How To Price Your Products And Services
Knowing how to correctly price your products and services is essential to the long-term longevity of your company.
Price them too high? You won’t get enough business to stay profitable.
Price them too low? You aren’t earning what you’re worth and quite literally selling yourself short.
Today we cover everything you need to know about the process.
Main Problems When Pricing Your Products and Services
When deciding what to charge, there are two main problems companies face. These problems can affect companies across all industries.
1) They don’t know their value as a company
How does the product or service you are selling help change your prospects’ lives? What is the end result they can expect when paying you?
Accurately answering this question requires market research. Skip this step and you as a company have a far more difficult time knowing just how valuable you are. This makes it next to impossible to charge what you should.
Focus on how your customer or client will change after doing business with you, and the tangible results they will receive, and you will start to view pricing your services in a different light.
2) They are afraid to raise their rates
“Increase your prices” is one of the most common pieces of advice consultants give to companies. And for good reason. If anything, your company is likely undercharging. In fact, according to several studies, many companies would be able to justifiably raise their prices simply because of inflation.
There’s no reason that raising your prices should you make you uncomfortable. If you’ve done your market research, you know your value. Assuming your product or service is a good one, the price your customer pays should be a steal.
So err on the side of charging too much. It’s easy to bring prices down if you aren’t making many sales. It’s far more difficult to raise them if you’ve already cemented a lower price in the heads of your audience.
5 Questions to Ask When Pricing Your Products and Services
Let’s now dive into the main questions you need to ask yourself. These will help you think about your offer and will make pricing your products and services that much easier.
1. How much do you want to get paid?
Yes – this is the first question you should be asking yourself. You’re in business to get paid. Sure, you may love what you do, and may very well be passionate about the service you provide.
But that’s not going to pay the bills. How much your customers pay you will not only reimburse you for your hard work, but is the determining factor in how effectively you are able to serve them.
So ask yourself first and foremost how much you want to get paid. Work backwards from there.
2. How much are potential clients willing to pay?
Now that you know what you want to get paid, it’s time to investigate what your clients are actually willing to pay you. What is the going rate for what you provide? What is the high end of the price range? The low end? Finally, what kind of resources does this client have? Are they a big company that has a history of hiring agencies, or a smaller organization that likely doesn’t have the budget for extensive services?
These are all important factors in determining what you can actually charge. Once again, answering this will require a fair amount of market research.
3. What differentiates you from the rest of your competition?
It’s not enough to market your company as a “better solution.” In fact, the company that makes the most money is often the one that positions itself as different – not necessarily better.
Plus, if you are competing against huge brands with more resources, it can be difficult to position yourself as better or more high quality. So what is it that makes you different? Getting clear on this will also help you with your marketing copy.
4. What is the outcome you are providing to your clients?
One of the most common copywriting tips is to focus on the benefits instead of the features. Features are specific information about a product; benefits are the desired outcome.
It’s the same with your services. For example, at Lúgh Studio, we build websites that help businesses and nonprofits with their visual branding. But that’s not really our main selling point. What we really sell is the outcome of a new website – more traffic, a better user experience, and more income or donations for our clients.
Ask yourself not what your product or service is worth, but what the outcome is worth. That will allow you to price your services more accurately.
5. Do you offer any sort of guarantee?
People want as little risk as possible when they spend money. Think of your own buying habits. The products and services you are most likely to purchase are the ones that have some sort of guarantee. A free trial or a money back offer, for example.
These are things you should think about when pricing your own service – especially if you want to raise prices. The higher the price point of your service, the better your guarantee should be.
And the most powerful guarantee of all? A guarantee of results. This may be difficult to do depending on the service, so be sure to check out this post for some ideas.
Are you an enterprise, nonprofit or small business looking for help on your website? Give us a shout! We provide a free consultation. Email us at email@example.com or call us at (718) 855-1919!