How to Earn a Raise – Lessons from Pricing
The other day one of my employees asked for a raise. Believe it or not, as director of pricing at a large company, I don’t really have much influence on the salaries of my people. However, I wanted to give him thoughtful advice on how to get a raise. This is just a pricing problem, people putting a price on themselves. Here is part of my advice. If you are an employee hopefully you will find it useful.
You are a product!
Just like your company buys computers, manufacturing equipment, building space and paper clips, they buy people. Actually they buy your time and ability (your features) to generate results (their benefits).
Companies who properly price products charge what their customers are willing to pay. You should too.
Imagine you are a PC. One of the company’s PCs just quit working, so they have to buy a new PC to replace it. How much will they pay for you? The answer is it depends on how much other PCs are going for. They will surely get more benefit than what they pay, but they will try to pay as little as possible. If you as a PC cost 50% more than another PC you will not be selected. The best you can do is charge the going rate.
Now imagine you are a Mac. You charge 50% more than a PC and some people pay it. Why? Because a Mac has features that aren’t found on PCs. Some people highly value the ease of use, the lack of virus, the beautiful design. A Mac is different and some people are willing to pay more for it.
Let’s bring this back to people. If you are like everyone else, you will get paid the going rate. The company doesn’t owe you a raise just for being there. The company may be willing to give you a raise but only if you provide more value to them than someone else they can hire.
Important lesson #1: Add more value. Ask yourself how you can build your knowledge and skills to make yourself much more valuable to your company and to the market.
Now ask yourself, are you commodity or a highly differentiated product? If you are a new college grad, you are a commodity. Many people graduate with the same degree you have. Your salary will be based on the going rate for that degree. Sure some companies pay more, but they are trying to skim the cream off the top. Can you prove you’re cream?
Important lesson #2: Become highly differentiated. Pick an area where you want to focus and become an expert. Prove you’re an expert through papers, presentations, blogs, social media, etc. This one thing will make you more valuable. It’s OK if other people are in the same area. The point is there won’t be millions. Become an expert.
IMPORTANT Aha! moment: Doing your job will NOT get you a big raise. Doing your job well will NOT get you a big raise. The only way to get a big raise is to do MORE than your job. Add more value to your company than anyone expects. Of course this alone will not get you that raise, but it is a prerequisite.
Pricing has many more lessons to teach us employees about making more money. We may cover them in future blogs (if there is interest). But today remember the single most important lesson in pricing: Charge what your customer is willing to pay. Willingness to pay is completely driven by your value relative to the other options.
If you want a big raise, make yourself valuable. Make yourself more valuable than others like you. Become an expert.
(My friend Wendy Hanson and I discussed this concept on a radio show. If you want to hear it go here.)
Mark Stiving, Ph.D. – Pricing Expert, Speaker, Author
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Photo by David Blackwell
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