The secret to pricing your product or service

Australian notes

When my partner and I went into business for ourselves, we figured we had a plan that couldn’t fail. We were both right and wrong.

The bones of the business – the structure, the services, the goals – were great. Although they have changed somewhat since we began through the growth and evolution we have experienced, the bones have remained mostly intact. And we have created real value in what we do by focusing on who we are at heart and filtering this through our business. Our point of difference is us.

But when it came to placing a value on what we offered, we got it wrong. We figured that without a portfolio of existing clients, we couldn’t really prove we were worth our salt until someone gave us a red hot go. We also felt that because we were in need of cashflow as soon as possible, then any money would do as long as we got it fast.

So when pricing our services, we looked at ourselves from a negative perception. This was a mistake! We valued ourselves so poorly that, looking back, it made us look like amateurs who were desperate for work! The result? The clients were not encouraged to respect our expertise, we had little cashflow so we couldn’t afford to set up professional systems, and the work we produced on a few occasions actually cost us money before it made us money, because we were so very keen to avoid producing amateur work.  Oops.

What I know now that I wish I knew then

Look at what makes you special to the client when pricing your products and services.

What is it that makes them want to engage you? Why is your work a standout and what do you offer that no one else can? Always, always think from this perspective rather than thinking of reasons why they wouldn’t want to pay you. Unfortunately at first we thought about the difficulties we would have in gaining clients, rather than the reasons they would want us. (I should add this changed after about 2 jobs – we are fast learners and we quickly understood our point of difference and why it made us special). As soon as we put more faith in ourselves and quoted potential clients a sensible rate, we found that because we had considered so heavily why we were worth the requested amount, we actually sold ourselves better and attracted a higher level of client.

Consider your value, not just your service

OK, so you can build a beautiful website? You make delicious food? It’s not a secret that you are not the only person who can offer these skills to prospective customers – so what value do you offer in addition? Is your aftercare service unmatched by local competition? Do you package your food in specialised containers? Maybe you have experience in their industry and can offer that edge over your competition? If you have selected to offer a product or service that you know you can deliver as high quality, you must consider the value you contribute and look beyond the service or product itself. This is what makes you worth your customers’ money.

It’s also worth mentioning that if you are looking at placing a higher, more premium value on your product or service then you need to be able to back it up.

More expensive doesn’t actually mean better – unless the value in the return for the customer is regarded as premium. There are two major aspects of business that drive your prices: Value and demand. If you are not able to offer a unique value in what you do or produce, and there is little demand for you and your business, you have to ask yourself if you can truly justify the price you are asking for.

In short, while it’s important to consider your industry and competition when placing a value on what you offer to your potential clients or customers, you must consider more than the product or service itself.

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