March 2019

11
Mar

PRICING STRATEGY: KEEP IT SIMPLE

Don’t overcomplicate pricing. When it comes to setting prices, many people get overwhelmed.

Pricing is based on many factors. Ask yourself: How are your services delivered? Hourly? One and done? In the service industry, packages are most popular. What products do you offer? How are you positioning your offer (mass appeal, high value, luxury, etc)?

Three pricing models for service businesses:

  • HOURLY: your client pays for your time
  • PROJECT: your client pays for a tangible deliverable such as a logo or a time-based deliverable such as consulting — this is the easiest price model
  • RETAINER: your client pays a recurring monthly amount for a specific number of hours whether used or not

Three general pricing strategies and the +/- for each:

COMPETITIVE: Charge standard industry rate, plus or minus. This is easiest to start, establish price aligned with competition and increase as your reputation grows.
+you know what the market will bear
-clients may be willing to pay more based on value and positioning

PENETRATION: price your product or service at your lowest agreeable rate to build a base of clients or consumers
+get clients quickly
-likely you will be undervalued

NEED: what you require for income (what do you want to earn, and divide it by hours for service or units sold for a product)
+you get what you need
-this doesn’t account for all time or all value

A HYBRID approach with these strategies is optimal. Determine a price for your offer or package, then discount to build your client base and get results, then reduce the discount to raise your price as demand grows. Alternatively, add value with bonuses. This keeps the price for your product or service at the highest level.

Consider who you serve and what the competitive arena of alternative solutions available to them. This will give you an indication what the market will bear and you can adjust for penetration and necessary income. It is important to price at the highest level because you can always discount or reduce, which is easier than to raise prices once established.