Episode 54
Pricing theory vs practice
Pricing is not just about setting a number, but understanding the value that your product or service brings to your customers. It's about considering the problem you solve and the positive change you can create for your clients.
Pricing should be based on a deep understanding of your target audience and what they are willing to pay for the value you provide. We need to overcome the stories and discomfort that can hold us back from pricing our offerings appropriately. By connecting to our motivations and being confident in the value we offer, we can navigate the leap from current pricing to charging what we’re truly worth.
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Transcript
It's confusing, isn't it?
Ben:Because I was just watching the World Cup, which I did stop in the background and so I can watch live football and ITV with no fan, but I come on Crowdcast for a live thingamajiggy and I get fan.
Ben:What is that?
Carlos:That's interesting.
Carlos:'Cause football really requires fans.
Ben:Hey.
Carlos:We don't need any fans.
Carlos:Thank you very much for joining.
Carlos:Today we're gonna be talking about the things that we learn around pricing versus putting that learning into practice.
Carlos:This was inspired by a little bit of a spicy comment thread that appeared after a post that I shared about a guy, mark Ritson.
Carlos:He wrote this post about how Elon Musk was getting pricing wrong, and then someone came back at him because Mark is, he's got, he's a professor in marketing.
Carlos:Someone came back at him.
Carlos:Ah, you're an academic, you don't know anything about pricing and what?
Carlos:Elon Musk, he's in it, he's doing it.
Carlos:Uh, I'm not sure if he's doing it well, to be honest, from the outside.
Carlos:But anyway, mark got back saying, you know, he's, he's had real world experience in this as well as some kind of academic experience.
Carlos:So I may think actually, yeah, we know we want to educate people about these different ways.
Carlos:You can think about how you price, but ultimately you have to do that.
Carlos:You have to go in front of someone and you have to give a number.
Carlos:So I thought we could talk about that and the things that might get in the way that we've seen that might gets in the way of people.
Carlos:Of actually pricing.
Carlos:Well, even though they have the knowledge
Ben:So we've done, got a few, quite a few rounds of the.
Ben:Uh, happy pricing course.
Ben:And when we first started doing that, we were doing it, doing it over a week.
Ben:So we would meet every day for a week and it was really intense.
Ben:And, um, we'd meet for an hour a day and there would be basically a version, versions of, uh, me.
Ben:And or you shouting at everybody in a very friendly way for a whole week, and everyone would get the end of the week and then need to go to sleep for two and a half weeks.
Ben:At which point they would wake up and promptly do absolutely nothing with any of the kind of tools and tips and tactics and strategies which they had, uh, heard about over the kind of the, the, the program for the week.
Ben:And we ran the, we ran the format like that for a little while, and then last time round we actually changed the format so that it ran over a six week period.
Ben:So there was the opportunity a for people not to feel shouted at, even in a friendly way.
Ben:I read intensive, intensive week, we could all speak a little bit more calmly and quietly and in a considered way without having to kind of race through all of this sort of useful tools and tips and tactics.
Ben:And part of the reason for, for doing that was kind of a wish, a desire that we would be able to help people make that quite hard leap between starting to hear the theory of something, uh, and, but the hard leap to, from the theory to the, to the practice.
Ben:So I think the, for want of a better story, this was the, you know, this kind of journey was, you know, is what kind of comes to mind there.
Ben:Because I think when we started out, there was a desire to give people the tools and taxes to help them start to learn.
Ben:But the realization or you know, the, the kind of realization, the kind of remembering essentially, but really the hard work is, is then in the doing.
Ben:We can have, you know, all the tools and tactics we can hide behind many tools and tactics in, in many instances.
Ben:But actually when push comes to some kind of shove, we are going to find ourselves sitting in front of somebody else and we're gonna have to be talking about money in some form.
Ben:And that is difficult for people, um, as one of the, one of the challenges which come out of that.
Ben:And also, you know, money makes lots of us kind of very uneasy.
Ben:So all of that dis-ease that uncomfort discomfort is very present when we then find ourselves sitting person to person talking.
Carlos:Yeah, I think that discomfort thing is the interesting bit.
Carlos:What spring out for me was the difference between teaching and coaching.
Ben:Mm-Hmm.
Carlos:And so, uh, the first approach was very much a teaching based approach.
