Price Signaling on Resumes: The Tradeoff

Monday, March 9, 2015

I know two project managers who are currently looking for work. Both in the same geographic area and similarly skilled in their trade. The economist in me perked up when I heard the news. Not because I'm happy to hear that anyone is out of work, but because situations such as these present an opportunity to learn new economic lessons by asking whether a difference between two people's actions can lead to drastically different results.

In this case, the difference in actions was rather easy to spot:

Checking back two months later, the results were rather surprising. While Peter's professional resume received only a few contacts from interested parties, James' less-costly attempt resulted in his phone ringing off the hook. It seemed that every day, he was the recipient of a dozen calls and emails from firms across the country.

Once word got out, everyone started mocking Peter quite mercilessly. He'd clearly been taken for a ride and wasted his hard-earned dollars on a resume that barely performed. Despite the supposed expertise of his agency, they clearly weren't able to deliver results.

Meanwhile, James appeared to be the newly-crowned king of the resume. His successes were becoming the stuff of legend, and there was little doubt that he'd soon be employed in a magnificent position.

Ever the curious economist, I dove in for a deeper analysis. Peter's professional resume had been noticed by a few great companies, leading to a number of promising interviews for excellent positions. Meanwhile, James' efforts had lead to a great quantity of interview requests that always seemed to end in frustration. Unfortunately, the salaries associated with those jobs were all absurdly low - less than half the usual market rate.

Fascinated, I acquired a copy of each resume and put them side by side to compare the two. Both were readable, with nice bullet points and the standard chronological organization. Peter's professional resume looked like that of a great leader - a person who could be dropped into any situation and solve any problem. James' fell quite short in that respect. It appeared vague and did little to promote his abilities beyond that of the competition. The result was a significant amount of price signaling. Peter looked like a professional who would be expensive to employ - so all but the most serious companies avoided him. Meanwhile James appeared to be a generic candidate that could be picked up for pennies. Thus, great employers avoided him, while the penny-pinchers were attracted to his resume like maggots to a rotting steak.

One of the biggest mistakes that businesses make is to craft marketing to act like James' resume instead of Peter's. A marketing effort should not only entice the type of customer that one wants to attract, but it should ideally dissuade the type of customer that one does not want to serve. Remember: If you're targeting everyone, you're really targeting no one!

Want to learn how pricing really works? I'm selling my book on software pricing and am also available for consulting too!