How much are you worth?
This can be an sensitive issue when what you’re offering is your time and your competence. Many service providing business owners start twitching uncomfortably, muttering something like “Well, it depends on how you look at it…” or “Oh, well that depends on how much the customer can afford …”.
This is not an OK pricing strategy! Your value must be well-thought through, clear, reasonable and profitable. So why do some business owners constantly end up with price levels so low that they risk damaging their company? Here are some of the most common mistakes we make when putting a price tag on ourselves:
You´re the one lowering your prices: in a negotiation, you actively bring down the price level, instead of leaving it to the customer to try his best. You tell yourself that the customer surely wouldn´t be prepared to pay this or that much. Your pricing level ends being so low so that there´s no room for negotiation.
You let chance rule: you haven´t researched the market and have no idea of how much your competitors charge or what added value you offer in comparison. You risk setting your prices either too high – or, more frequently, way too low.
But it´s just me…: you let your prices reflect your self-esteem instead of basing them on objective criteria. You have a hard time backing up even really low prices, and the client will easily negotiate a price level that suits him.
Your time is free of charge: you´re happy to work extra hours at no extra cost since “time doesn’t cost you anything anyhow”. You don’t take into consideration what you could make doing something else during those hours, e.g. working on getting new clients or working on fully paid projects.
Too good to charge: You might be working as a therapist, coach or masseuse. Maybe you, like many others in your sector, feel that your main focus is helping others, not making money. When money is perceived as a bad thing, it´s hard to set reasonable prices.
Special price for you: in order to attract clients you´re using special offers all the time. You´re constantly way below the price level that you need to have in order to make your business work.
The effects? With prices that are too low, you put your company and your brand at risk. Chances are that you’ll also attract free-riders who don´t value your services but just want a nice discount.
So how can you solve the price tag problem?
1. Locate the problem. What are the reasons behind your pricing strategy? Carelessness? Insecurity? Something else? In order to set new prices and be able to stand for them, it’s wise to work on the underlying reasons behind your current pricing problems.
2. Take charge. Check out the market. What are your competitors charging? Where do you want to position yourself in the market – and why?
3. Think production. Most production companies base their prices on the cost of production. You should also “count backwards” and decide your price per hour.
4. Believe in your value. List the arguments for your new, profitable prices: education, experience, specific competences, happy customers… If you´re unsure, ask for feedback from clients, colleagues, friends or family members.
5. Make it clear to the customer. Your customers obviously need to know what they are paying for. Be prepared for questions and be clear on the advantages that you are providing: why the customer should choose you instead of your competitors.
In the end, the right price level is always about a win-win situation: keeping the customer satisfied and running a lucrative, quality business!
Are you lowering your own prices? Do you have a hard time setting the level that is right for you and your business? I´ll help you get out of the low price trap and find a sustainable pricing strategy! Contact me for more information on how I can help you create a profitable business!