Carlos:This is a brain dump of all the useful things we think you need to know.
Carlos:Take them, use them.
Carlos:Versus a coaching approach, which is, I think is just, from my perspective, is a bit more emergent.
Carlos:Uh, and it's based on what is the problem at hand for the coachee, for the participant?
Carlos:So they bring the, the stories, the challenges to the table, and the coach then helps them answer their own questions based on what they understand to be their, the things that are getting in the way at the time.
Carlos:Now that's quite a bespoke approach and you do that as well.
Carlos:Ben's, you know, he coaches one-to-one with people.
Carlos:And I, I can imagine that be, uh, it's quite a responsive way of working.
Carlos:You can't necessarily predict what people are gonna come to you with, but you, you can work with what you've got based on your knowledge and experience.
Carlos:Um, in the case of where we wanna be with the Happy Pricing, I think is that interesting.
Carlos:Intersection where we present some stuff, but we also try and respond to people's challenges and then apply that knowledge to that specific, uh, issue, but also talking to what might be also getting in the way for the specific person.
Carlos:So that's, that's the messy, I think, bit about this work when you really wanna make some, a change in someone's life in, when it comes to whatever, uh, thing they're learning at a time.
Carlos:In this case, pricing versus being able to have something that you can deliver.
Carlos:And it's, it's like systematic.
Carlos:That's a nice thing about course, there's a curriculum.
Carlos:Follow the curriculum, you're .Done more often than not when it's a real world thing, not necessarily the case.
Carlos:With that in mind, I thought rather than us do that whole thing, like, oh, this is what you do and this is what people, what gets us in your way, why do we use some of these questions that are coming in the chat now to talk about what we might teach, but then maybe share what we think might get in the way.
Ben:Mm-Hmm.
Carlos:And if Zoe or Claire are brave, they can come and join us and say, what is getting in the way?
Ben:Mm-Hmm.
Carlos:So I'm gonna, I'm gonna start with Zoe's, uh, point here.
Carlos:And it's, it's essentially she knew how to price for consumer goods in her previous job.
Carlos:And now she's having to switch to mentoring and she has no clue how to price these services.
Carlos:So maybe we can just start by thinking, all right, how can she start thinking about this without going, as I assume Zoe might be doing, a finger in the air, or they're looking at other people who do mentoring in, in that space and trying to essentially figure out what pricing is dependent on them.
Ben:The, of course, all of this stuff is much easier for people who have some kind of record or sort of some, some journey essentially of the thing that they're doing.
Ben:When you are starting out, you know, you don't have the same kind of, sort of, uh, information available to you as you would do if you've been kind of working in a, in a sort of field, in a space for a certain amount of time.
Ben:So it is definitely harder when you are first begin.
Ben:One of the first things that we do, uh, get people to focus on, on the course is getting people to, uh, really have a good, clear understanding of who it is they want to be working with.
Ben:Who it is, who their ideal, who is.
Ben:Because mentoring, of course could take, you know, sort of many, many different shapes or could, could come in many different forms.
Ben:The who you are mentoring is really, really important because you know the who you are mentoring, that type of who is that person in a company?
Ben:Is that person not in a company?
Ben:Are they paying for it themselves?
Ben:Is somebody else paying for it?
Ben:What are the other kind of things that that person or company is used to buying?
Ben:What do they typically sort of spend money on?
Ben:How much money do they typically spend?
Ben:These are all of the pointers, the, the information guides that you would need to start exploring to start understanding, to start to give you a kind of a feel for what the person might spend.
Ben:And of course the other thing, once we, you know, the other part of this better understanding the who is one of the things that we sort of talk about sort of generally in these sort of podcasty things and, uh, on the courses is understanding what it is that somebody is buying.
Ben:Because the person who you, you know, Zoe will be working with in that instance, they're not really, well, they're not, they're not buying mentoring.
Ben:Mentoring is in service of something else.
Ben:They're buying mentoring to change something.
Ben:So on the course we sort of talk about that as being, uh, that basically people buy two things.
Ben:They're buying kind of a combination of good feelings and solutions to a problem.
Ben:Uh, and so what those kind of good feelings are is a pointer to how much somebody wants to spend.
Ben:But so is the solution to a problem.
Ben:You know, the how badly somebody wants something to go away is a big marker or a big sort of pointer to how much they're willing to invest.
