You get what you pay for. Not only is this saying true BUT many consumers (including your ideal clients) subscribe to this doctrine. And it’s true if you’re being honest with yourself. You know that there are only certain things you’ll buy from the dollar store. C’mon, be honest **wink**
Sadly, many entrepreneurs set their prices based on fear – fear of rejection – instead of what they KNOW they need to charge in order to ensure excellence in product and delivery.
I am often quoted for saying that “undervaluing your products and services makes it impossible to deliver legendary service.” There is no way, if you under charge, for you to give them what they need to receive to see you as the only solution whenever the problem you solve shows up.
So, you may be asking yourself this question: how do I set prices that are going to add value to my clients and add profit to my business? This is exactly what Monica wanted to know when she submitted the question we are featuring in this week’s episode of Incredible Factor TV.
“Hi Darnyelle. I am so confused about how to set my prices. I have looked at what other people in my industry charge and tried to make my prices the same thing, that didn’t work, no one bought. I’ve tried to just pick numbers that feel good to me and that didn’t work either. Help! I’m at my wits end and I have no idea what I should be charging but know that I need to make money in my business ASAP!”
In the episode, I share with Monica that you can’t just pull your prices out of your Woo-Ha and expect to gain traction in the marketplace. Pricing your products and services take strategy and intel. You have to be crystal clear on the vision you have for your life and business as well as a few other keys that influence price. And yes, I think it’s okay to have an idea of what your market will bare but that alone does not a pricing strategy make.
Here’s what else you need to consider:
Consideration Number One: Which pricing strategy is best for your business?
a. Lower pricing which allows you to position yourself for more of your market but with a known loss. With this strategy, you know going in that you are under pricing but you’re hoping to get a ton of clients, which will offset your low prices to begin with. Here you can choose this strategy if your goal is penetration, predatorial or expansion in your market.
b. Higher pricing which makes your product exclusive and desirable. When you set your prices higher, they are at a premium and you know that everyone will not be able to afford them but you are clear that those who can afford them will choose you because they buy into the adage that we get what we pay for and higher prices are synonymous with luxury. Here, image, value or quality and opportunity play largely into your pricing strategy.
c. Parity pricing which allows you to “flip-flop” your prices based on your need at the time. Here, you focus on being at the right place at the right time. You are looking into “going rate” pricing strategies that target to a specific demographic within your industry and/or you marginalize your prices just to cover your expenses.
Let me also say here that depending on the type of product or service, there may be a clear pricing strategy that is best for you.
Consideration Two: What overhead expenses must you consider and meet in order to perform the job with ease, grace and exceptional service levels? Will you need to have people assist you to complete the job? Have you assessed the true amount of time it will take to perform the job? Have you taken into consideration what your time is worth as it pertains to your life vision and what makes your business profitable? What about your profit margins? Are they consistently at 65% or better? This is where many entrepreneurs/small business owners lose because they don’t know their numbers. Keep in mind that if you are a service based business owner, time spent working with a client or on a project is time you can’t spend to gain a new client so you want to ensure you price services appropriately.
Consideration Three: What will your market bare? Here is where it gets very tricky. I recommend that you start by conducting some market research. In fact, do some direct (people who do exactly what you do) and indirect (people who don’t do what you do but do serve the same clients you serve) competitor research and learn what they charge and what is standard in your industry. Usually, you’ll uncover a range of prices. Where you fall out in that range will depend on:
a. The amount of social proof you have to validate that you deserve to charge what you charge
b. How confident you are that you are worth that much
c. How much your marketing copy speaks to your differentiation in the market
When you take these three things into consideration, setting your prices should become clearer. But, I do recommend that you review the internal and external data that you’ve collected while taking your life vision and business goals into consideration so that the prices you set reflect who you want to be in your industry. And, you might want to work with a business coach or consultant for guidance in ensuring that your prices will allow you to achieve your life and business goals.
What’s your two cents? I want to hear from you! How did you set your prices? Are you still struggling with your price points? Do you have a tip or strategy that could benefit Monica or others who are where you once were? Share your two cents below by leaving a comment right here on the blog.
Struggling with how to set your prices? Perhaps you should consider joining us at our next Get Paid: How to Package, Price and Successfully Sell Your Incredible Factor. Learn more here.
©2013 by Darnyelle A. Jervey. All Rights Reserved. Darnyelle A. Jervey, MBA, The Incredible Factor Speaker, Business Coach and Marketing Mentor, is the founder of Incredible One Enterprises.com, Incredible Factor University® the Leverage Your Incredible Factor System® a proven step-by-step program for more clients, more income and more leverage in your business. For more information and a FREE audio CD “7 Critical Mistakes Entrepreneurs Must Avoid When Unleashing Your Incredible Factor So You Attract More Clients, Make More Money and Gain More Leverage” just fill out the form below.