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Are your prices working for you?

Written by: Helen Dowling

Article Overview: Funny thing prices. If I ask one group of small business owners whether or not they’re happy with their prices, I can receive the answer yes. Check with another group however and I find they’re not. Yet, many business owners struggle with this area.

Are your prices working for you?

Funny thing prices. If I ask one group of small business owners whether or not they’re happy with their prices, I can receive the answer yes. Check with another group however and I find they’re not. Yet, many business owners struggle with this area. They know they should put their prices up every year, but most don’t and I also know some businesses that have all the work they can handle, but are not making enough money to take on extra staff to cope with the work they’re generating.

So, let’s look at your prices. Pricing your products or services is mainly about one thing and one thing only: CONFIDENCE! If you’re confident with your product or service and feel it’s worth what you’re charging for it, great. If you’re not, it’s time to look at bit closer at this issue.

Why do people buy? Think about the last thing you bought for fun. Now think about why you bought it. You may have come up with answers like “It was on special offer” or “It goes with the colour of my cat” and so on.

But, fundamentally did you buy the item because you WANTED it? That’s the reason most people buy things – because they want it. There is also a difference between want and need to – I might have wanted my car, but I need petrol to run it. Need is for things that are absolutely essential. The problem is that a lot of people substitute the word want for the word need and so you hear “I need a website” or in the case of my husband “I need a new car”. What they are really saying though is “I want…”.

Now, have you ever seen people spend more money than they intended to on an item? I definitely have. What does that tell us? If they feel they need or want the item badly enough, they’ll spend the money on it.

So, you have two jobs in your business? Firstly to create that need or want desire badly enough so that your customers really want what you’re selling. How do you do this? Talk to them, ask them questions, find out what those needs or wants are and see whether you can fulfil them.

Your second job is to concentrate on building yourself into an expert – write articles, give quotes to the press, write a book, give talks and so on. Why? Well, do experts get paid more? Absolutely! If I were to ask you which would be priced higher: an apple pie made by my mum or one by Gordon Ramsay, what would you say? Now, obviously I know that you would buy the one from my mum, but would you agree that Gordon Ramsay’s apple pie would be selling for a higher price? Why, because he’s built his reputation.

I met a guitar teacher the other day who told me that this philosophy wouldn’t apply to his business. Then I asked him how much he would pay to have a lesson from Eric Clapton or from another guitar legend. Do you see? They’ve made themselves into experts, so they can charge more and you would expect to pay more.

There’s something else at play here when we talk about prices. And that’s VFM or Value for money. If I’m going to spend top whack with someone, I would expect that absolute best. If I got that, I would say it was worth spending that money. If not, I would feel cheated. So, if you are going to increase your prices, make sure that the product and service you provide is fantastic too.

What about those people who really do buy on price – and yes 10-12% of people out there do buy the cheapest products out there? Unless your business is catering for this group of the market, I would say steer clear if at all possible. Why? Well these are the people that typically are critical of your work, question everything and generally want the best deal they can get all of the time. In short, they are a nightmare to work with. Putting your prices up often means that you’ll get rid of this group of penny pinchers and save yourself a headache as well. Let’s face it – would you rather work with someone who appreciates what you do and thinks you do a great job or someone is constantly asking you why you charged them x, even though you’ve done a fantastic job for them?

And the other thing is, if you put your prices up, you can afford to lose some customers. Let me explain. If you normally charge £20 an hour, it would take you 5 customers to reach £100. If you put your prices up to £25 an hour, you would only need 4 customers to get the same amount – you can afford to lose one without losing out on the income. If you put your prices up to £50 an hour, you can afford to lose 3 customers and still make the same amount.

Someone once pointed out to me that it takes as much effort to get one customer paying a higher price as it does to get a customer paying a lower price – so why not go after the higher paying customers and get fewer of them to make the same money? Just a thought.

My key tips on prices are then:
1) Work on wants and needs – find out what your customers want or think they need and give them this.
2) Concentrate on making yourself into an experts – experts can charge more
3) Give value for money – if you’re going to raise your prices, make sure that your service matches
4) Put up your prices – you can afford to lose some customers and the customers you will lose will probably be the ones you don’t want to work with anyway.
5) Finally, have some fun with prices. Do some two for one offers or loyalty cards. See what works for you.