Ben:In making that happen.
Ben:So again, this really trying to understand who is the person, what are the things which are important to them?
Ben:What is it that they are trying to change as a consequence of your mentoring?
Ben:The mentoring is in service of something.
Ben:You need to start understanding what it is in service of to start to get to a place of understanding what an appropriate, um, sort of fee might be for that.
Carlos:So I'm gonna make some assumptions here, Zoe.
Carlos:So just, uh, apologies if it's not exactly where you are at, but just to try and illustrate a point, Someone told me the difference between mentoring and coaching was mentoring and essential giving answers based on your own knowledge and experience, coaching you're pulling answers about out of other people that they already know.
Carlos:And so there's, there's, that was one of the things that, the way I wanna classify my answer is that I'm assuming, let's say you've got a lot of experience in consumer electronics industry, for instance.
Carlos:Uh, and you know how a business grows or you know how to price things, you know all of the things around that.
Carlos:And so you could mentor people who are starting a similar kind of business.
Carlos:And they wanna basically speed up the development, avoid uncertainty, feel more clear about a plan, uh, maybe leapfrog or get some knowledge around import, export, some challenges that they face.
Carlos:And how much they will pay you would depend on you finding out from them how much that business could be potentially worth as a, a signal, I think as a, and what I learned from Ben.
Carlos:So on one hand you could think of, oh, mentors charge X amount per hour.
Carlos:Or you can think of, actually, I wanna help this founder or this person in this business go from here to there and connect to that change is a related, uh, an increase in revenue, a decrease in costs, uh, increase in confidence, a decrease in anxiety.
Carlos:And it's conversations around that that I think allow you to hone in to what a good price might be for you.
Carlos:As well, and this is one of the things that Ben teaches on the program.
Carlos:People might actually also just buy you.
Carlos:There's something about being in relationship with you that is a value.
Carlos:And so understanding why they're interested in you potentially, particularly if they're coming to you, or why is it about the relationship and, and the energy and chemistry between you that also could add this idea of price?
Carlos:Then there's what's might get, might get in the way.
Carlos:Am I allowed to charge so much?
Carlos:For instance, it's like, oh my God, I could, there's a potential to increase this person's revenues from 500,000 to a million with my knowledge, and I could charge a 10th of that revenue that potentially you make.
Carlos:So, I don't know, 50 grand.
Carlos:Is that allowed?
Carlos:That could be one of the things that get in my way, which is more about a story rather than a level of knowledge.
Ben:One of the stories that we kind of often tell is that when we're beginning, it's better actually to not charge very much, because that helps us get clients and sort of prove our worth and our value and get things going.
Ben:But actually I've kind of found that actually completely not true, um, in, in almost kind of every sense actually, because money and price is a really important signal.
Ben:And particularly when we're starting out, you know, the, the price that we suggest to somebody can either reassure people or it can suggest to people that we are also not totally convinced.
Ben:But anyway, that's a, a slightly.
Ben:Slightly different point.
Ben:I think, you know, the, the big thing that gets in the way is the story.
Ben:Am I allowed to, is it appropriate to charge X or Y when I'm just starting out?
Ben:You know, should I price at a lower level?
Ben:Some of these kind of things.
Ben:It's, it is often it comes down to story and confidence, essentially.
Carlos:And so that's, that's really interesting aspect of this in terms of the value of the change and in a sense, what we can guarantee whether that change is gonna happen or not, and how that I think relates to confidence.
Carlos:I saw Richard talk, he is got comment here.
Carlos:Uh, ethical dilemma and challenges on price discovery in healthcare.
Carlos:Is there's basically Affordable healthcare versus healthy margins, sustainable quality growth.
Carlos:So that might be a little bit more, we can maybe talk to that in a bit.
Carlos:But there is one of the, I think the things that we come across, uh, a lot in, in our Happy Pricing course is people who want to make their work accessible and how pricing high in inverted commas makes them feel uncomfortable because it would be less successful.
Carlos:And that, again, can get in the way of actually using these tools as well because you are now caught in some moral, personal, moral dilemma about what is the right way.
Carlos:Well, am I allowed to use these tactics in a sense?
Carlos:Okay.
Carlos:Alright, I'm gonna go on to Claire and we've got France made a comment as well.
Carlos:We'll see if we can have a look at that in a bit.
