How Do I Price My Products And Services?
Pricing your products and services as a business owner can be a confusing task. But I hope to clear it up with a post to give an overview on how you can do it confidently, your way.
With your ‘End Goal’ in mind, for you, your customers and how you want your brand/business to be perceived in the marketplace, find a price that feels good to you.
That is three perspectives; that covers a lot of ground. It looks inside your business and life (your perspective), looks from the outside in (your clients) and looks at the overall picture (the industry). And it eliminates the idea that there is only one way to do it. You then have choices. You can then take this information and make a confident decision on your prices.
What’s your End Goal? A wage, a financial safety net, cover business expenses, tax, emergencies, upgrades and/or savings? How do you want to feel in life? What do you need to do to feel that way? What does your business need to provide for you to feel that way? How do you want to feel in business? What qualities do you demand in your work and products? Can you quantify this on a monthly basis?
YOUR CUSTOMERS PERSPECTIVE
- Why do they pay you; what value are you bringing to the exchange?
- Maybe they don’t want to or can’t complete the task themselves?
- You can do it better, faster, cheaper?
- You provide peace of mind, safety or security?
- You’re satisfying an emotional need they have? A physiological need?
- You’re providing an experience they couldn’t replicate?
These ideas are not always quantifiable in monetary terms. Really, what is your clients’ peace of mind worth? Or their health? We don’t need to put a number to it; we just need to be clear that when they are paying you money, that you are returning something of great value to them.
If you don’t understand this exchange, it can be difficult for you to price at the level you need to design a sustainable and profitable business.
This perspective is not about comparisons…it is not about deciding that your price should be higher or lower than anyone else’s. Or more specifically, it is not about using someone else’s price as a guide for ourselves.
This is about understanding where you sit in the big picture and ensuring that your product, service or brand sits in the right ‘position’ within your industry. When our brand is incongruent with our pricing, it causes consumers to be a little confused or sceptical of what we’re offering.
We would be hesitant to purchase a fair-trade cotton shirt that cost less than a sweatshop factory made shirt (premium product, low-cost pricing strategy). We would be just as unsure about paying top dollar for jewellery made from plastic with no real stones, crystal or metal (premium pricing strategy, low-cost/low-value product).
We unconsciously question when a brand (or story the brand is marketing – essentially its values) doesn’t line up with the price.
WOULD YOU LIKE TO KNOW MORE?
I write emails about making and managing money in business when you're a kind, considerate and empathetic business owner. I speak about our monetary behaviour and practical finance business advice. We look at money from all angles.
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