Pricing is tricky. Set it too low, and your profitability plummets. Set it too high, and your target audience will correct it for you – by buying elsewhere.
Often, new businesses will set prices too low, concerned that high prices will scare off new customers. Established companies often haven’t revisited pricing, steadily increasing prices every year, only to be surprised as their market share is taken by more efficient businesses and newcomers. Frequently, our clients who are amazing at delivering services simply don’t know the current market rates, and are shocked at how far off their pricing structure is. Here are three steps to ensure that you are setting the best prices for your products and services, now.
- Establish The Market Rate
Do your research. Get out into the market. Shop the competition. Ask your current clients what your competitors have offered them that have tempted them to switch. Ask potential clients who have chosen not to buy from you, how your pricing compared to the competition. Ask your trade or professional association for their latest survey on pricing. Finally, just google it. There is almost always a pricing survey or writeup online, for free or for a relatively low cost.
Typically, our researchers can determine the market rate for your products or services with just 2 – 3 hours of research time. It shouldn’t take you too much longer.
- Consider The Value You Provide
New and less experienced? You’ll probably offer your services at somewhat below the market rate. Been there, done that? Your level of experience will enable you to make faster, more accurate analyses and provide a better quality product in a shorter period of time. So, you’ll probably price somewhat above the market rate.
- Check Your Costs
An accurate understanding of exactly what it costs you to deliver a product or service is essential. It’s a crucial element to the long-term health of your business, and to ensuring that you make a profit. Overall, your services should be priced at a level that enable you to cover direct costs and overhead, and to make a reasonable profit – so that you can continue to invest in delivering great products and services.
If you work with us, we’ll also show you how to calculate the value you provide with your products or services, and how to communicate that to your customers. Our clients are typically amazed at how much value potential buyers will place on their products or services, and how much they are willing to pay. Once you have a strong value proposition, it can be astonishing how much easier it is to close a sale – without discounting.
March 27, 2013