Carlos:Uh, so Claire, what's the leap between what you are charging now and charging 10 times more?
Ben:Yes.
Ben:Well that is interesting because that happens to talk to directly one of the, one of, one of the, the modules on the course.
Ben:And, and I guess one of the, some context, actually, before we sort talk about it.
Ben:I think one of the things that we are interested in with the course and actually all of this work we're doing, it's not really earning more just for the sake of earning more.
Ben:In fact, the way we start the course and a lot of what we're talking about here is really for, you know, for people to kind of connect to what is important for them.
Ben:It might be that it is important for them to be earning more money and that, you know, might be important for them to earn more money because they're not making it all sort of hang together properly.
Ben:They're running out of money.
Ben:They don't have enough money.
Ben:There are things that they can't afford.
Ben:There are things that they're not doing or they're sort of struggling.
Ben:So I think the thing that we're actually most interested in, and just again, there's context before we come to the idea of making something 10 x.
Ben:Most importantly, I think it's for people to connect what is it that they want more money for?
Ben:And so we start on the course with this idea of a more money, more money manifesto so people can connect to that motivation, connect to that understanding.
Ben:Because actually we are not really care about why we're doing something.
Ben:We're never really gonna do the hard work of making the change anyway.
Ben:And it's important to know what that is.
Ben:And so it may, it might be for whatever reason, is relevant to you that, you know, making a leap where you are being paid 10 times the amount for your product or service than you are at the moment.
Ben:It may be that it is important for you in lots of instances.
Ben:It is that, that it's important for you to make that leap.
Ben:So where that is important, one of the, the things that we, um, get people to, to look at when we're actually doing, doing the course around this idea of the 10.
Ben:'cause, you know, the whole thing around 10x starts to kind of feel like it plays into the whole kind of business sort of hack thing.
Ben:You know, blah.
Ben:There some other, there are kind of easy things to, of course they're relevant.
Ben:There are of course benefits of talking about something as a, as a 10 x.
Ben:In fact,.
Ben:One of the coaches that I was working with has a organization called Strategic Coach.
Ben:And, uh, on, on that, they do get you to think around your service and what you're doing in a sort of 10 times way.
Ben:And the, the rationale that they use in that is the, you know, the advantage of doing it is that it forces you to think, to think about your product service in a completely different way.
Ben:Because if you are just thinking about kind of incremental changes where we, where people tend to get sort of stuck and this happens to, on the, the 10 x question, which I'll come to in a second, where people get stuck is they just feel like they need to add more of what they're doing now to make something more valuable.
Ben:But of course, if you do start to think about something from a 10 times multiple, you are forced to actually think about what you do in a completely different way.
Ben:Now that may not be doing something completely different, but at least thinking about what you do in a, in a different way.
Ben:But the the other thing, which I think is kind of really helpful.
Ben:Around this idea of kind of 10 times in which is one of the things that we do get people to, to go look at on the course, and it might be worth actually goes, I was just putting this, um, exercise into the next newsletter so people can sort of do it anyway.
Ben:Actually, the thing that we sort of find when you, if you say to, you know, whether it's Claire or, or whatever, you know, the, at the moment I'm earning, I charge this.
Ben:So whatever the, the number is, yeah, let's say it's a hundred.
Ben:Um, the, I charge, I charge a hundred now.
Ben:When you start off by saying, okay, so what would need to happen for it to be 10 times that?
Ben:So the person's in mind, okay, thinking, so it's a thousand.
Ben:It's a thousand.
Ben:How am I gonna get to a thousand?
Ben:You know, as I was talking about before, people's first sort of stop on that journey is to think, well, God, it needs to somehow be 10 times the amount of what I'm doing now.
Ben:And where we kind of, where we fall down to pretty quickly is it's 10 times more time.
Ben:It's 10 times more effort.
Ben:It's 10 times harder somehow, you know, is the kind of the picture in our mind.
Ben:But of course you can't really do that sort of thing.
Ben:You can't, you know, most of the time work 10 times harder.
Ben:You can't work 10 times more.
Ben:You can't sort of suffer 10 times the sort of struggle to make, to make that happen.
Ben:So it's, you know, thinking about it in that way is never gonna get me there.
Ben:One of the things that we like to get people to do is to actually then to, to kind of pause at that moment and reflect back.
