What is your right Price?
pricing. seriously, i think this is one of the most challenging parts of building your own little biz.
last week i recommended an ebook called earn what you deserve. this book does not give you a magic formula for figuring out your pricing. what it does do is tackle the underlying issues you need to consider before you can really charge what you are worth.
let me say that again. no pricing advice in the world is going to help you if you do not have a sense of the value of your work.
earn what you deserve is going to help you do that. with it, you consider what it means to be a biz owner, tackle your own beliefs about money and finances, figure out the true cost of doing business, look at new ways of marketing and selling, and start to build your own sense of value in your work and your product. once you have done that, then what?
well it is time to look at what you have been charging for your product. as promised i have compiled a list of tips, advice and strategies from all over the place that may help you with this. this is not a step-by-step formula for figuring out your price. (if i ever find the elusive, magic step-by-step formula for pricing i will share it immediately!) what i have done is a lot of research into different strategies and taken the bits and pieces that make sense to me and apply them to what i do. so i am sharing those bits and pieces with you here.
first, let’s get your head in the game…
~ you have to value your own work. or no one else will.
~ cheap prices give the impression that your thing is cheap. (cheaply made, cheap in quality, cheap in value etc.)
~ your low, low price should not be the thing that makes you stand out among competitors. this is not sustainable or wise. someone else can come in and undercut you in a second, and if your only thing is that you are cheap your customers won’t stick with you.
~ the quality of your products and services will not only be judged by your prices but also by the prices of the products and businesses you associate with. choose wisely.
~ stop apologizing for your style, your product, your methods and YOUR PRICE. if you do not have confidence stating the price for your thing, no one is going to be willing to pay that price.
~ as part of your market research you probably looked into what other people are charging for similar things. that’s a great tool for getting a snapshot of what is happening in your niche and seeing what others are doing with similar products and services. (maybe you can offer something they are not!) but using someone else’s advertised prices to determine your pricing strategy is a slippery slope.
~ a comparison to what someone else is selling and charging does not factor in YOU – your level of expertise, your costs, your time, the value your customers receive, where you get your supplies etc. etc.
~ you do not know their costs of doing business: do they have 5 nieces helping them make their thing for no charge? do they have to rent a studio space? do they have to pay for childcare so they can work? do they frequently discount those prices?
~ comparing is looking to external factors (what other businesses are doing) for answers to internal questions (what is the value of what i do? what is the right price for me?). you need to get those things sorted for yourself.
~ you will probably never feel comfortable stating your prices if you based your strategy on what someone else is doing. it has to fit your brand, be based on your value, and feel like your right price if you are going to have confidence in it.
true cost of goods…
~ take the time to calculate the true cost of doing biz. (you will have done this if you readearn what you deserve.) this is not just what it costs you to make your thing (supplies and materials), but all of your extra and yearly expenses (insurance, website, bank fees, licenses, office supplies, ads, packaging, postage, etc. etc.)
~ you can determine a price for your thing by taking the cost of goods and multiplying (by 3, 5, 10 etc.) it to get a profit. just be sure you are including an amount to cover your cost of doing biz, an amount to put aside for your taxes, an amount to pay yourself, an amount to go back into growing your biz and an amount to cover any possible discount you might offer (facebook promos, market specials, repeat customers, package deals etc.) or commissions you might share.
~ take time to figure out your average monthly sales, your yearly earning goals, and the average number of hours you work. calculate how much you would need to work and sell to cover your costs and meet your goals. it can help you determine how much you would need to charge.
~ your thing might be a physical product, an hour of your time or some combination of both. it can help to weigh both factors when you are coming up with a cost for your thing. time is money! things can cost a lot in materials but take no time, or cost very little in materials and take a lot of time. don’t forget to factor in your time.
~ keep it simple. a size 2 dress is priced the same as a size 16, regardless of the amount of materials used. no need to get sticky about exact cost for the square cm of materials; round to an average or use the highest amount for your pricing. try just having a few catagories (small/med/large, low/mid/high, basic/premium/deluxe etc.)
~ pricing is not just based on cost alone. you also need to consider value. value is the total sum of what customers get from dealing with you. this can include quantity, quality, expertise, time, attention, and more. here is a great post from a photography blog that i think exemplifies what value means.
~ is there a way to add more value to your product or service without increasing your cost by much? this will allow you feel more comfortable with what you need to charge and clients will love the added value.
~ clients aren’t aware of and frankly don’t really care what your true cost is. they have a problem they need solving and they probably have a price in mind about how much it should cost them. if you consistently solve their problem, if you offer them awesome value and service, they will pay you whatever you ask.
~ consider a la cart pricing vs package deals. packages are a great way of offering added value to your products and customers feel as though they are getting a good deal.
~ studies show that people often go for the ‘middle’ product or package so keep that in mind as you are building your packages.
