Pricing is difficult. How do you determine how much to charge? Do you compare your prices to others in your industry, then add 10%? 5%? What if you could set your own pricing strategy, determined solely by the value you bring to your customers? Charles thought I was nuts when I brought this up.
“I know what my customers will pay me, and if I raise my prices, I’ll lose them.”
My answer to him went something like this:
"Of course you’ll lose them if you raise prices but give no additional value in return. But can you agree that prices raise when you receive more? I’m talking a little about raising prices, but more about making your services so important and valuable to the customer that they’d never think about leaving you."
It doesn't surprise me that most entrepreneurs don't know how to price for their service or their product. Most of the time, they are still thinking like a customer. Which is important, but one-sided. When you price a service there is more to it than just, "What can I get someone to pay for this?"
I thought I knew how to price for the longest time. But when I came to dread the question, "So how much?" I came to the realization that I had no clue. What caused my stomach to churn and my speech to stammer was that I had no real foundation for where these "prices" were coming from. Which meant that if I was pushed at any point, everything became negotiable. Then I found myself doing work I didn't really want to do for less than it was worth. And that was frustrating.
If you have a franchise, you have limited opportunities to change your prices. But for those of us that don't work within a franchise environment, pricing strategies feel a little like the "What came first, the chicken or the egg" exercise. You don't know what people will pay until you put something out there, but you don't want to price something too high for the fear that no one will buy. Check, please!
I wrote the Start-Up School curriculum piece on pricing first, because to me, it's one of the most important elements of any new business venture. The mindset you have toward the pricing in your business will make or break it. If you think that's shocking, wait until you hear me say "Cost has nothing to do with price."
(I just blew you mind, didn't I?)
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