Ben:Reflect back to a time where maybe.
Ben:Which is kind of almost universally true, you know, when was the time when you were earning one 10th of what you were earning now?
Ben:So rather than the time now where you are charge, you charge a hundred, there was probably a time where you were doing a very similar thing, but you were charging 10.
Ben:And so it's like what changed actually for you to go from the point, the place, the time where you'll be charging 10 to the place the time now where you are charging a hundred?
Ben:And the thing that people tend to find is that actually the what of what they do oftentimes hasn't changed at all.
Ben:The thing that changed in that journey from 10 to a hundred, the thing that changes that they thought about what they were doing differently.
Ben:One of the other things that changed is the people who they were doing it with have changed.
Ben:So those people, you know, there were, so there was a pool of people who were sort of comfortable paying 10.
Ben:There's now a pool of people who are comfortable paying a hundred.
Ben:And the thing which kind of facilitated that change was the confidence that that Claire had, or whoever it is, is providing.
Ben:The confidence that they had to go out to those people who had, who could spend a hundred, so that, and to be able to kind of talk to them confidently with the experience of knowing how to do the thing they do with the confidence of knowing that they have kind of delivered it with the confidence of knowing that their product and service is important and useful and, and people kind of want it.
Ben:They realize when they look back, I've already made this journey once.
Ben:I've already made this transition, this 10 x transition once, and so the same thing, of course, can happen again because with with that realization, with that story, you know, the brain, the mind is a hugely powerful thing.
Ben:So, you know, once you kind of have understood that I've already made that leap once, actually the belief is there to know, oh, I can do it again.
Ben:It's the same thing I did before, again, which might mean I start to work with different people.
Ben:It might mean I'm talking about what I do in a slightly different way.
Ben:It might mean that actually the confidence I have in the change that you will enjoy working with me is such that I'm better able to communicate that.
Ben:They're the things that start to change for you to make that kind of leap, if that leap is important to you.
Carlos:Boom.
Carlos:There you go, Claire.
Carlos:I like really excited now 'cause I've got like three Ps to this now.
Carlos:If you want to 10 x your 10 x your pricing, there's the product pivot where you just change what you do, add more stuff to make it more valuable because there's more stuff in it.
Carlos:There's what you call the people pivot.
Carlos:Find customers who actually value what you do 10 times more, and they're related to that, I'm gonna call it the purpose or the prose pivot.
Carlos:How do you tell the story, uh, with the confidence you require about what you do so that it sounds 10 times more valuable?
Carlos:And I think the, the thing getting in the way, maybe around that is that I can't tell the story confidently enough.
Carlos:I don't believe that this is 10 times more valuable because either it's too easy or it's something that, um, I'm, I'm not adding anything to it to make it more valuable in a sense.
Carlos:And ultimately what I'm hearing from this is about is that change that you create in people's lives, that then adds much more value to their business or their lives themselves.
Carlos:And with someone like Claire who has a wealth of experience around marketing and community building, there are organizations and they are properly coaches and teams who would find that immensely valuable, under learning from your wisdom and your knowledge and experience of how to build these things.
Carlos:And so for me, particularly with Claire, there's a, there's a, a potential people pivot.
Carlos:It's like, who, who can I tell the story to?
Carlos:Of the work I do in my experience, that then, and the change that they want to have in their lives, that makes it feel like, oh, okay, actually I, I'm willing to pay more.
Ben:Mm.
Carlos:And then relating to that, just the little caveat as well with the 10 x thing, and then the, how we talk about happy pricing, like, you know, how to price well or how to price more sometimes is what people think about.
Carlos:I think it's just how to price with more ease more than anything else you could be, like, it might be that you are ha what you're selling.
Carlos:The amount, the, the amount of money that you are selling your stuff for is fine.
Carlos:It's just, it feels really icky every time you, you put that price out.
Carlos:So one of the things that we can help with and we'd like people to do is just, just be more comfortable.
Carlos:Be more happy to receive that money and to save that number rather, so that they can focus all their time on energy, on delivery and creativity and storytelling and all that stuff, rather than worrying about the next time they have to send out an invoice and think, oh, oh, they're gonna reject it?
Carlos:Like, how can we make you feel much more happy to send out that invoice rather than with trepidation and, and fear?
Carlos:Right.