~ have an ‘a la cart menu’ for your individual products and/or services that have quite a high mark up – if people just want to buy one thing from you it will still be worth your time, and this high mark up allows you to offer package discounts.
~ make a small package based on the minimum average sale you would like to achieve and offer a discount that will still allow you to make your minimum profit goals. a medium package should offer great value to the client and be priced so you make your ideal sales goals. a large package should be for the client who wants it all. offer them the works at a premium price which will still be a lot less than if they had ordered each item separately from the a la cart menu.
~ clearly show people how much money they save on each level of package. people love to feel like they are getting a crazy deal!
~ try to incorporate both products and services into your packages for extra value. an a la cart item might be a ‘what you see is what you get’ product while a package could offer customization or a one-on-one consultation.
~ try to be creative in your packages. list every possible product and service you could offer a client and see how you can use them in your packages.
trust your gut…
~ these strategies are all fine and dandy but if you are not feeling comfortable with the numbers you get you aren’t going to be confident in charging those prices. do not underestimate the value of your intuition. if you have really been focusing on your ideal client and are aware of what is going on in your industry then you will be attuned to what feels right.
~ mark at the heartofbiz.com has a wonderful strategy for finding your right price. i love it because it speaks to the discomfort we sometimes feel over a price that we have arrived at just by plugging numbers into formulas. mark’s method involves more heart and intuition, and it might suit you more than a formula does.
~ once again, no price will feel right if you do not value your product or your business enough yourself. you need to have a strong sense of what you are worth, and be determined to earn what you deserve. get there first and the right price will be much easier to decide and live with.
consider your brand….
~ just like with any other aspect of your business you send a message with your price. think about your branding message. what are you saying with your brand? (for example…. quality, luxurious, timeless, reliable, trustworthy, innovative etc.) does your price point match this message?
~ be transparent about your prices. publish them on your website, facebook page etc. potential clients should be able to tell right away if your product is the right fit for them and there is no sense in you wasting your time for someone to tell you your price isn’t right.
~ the value of your product, the quality of your product, the price of your product, the characteristics and needs of your ideal client, your marketing strategy and your overall brand message…. these things should all should line up!
~ once again, cheap prices give an impression that your stuff is cheap. is that the message you want to send with your brand? then why are you sending it with your prices?
a few random points….
~ when you get too busy, increase your prices.
~ some people should find you too expensive.
~ time is money. time is money. time is money. yes, get that in your head already!
~ you will get to a point you can’t just make more stuff in order to increase your profits. you won’t have enough time. find other things you can sell, other income streams.
~ focus your marketing efforts on your big money makers, the stuff you love doing, or the big draws that get people into your shop and buying.
~ charge more for stuff you don’t really like doing. if someone asks you to do something you don’t like to do or don’t have time to do, quote an outrageous price. then if they take you up on it is worth your while!
~ combine things that cost you a lot to make (or take a lot of time) with stuff that doesn’t to create better value for a price.
~ make stuff that people really need. solve problems. it is easy to charge more for stuff people really want, than for stuff you sell just because you love it.
~ start as you mean to go on. even if you are ‘just starting out’ set your prices where you want them to be once you are established and offer a discount for clients who support you as you build your biz. be clear that you are in the ‘building phase’ (photographers call this ‘portfolio building’) and that the discounts will only apply until a certain date when you launch your biz.
~ terms like ‘sale’ or ‘discount’ can sometimes undervalue your product. try using words like ‘special VIP prices because you are an important customer’ or ‘special market prices for stall holders and guests only’ or ‘special membership prices’ or ‘a special price to say thank you for passing my name on to 10 friends’… well you get the idea
~ you don’t have to give discounts and have sales or let your friends and family have free suff. part of valuing what you are worth might mean that you just say no to freebies. or maybe you say yes, it’s up to you. either way, make your choice and stand by it.
finally, question the rules…
(just so you know, this is my favourite thing to repeat to myself when i am struggling to wrap my head around any strategy for business: question the rules.)
~ just because ‘everyone else’ is doing it one way does not mean you have to as well. (packages, discounts & sales, multiply by x to get the price, etc. etc. etc.) do what feels right for you and your biz. there is no right formula, no fixed magic number that works.
~ maybe think outside the box to find a strategy that suits your style. some creative pricing strategies i have seen are: letting the customer name the price, letting the customer build their own packages and doing a bidding or negotiating system.
~ some of this advice might be feel like absolute crap to you and your biz. don’t struggle to fit your biz into someone else’s formula. pick out the things that feel right or that will work for you. ditch the rest. =)
ok – that is my mish mash of pricing tips and advice. i hope something in there helps you find your right price. do you have a tip, a bit of advice or a strategy you can add to this list? please leave a comment, i would love to hear from you!