I know, pricing is hard and it can be quite anxiety provoking as you question your value and worthiness as a business owner and wonder if people will be willing to pay your prices. And it seems so logical to price lower than your competition (especially when starting out and are lacking in confidence) and it is easier on your ego to play small and keep your prices way down. But being cheap and changing less than the competition is usually an unprofitable strategy.
It is time to stop underselling yourself and price according to your VALUE.
Firstly, you’re in business and you are supposed to make money.
Secondly, pricing is part of your branding. If you price cheap, what is the message you are giving to your potential customers about your business? Your products and/or services are poor quality? Many business owners are in business because they love what they do and are passionate about their craft and as a result provide very high quality, high value products and/or services. So price accordingly!
Being the cheapest doesn’t guarantee the sale, people buy for many other reasons other than price, such as:
- Market knowledge
- Product/service availability
- Customer service
- After sales support
- Social/environmental responsibility
Value based pricing strategy
Many people are not actually looking for cheap, they are looking for the best fit for them and make their purchasing decision based on the perceived value. Often people will prefer to pay the higher price for a service or product that is similar to others because of the perception that the high priced offering is much more valuable.
This is known as value based pricing, whereby the price of a product or service is set based on its perceived value to the customer. The greater the value you provide, the higher the price you can charge.
Get clear and find ways to add value to your products and services. Price your products and services to make a decent profit. And clearly communicate your value and how you can make a difference to your customers. It is up to you to educate your potential customers the value of what you can do for them.
Define your ideal customers (someone not looking for cheap), develop your making strategy to increase the perceived value of your offerings and only market to your ideal customers.
Don’t be cheap, price according to the value you provide. You are in business to make a profit.
Other factors to look at when setting your prices:
When you are setting your pricing, don’t forget to take a close look at exactly how much it costs to provide your product and service. That’s not just your raw materials, you need to include all your overheads such as rent, phone, insurances and marketing. You might be surprised just how much it costs to provide what you offer.
Don’t disregard your competitors pricing strategy. Be aware of how they price, but charge the value of what you offer, don’t price the same, or less than, your competitors. Your offering will never be identical to your competitors; each business varies in its strengths, weakness and perceived value to others.
When you define your pricing strategy, ensure you see the value of what you do, focus and promote your strengths and leave cheap to others.