The goal of your business is to make a profit, and pricing your product or service right is a key factor in whether you make money and enjoy time freedom or lose money in spite of working long hours.
Finding the ‘optimum price’ is a balancing act. Ask your customers to pay too much and, well, they won’t!
But if you set your price too low, you’ll either be viewed as less valuable than your competitors or you’ll be overwhelmed with too much low-price work, or both!
Here are some tips to help you price your product or service right:
1. Research the market. Before you set your price, find out what the market can bear. While it is important to factor in your costs, if the final price is more than your potential customers will reasonably pay, the price is too high and you’ll need to work on lowering your own production costs.
What are your competitors charging? Look closely at what others in your industry are charging for similar offerings and decide whether you want to match or beat their prices.
You’ll need to look at more than just price, however. Consider what may be going on behind the scenes in their companies to make their prices possible. If they have proven systems and manpower in place to deliver quality work at a specific price point, be sure you can produce the same result with your current business structure.
2. Use Pricing Tiers. Setting up pricing tiers simply means that you charge different prices for variations in your products and services, and it is a powerful way to appeal to different segments of customers in your market. You’ve seen this in action yourself; think of the shipping options when you make an online purchase!
Another benefit of tiered pricing is that it can limit how intensely your potential customers compare you with your competition; they essentially compare you with you rather than you with someone else, because you are offering them a variety of purchasing options.
Add value as your tiers increase in price. This value could be in terms of:
- Speed (consider our shipping example)
- Quantity (more of something – such as hours of work)
- Customization (giving them more options in what they receive from you)
- Duration (the product or service is available for a longer period of time)
- Access (the higher the tier, the more access they have to something – and perhaps that something is you!)
3. Find the right prospects. Finally, it doesn’t matter how perfectly you’ve priced your product, if the right people aren’t seeing it, you won’t sell it.
Be sure you know exactly who that ideal customer is – the one whose problems you have a solution for and who is willing to pay your prices — and make sure they are aware of your offerings.
And take advantage of networking and joint ventures. Those competitors we’ve been talking about? They can become a great asset when you work together to share referrals and promote each other’s special offerings.
One last tip: be flexible. Pricing products and services is not static; it will need to adjust with the changing market, so plan to periodically revisit your pricing structure and make changes as needed.