Pricing strategy — it’s not all just about the numbers.
That might seem hard to believe, but it’s true.
It’s as much about how you value yourself and your business.
Okay, so you have to get the numbers right, but if you don’t have a true, confident appreciation of your own value, you can get your pricing strategy wrong.
It’s a complicated subject, so let’s look at in two parts, starting with some rules for the practical side and some suggestions for the more reflexive aspect of pricing.
Rule 1: Know your costs
Costing is essential. You’ve got to know your costs.
What is the cost of the labour itself?
What costs do you have to cover when you provide your service — admin, transport, materials?
What about overheads such as electricity, rent, office supplies and other similar costs?
You need to factor costs into the price of your services.
The price may seem high because of it, but you’ve got to be practical.
You’ve also got to be confident. There will be those who complain when they see a price. They’ll want you to lower it.
That’s why you must value yourself. You really shouldn’t work for less than you deserve.
Rule 2: Know what your competitors are charging
Competitor research is crucial. You’ve got to know your market.
Websites… friends or family who have used a competitor’s services… phone calls… you can get information on competitors’ prices from all sorts of sources.
This, too, is where you truly need to understand your worth and that of your business. If you’re trying to compete on price with your competitors, you’re playing a mug’s game.
What you’ve got to do is work out what makes your business truly valuable.
What makes it different? Do you offer a different service? Do you provide the same service as your competitors but in a different way?
This is where you can compete — and it’s also where you can attract customers who’ll be loyal to you in the future.
If a customer comes to you because of the price, will they stay?
Rule 3: Understand how your customers perceive your value
Ever heard a customer exclaim in disbelief: ‘How much?! I’m not paying that’?
Maybe you’ve said it yourself sometime.
It’s because the customer has a certain perception of the value you offer. You might think the value lies in how much time you spend on a job or project, whereas your customer could base their perception of value on the result.
It’s a clash of perceptions.
Again, this is where it’s important to be confident. You don’t want to get a reputation for ripping people off, no, but you do want to charge the amount you’re worth.
What you don’t want to do is price yourself too low — unless you want your business to fold.
Understand how your (potential) customers are perceiving your value and let it help you to find the right price.
Just don’t let them have the final say in it.
How do you perceive your own value?
As I’ve said, it comes back to how you value yourself and your business.
The question is, where do you start?
Here are a few pointers:
Start with your own values
To work out your own value, you must know what you want to achieve with your business.
You’ve got to think about why you started out on this journey. Who, exactly, do you want to be?
Decide upon your values.
Are you looking to be authentic?
Are you aiming to provide a high(er) standard of customer service?
These are just examples, but your values will determine how you run your business.
What do your clients think of you?
How many people do you help each day?
That’s right: a lot of people will have benefited from working with you or from hiring your service.
Your business will have made a real difference. Perhaps that difference is to their own business. Perhaps it’s to their life outside the workplace.
It’s time to give yourself that credit.
Go out there and get some testimonials from happy customers. They feel good about your service — and you’ll feel good about it, too.
One of the most important ways to build trust is to make good on your promises.
If you say you’re going to do something, see it through.
When you say, ‘I’ll have that ready for you by Friday’, then make it so.
This shows integrity. It shows you care about your customers and that you don’t want to let either them or yourself down by breaking your promises.
When you keep your word and customers pay the prices you deserve, business will be even more fun and you’ll truly realise your worth.
A few final thoughts on pricing
You’ve got to be practical when you price your services.
It goes beyond that, though.
You’ve got to reflect on what you and your business are worth.
That’s just as important.
If you don’t do that, you’ll miss out on what you deserve.
And you certainly don’t deserve that.
Know your value. Know your business’s value.