezzlement. To top it off,  it interacts with a mainframe you’ve never heard of that was scheduled to be retired a decade before you started working there.

In the second scenario, would you err on the side of optimism or would you promptly ask your HR person how much time is left before you vest and then multiply that answer by 8 in order to derive your very own “Go Away” estimate?

If you noticed yourself leaning towards the second option, then you may want to stop and consider what we’ve just learned from the wine researchers.

If you over-inflate your time estimate too much, then you may inadvertently make your boss want that change all the more.

Quote too high of a “Go Away” estimate, and you’ll soon find yourself in a product kick-off meeting heading up a team of “high quality” consultants, all of whom are charging “go-away” rates, and listening to your CIO give a sunshine up the arse speech about how the new TCII (Text-Colorization Improvement Initiative) is going to revolutionize the way you do business.

Don’t say I didn’t warn you.

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5 Comments so far

  1. Michael C. Neel on October 6th, 2009

    When I worked as a consultant (solo and with a small company) we called this the “Out of bounds” effect. The client has a range in mind they expect quality work to cost – if you’re above or below this range then you’re out of bounds. Ask to little and you must not know what you are doing, or you cut corners to meet that price. Too much and you are padding the bill and charging for extra work that isn’t needed. Of course, the client isn’t really capable of making a good estimate of actual work required, so these ranges have little to do with reality, unless it’s the reality of landing the job.

  2. [...] This post was mentioned on Twitter by Ville Laurikari. Ville Laurikari said: Will a "go away" estimate for project cost really make them go away? http://bit.ly/401VNg [...]

  3. Troy Tuttle on October 8th, 2009

    :-)

    Love the project kick-off description! Seems familiar.

  4. [...] Syndicated from Coder“>Russell Ball [...]

  5. Data Entry Services on November 6th, 2009

    I like that – go away rates! So giving over-inflated rates builds value. I try to be honest in my pricing and assessments but I can see you’re concept has value.

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