Business Basics 1: Pricing Strategy and Do You Have One?
My new weekly series ‘Business Basics’ will be looking this week, at the subject of charging for your product or services.
What seems like a very straightforward process can be fraught with anxiety over what to charge, what to ask for and what we think of ourselves.
Pricing is always a tricky subject when you’re starting out in business. At some point we have to sit down and work out our pricing strategy. This can be based on many factors including:
- What the market can stand
- What the economy is like
- What your financial needs are
- What your level of skill is
- What the competition is charging
- What your customers want to pay
- What customers are willing to pay
- And even your self worth
After I graduated from my therapy course and before we were all let loose on the general public, we were invited to a business workshop were we would be offered training in how to set up in private practice.
One of the trainers was an accountant and she gave us all a small piece of paper to write down how much we were going to charge as an hourly rate. She then collected the papers in and proceeded to read them out to us all.
We were horrified!
First of all, the differences in rates were staggering. Secondly, the majority of them were very low and just could not sustain anyone in business for very long. She had her work cut out. Next week I’ll share with you, what she shared with us . . . . . .
Do you have a pricing strategy? Has it changed over the years? Have you put your prices up recently? Or down because of the recession? Do share . . .
We use the “packaging” system- where you can pay a low charge for basic services or pay more for a bigger package of services. We think it’s fair system because then people can figure out what they need depending on their budget. We usually plan that buyers will buy the cheaper one, especially now during the recession. However, we have seen a few people buy the more expensive package.
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This is a great way of giving customers lots of choice and they can see the comparative values. I like this way of pricing – it makes things very clear for the buyer and they know exactly what to expect.
This is sooooo hard. As a childminder I had to do a business course but I never felt able to charge the top-end rate for childminders in my area even when I was full-up and probably should have put my prices up. It just didn’t
Here in Italy I’ve been doing language lessons for less than half of the normal going-rate but I’ve noticed that a lot of people don’t turn up or seem to think they can turn up when they feel like. This led me to have a re-think recently and double what I ask. This seems to have led to me being taken more seriously. I don’t really count on the money as my partner’s wage covers all our living expenses but a bit of my own money is nice to have.
I’m about to start my own copy-editing business and pricing is really difficult. I don’t have any ‘certificate’ to say I am qualified but I have done it for friends on a number of occasions. I’m also wondering who my target audience will be and how much they could afford to pay for the service. It’s so difficult and made up of so many different aspects….. and can be so personal too. Especially when you might have ‘self-worth’ issues…..
Excited to hear about your new biz – I’ve got a question about it for you:
If you were looking for a copy editor would you go for someone who could show you a piece of paper to say they have done a course about it but haven’t had a customer yet, or someone who could show you years of experience, expertise and several testimonials from satisfied customers?
Just something for you to think about 🙂 LOL
Will be watching you on your new journey and cheering you on.
I lerned, years ago, that people will find the money when they truly zee the vzlue in what you offer. AND they will pay more to get perceived higher quality.
Years ago when I sold jewelry and sculptures (and calligraphy) an experiened artist told me my prices were too low. I increased the prices significantly and started selling more. Sometimes people pay me more than I ask saying my work is worth more than I charge. (Okay. I do the same when someone undercharges for their service.)
What does it say about the practitioner who under charges? I would avoid that person thinking if they do not value themselves why in the world would I think they provide what I need. I wasn’t always that way.
Now I “get” it.
You are spot on!
If we don’t value ourselves, then others won’t either.
If we put a low value on what we do then customers will assume we mustn’t be very good.
My friend is a silversmith and makes the most beautiful unique pieces. He was asked to exhibit at a 2 day very prestigious show. On day one he sold nothing!
That evening over dinner, the organisers told him to put his prices up as the customers didn’t believe his work was real silver. They were used to paying high end prices, so just assumed this was fake.
Next morning he added a zero to every price tag and guess what?
He sold the lot!! Absolutely staggering, but worth taking note of.
I appreciate you sharing your experience with us – we can all learn from it.
Fascinating story about the silversmith! And it perfectly demonstrates what I’ve learned — your prices are probably not too high. If you’re not selling, it may be that your prices are not high enough — or it may be that you haven’t found the right audience. Or, it may be that you haven’t explained your product or service correctly, or communicated value. Very seldom is it because your pricing is too high.
Early in my marketing communications firm, when I wasn’t getting the work I wanted, I lowered my pricing. Yes, I got work — but it was with awful clients! They were horrible to work with, didn’t value what I did, asked me to change it over and over again, and then haggled about a bill that was way too low to begin with! Now when I’m not getting the work or sales I want, I know I’m not reaching the right people, or my message is off — and I resist the urge to lower my price. I don’t want those picky low-end clients ever again!
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Thanks for sharing such important advice, if we charge too little, we can become inundated with clients that we don’t want to work with. I’ve learnt to value what I do and my clients will do the same.
Setting price points can be a pain-in-the-patootie, Heather — so glad you’re blogging this topic!
Entrepreneurs I have spoken to who are faced with what to charge for their products, services, or programs usually start the process by checking out their competition. I tell them, “Wrong! You have no competition.” That remark always ends with a long pause and a lot of dead air floating around.
It’s all right to observe what others in your niche are doing and how they’ve priced their offers. But your customers and/or clients are getting YOU — not them.
Let’s take Marcia Hoeck as an example (I don’t think she’ll mind). She’s got over twenty-five years experience in business. Folks, that’s over a quarter of a century! So, naturally, the expectations should be that Marcia’s price points are NOT going to be set at bargain-basement, flea market deals. It would be ridiculous for her to discount herself that way — she’s not a newbie.
Lots and lots of factors come into play when setting up a pricing scale.
Anxious to read more from you on this subject!
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Spot on Melanie,
Thanks for joining in and offering your wisdom in this area.
We need to stop charging for our time and start charging for our value.
When I work with my therapy clients, they can make life changing progress in a very short space of time – what’s that worth?
If they book an hour with me, but manage to shift their problem in ten minutes, does it mean they shouldn’t pay for the whole session LOL.
It really is a matter of how we perceive value.