Carlos:Last thing, last thing, the last three minutes.
Carlos:I just wanted, I wanted to see if there was something here that we could talk to.
Carlos:Uh, so Frances was saying she actively wants to get people to think about how they might be happier earning less in connection with working with her.
Carlos:That might be worth more to them in the long run.
Carlos:So it's, she's pitching her value less about, all right, you are gonna get that much more income, there's something else she's selling there.
Ben:Which again links back to the same thing that we were saying to Zoe and it's true with the Claire thing is that, you know, what is it that people are buying?
Ben:And, uh, what is the change that people make?
Ben:And there might be instances where, you know, we're actually getting people to focus less or worry less about what they're earning is hugely valuable for them.
Ben:Because if there's too much focus, you know, for, for somebody in a, in a, in a coaching situation, maybe like Frances is talking about, it might be that somebody is, you know, is too blinded by worries around money, um, kind of focus on money and actually they're missing a whole kind of, sort of spectrum of opportunity which exists beyond that.
Ben:And actually then the really valuable thing that you can do is help people shift that perspective, help people broaden that lens.
Ben:If that's kinda what if, if that's what Frances is talking about.
Ben:But in the same thing is true in that, that is really valuable to some people, you know, that is really important to people that you know, that might be worth a huge amount of money, actually.
Ben:And so in some form, obviously, 'cause obviously all we are really talking about on air is how you start to link these things back to what you might charge, how you might get to a price.
Ben:And even in a situation like that, it's important to remember for the person who is providing the service, yes, one of the things I might actively encourage you to do as my coachee.
Ben:Is to think less about money, is to aim to earn less.
Ben:It may well be that that is an important part that we're sort of speaking about.
Ben:But then it's also important to remember that is potentially really valuable to me too.
Ben:And so it's about how you then take that intent and start to understand how you would put sort of prices around that because in some form there's going to be a financial exchange where you are providing your coaching services and somebody's gonna give you some money in exchange for that.
Ben:And so, you know, all we're really talking about are the ways you can explore around that to get to that number or those numbers.
Carlos:So the way I'm was gonna break that down was the theory is value is in the eye of the beholder.
Carlos:So understanding what's really important in that, in the client's life that you are doing for them, rather than coaching or mentoring or or selling a widget.
Carlos:And then I think particularly with what Frances is talking about here, then how we come across or how we communicate with the client in order to give them confidence and clarity that the price that they're paying makes sense.
Carlos:And so a potential hurdle, I'm not saying Frances does that, is that if we have this story about money that I can't bring it for, I don't wanna promise that you're gonna make more money, so I'm gonna promise that you might earn less money or I'm not gonna even talk about money in the first place 'cause I find it uncomfortable, that could be a hurdle, even though the whole purpose
Carlos:of the, the work you're doing is to get them to worry less about money themselves and become more comfortable to earn less and actually to shift the way they work so it is less fought with anxiety and stress and busyness, but they, at some point, you still have to get them to understand, okay, it's worth this much money and for both of you to be comfortable with that number.
Carlos:And so there's something here around the theory.
Carlos:What is a value versus the practice of like, how do I still talk to someone about charging 250 pounds, 500 pounds, 600 pounds a coaching session, even though they're gonna earn less as a result of it?
Carlos:And that if that starts to feel uncomfortable, you won't be able to do that well.
Carlos:So I think that's part of the, I think, you know, nice way to end this in terms of the message, like, great in theory.
Carlos:How are we gonna do this in practice, and what do we need to think about?
Carlos:What support do we need?
Carlos:What self work do we need to do in order to just own this well?
Ben:I think when, so with France, they, it sounded like she was helping people, uh, earn less, but feel richer.
Ben:And there is a gateway to money.
Carlos:Excellent.
Carlos:And us at the Happy Pricing Course.
Carlos:Yeah.
Carlos:We are gonna make you earn less and feel happier because you know you're worth it.
Carlos:But yes.
Carlos:Um, I hope you enjoyed, uh, this conversation.
Carlos:We're gonna be here next week with less fans.
Ben:No, loads of fans.
Ben:Loads of fans, but no fan.
Carlos:No fan, no, buzz, no laptop fan, but loads of Happy Pricing fans, just to be clear.
Carlos:Until then, thank you very much.
Carlos:Take care.
Carlos:bye-bye.