My Old Pricing Strategy
When I first started my company someone asked me how much I charged for my services. I had NO IDEA how to answer. I told them, “I normally charge $100, but I would be willing to negotiate if that seemed too high.” We negotiated. I spent 2 days preparing, spoke for 1 hour and was paid $50. My teenage daughter makes more than that babysitting.
Pricing should be one of the first considerations when building a company. If a potential client asks how much services / products cost, there should be no hesitation or wavering.
A good pricing model is an indication of three things:
- a good value
- an established brand
- professionalism
There are 4 pricing models to consider
- Wal-Mart – How low can you go? People shop at Wal-Mart because the prices are lower than most other places. There are lots of products and the prices are constantly slashed. The challenge with this model is small businesses can only go low without cutting into their operating costs. If you choose this model, proceed with caution. Once you drop prices to a certain point, it’s hard to explain why they are being raised.
- Value – I am a “Nordy for life.” I LOVE shopping at Nordstrom. The customer service is second to none. Similarly, their products are top of brand – and they know it. The prices are higher, but they consistently deliver value in all of their products and services. Free shipping. No hassle returns. Clothes that last a long time. I pay $125 for a pair of pants when I know can get a similar pair for $40. Why? I know they are worth it.
- Freemium – Many of the apps in Apple’s App Store are built on this model. A person is given a product or service, but they can only use it for a period of time before being charged. They may also be given a “lite version” that limits their use. Once they are hooked, they pay for the full version. Dropbox and Evernote use this model.
- Bundle – Some clients appreciate a bundle package of services. There is one price for a single use, but a special price multiple engagements.Why buy the double cheese burger alone when you can get the fries and drink (and toy) for only $2 more? The client appreciates the discounted price. The service provide appreciates a guarantee of multiple engagements.
Finally, write down the cost. Publish prices on your website and social media sites. Hand the client a sheet with the prices listed, if they ask for it. Consider emailing it to them as well. The electronic version makes it easier to share with others.
Know your customers and what they will pay. Know the market. Knowing these will help you determine what your products and services are worth.
Scientifically Speaking, of course.
Next Week: What I Learned from Failure
