Pricing is Emotional
“Charge what you’re worth!”
Raise your hand if you are tired of hearing this? What does it even mean? Sure – no one could afford me if I was to charge my worth! I am priceless. Yet this is something we hear time and time again. What my time is worth to me and what my time is worth to you can be two very different things.
Have you ever had the experience of looking at a product or service and wondered ‘who would pay that price for that’? You may have followed that thought with ‘I’m obviously not their customer!’ Or looked at something you liked and then saw the price and thought that is so cheap, I wonder what is wrong with it?
These scenarios also apply to your business. You can put a lot of pressure on yourself to get your pricing right. You don’t want your ideal customer thinking your offering is too expensive nor do you want anyone to like what you are selling only to be put off by the preserved value when they find out the price. Pricing is not easy and, if you run a service based company you may feel it is harder. There is no single formula that works every time.
Pricing is emotional.
The real problem with pricing is that it deals with money. Money is emotion, energy and worth all rolled into one.
You tell yourselves that you have to get it right and think that if it is not right now, you will never be able to recover. So you agonise and go back and forth – thinking and worrying, and worrying and thinking. You are exhausted! Your next bright idea is to ask your colleagues and friends – what do they think? and before you know it you are taking on THEIR money issues and it all becomes too much and you leave it for another day to worry about.
Let’s take it step by step.
Step one – there is no right answer.
On the other hand, there is no wrong answer either. Pricing is arbitrary – in an ideal world you set your price and people either pay and become clients or don’t.
The reality is we live in a competitive world, so how do know what to charge?
Which kind of market do you want to sell in?
You have to choose your pricing model, and there are loads of them to choose from. For starters, do you want many customers paying you a little bit? Or do you want a few customers paying you a lot?
To help you decide, do this exercise:
- pick two items from your competitors that are like yours,
- one the most expensive and
- the other at the cheapest
- take out a piece of paper
- write down the details of the most expensive item/service
- write down the details of the least expensive item/service
- draw a line across the paper
- put the price of the most expensive at the end of the line on the right
- put the price of the cheapest at the end of the line on the left
- Put a mark where you want your product pricing to fall
- Document the details you are comfortable offering at that price
Who do you want to sell to?
Choosing your customer is the next step. Who are they and why would they buy your product/service? Is your customer in business and if so, how far on their journey are they? The ‘younger’ the business the less money (generally speaking) they have, however, they are more likely to have time to work with you.
The more ‘mature’ the business, (again generally speaking), the more money they will have but they will have less available time. Therefore, if your audience is in the earlier stages of start up a DIY kit, lower cost but requiring more input time from your customer, can work well. The more mature business audience will pay a higher premium but have less time to invest, so a ‘let me do it for you’ package works best.
Understanding your ideal clients will make offer decision making far easier – more profitable – while minimising the worry.
Step two – covering the basic’s
Your pricing needs to cover your costs. Regardless of whether you are selling a product or a service, you need to make sure you keep records of all your costs. Audrey, a start-up conference facilitator told me that she lost €6,000 on her first conference. She didn’t keep track of her costs and organised a fabulous lunch for the attendees with teas and coffee’s on constant demand throughout the day.
Costs can get out of hand very quickly if you are not keeping an eye on them, or in Audrey’s case, leaving it all until the end. Check out my example on how to cost an event here!
Step three – learn!
I know a lot of consultants who when dealing with pricing advise their clients to raise their prices after every 5 customers. This may or may not work for you, but the point is, if you are selling your product / service well and it is demand, you can start increasing your prices for new customers. If you have retainer customers or you work with a few clients 1 to 1, as your experience and understanding of how your niche works and how you can help your clients, so too should your prices.
You want to avoid filling your diary with ‘introductory’ prices and get burn out.
My thoughts on pricing? Focus on giving your clients value for money. Once you can add value to you clients lives and business, the money will come.
Join me in my Facebook Group, which is a safe space to talk about money and success. Running your own businesses is hard, let me help you on your journey. Contact me here.
I’d love if you shared this article with your business friends or anyone you think may be interested.