When you’re selling personal services and non-commoditized products, pricing strategy is always an issue.
In fact, whenever there really isn’t an accessible, public marketplace for something, pricing can be challenging.
Today, let’s talk about 5 different things you should consider, to determine price:
1. Your costs, and your tolerance and timeframe for profits
One of the easiest ways to determine price is to figure out your costs, and then back into the number.
So for instance, if it costs you $700 to get a new client (based on your advertising expenses), and another $300 to deliver your services, this means you need to charge $1,000 to break even.
Now in some cases, if you have a healthy back-end to your business, pricing like this makes perfect sense. In some cases, your back-end is so strong and so predictable, it even makes sense to go negative on the front end (charging less than $1,000 in a case like this).
In other cases, you can’t afford to break even or go negative.
So your costs and your timeframe for profits, definitely need to be considered.
2. Your product or service itself
If there are readily apparent standards of comparison in the marketplace, then you need to at least consider them.
If you want to price significantly higher, that’s not a problem at all. All you need to do, is two things:
First, be smart about it. Make sure you know your sales funnel and how each pricing jump impacts profitability not just at that particular level, but across all levels or touch points in your process.
In other words, consider individual pricing across your entire product mix, as it impacts NET profits on individual and overall sales.
So for instance, if you’re a therapist and it turns out you can charge $300 for your first session, but less people wind up taking the session, which impacts your ongoing regular and steady weekly visit load… then maybe you’re better off charging $250 instead.
Second, if you’re going to charge more money, make SURE your marketing and your sales copy is effective and clean enough to support the extra load.
Bad marketing is usually the first sign of low net margins.
3. Your customers or clients
How do they think about your goods and services?
What’s important to them?
Where do they see you fitting in the spectrum of their life or of the marketplace?
And how do they typically view the payment process?
For instance, with respect to the last question, some goods and services are perceived only as a “monthly nut” type of expense.
And in a case like this, you’re better off not giving a full price, and instead, just charging “$97 a month”
4. Most important – testing
No matter who (including me) says what… if you’ve done successful testing, then follow those test results.
Nothing beats optimizing your prices better, than what your experience has shown you to be true..
5. Lastly, as I alluded to a minute ago, your marketing is always going to have the strongest impact on your price.
The more effort you put into your marketing, the more you can typically charge. And of course, the less effort you put into it, the less you’ll be able to charge.
But be careful – I’ve seen some situations where something was over-marketed, and then when you got to the price… the price was too low to support all that good marketing.
So it leaves the buyer questioning the purchase. As in, “Why’d they work so hard to make so little money? What’s the catch here? Is the product or service really not as good as they are saying?… Is this a scam?”… and so on.
Go through these items a couple of times, and think about your own pricing – they’ll help you tremendously.
Now go sell something, Craig Garber
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listening to:
Troublemaker – Crippled Black Phoenix (2010)