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Article Tags: confidence, desire, enough money, funny thing, jobs, new car, second job, small business owners, special offer, struggle, word need



Related Forum Posts
Re: What is your biggest challenge? Today? - [quote="Alan Mater":3qk869js]No, but it's a good indicator that you'll get good quality. People that provide quality know that they can raise prices due to the quality of their work.[/quote:3qk869js] It is certainly an indicator, but my personal experience after working with many many freelancers, that price is can be a weak indicator. Quite often the reason is some people are much better at marketing and selling themselves, which results in more clients, and higher prices. But their ability to market and sell themselves it not necessarily an indicator of their quality. [quote:3qk869js]Should we let the market determine how much we're worth, or should we tell the market how much we're worth and let it up to them to decide if what we're saying is true?[/quote:3qk869js] The market always decides. The price is not set until a transaction takes place, so you could put your prices where-ever you want but if nobody wants to buy it, then the market has refused that price. Its certainly true some people undervalue their work (just as some over-value), but you can only raise prices as much as people are willing to pay, and as you raise your prices you'll find fewer and fewer willing to pay (market forces). If you can charge more than average in your industry then that is great, certainly you should not lower your prices and I was in no way suggesting that. Its up to the freelancer to try and get as much as they can for the work they do, but market forces will always limit that.
Re: What is your biggest challenge? Today? - [quote="christew":2y9rme1x][quote="Alan Mater":2y9rme1x]No, but it's a good indicator that you'll get good quality. People that provide quality know that they can raise prices due to the quality of their work.[/quote:2y9rme1x] It is certainly an indicator, but my personal experience after working with many many freelancers, that price is can be a weak indicator. Quite often the reason is some people are much better at marketing and selling themselves, which results in more clients, and higher prices. But their ability to market and sell themselves it not necessarily an indicator of their quality. [quote:2y9rme1x]Should we let the market determine how much we're worth, or should we tell the market how much we're worth and let it up to them to decide if what we're saying is true?[/quote:2y9rme1x] The market always decides. The price is not set until a transaction takes place, so you could put your prices where-ever you want but if nobody wants to buy it, then the market has refused that price. Its certainly true some people undervalue their work (just as some over-value), but you can only raise prices as much as people are willing to pay, and as you raise your prices you'll find fewer and fewer willing to pay (market forces). If you can charge more than average in your industry then that is great, certainly you should not lower your prices and I was in no way suggesting that. Its up to the freelancer to try and get as much as they can for the work they do, but market forces will always limit that.[/quote:2y9rme1x] Valid points on all ends. I appreciate your insight and experience. Do you have any tips for forum members on where the best place would be to find a reasonably priced freelancer that provides quality service, other than those already mentioned?
zipcar saves Gas cost - The gas prices haven't affected me in anyway. I use the Transit system and ZipCar. I love Zipcar 'cos it has Gas and Insurance included in the prices and they haven't raised that for a couple of years now.
Seeking advice on working procedure of Convenience Store Fra - I have some queries about the working of the franchises. How does the relationship between the Store Owner, Suppliers and Corporate works exactly? How does the store owners get reimbursed when they sell commodities like coke in fewer prices than others?
Re: What is your biggest challenge? Today? - [quote="christew":1f5i0uox][quote="Alan Mater":1f5i0uox]The question of quality comes into play at this point. [/quote:1f5i0uox] Yeah quality is often correlated with price, but paying more won't always guarantee higher quality. If you look around there is a huge amount of great writing talent that work at good prices. I was once one of those writers (started at $3/post) before I eventually ended up doing my own thing. The internet has empowered almost anyone to become a writer very easily, which has opened up the job market, pushing down prices considerably.[/quote:1f5i0uox] No, but it's a good indicator that you'll get good quality. People that provide quality know that they can raise prices due to the quality of their work. But, as you said, because of the competition these days, the prices are low and forcing people to charge less than they normally would. It's finding the balance between the price you want to pay and the quality you want that can be a challenge. You may have to go through several different freelancers before you find one that will be your long-term provider. I have a client I write articles for at very minimum prices. I don't mind it, though, because it's not my main service, and I know I'm helping the client out with getting more work. He has to charge lower prices because of the competition, so in turn I get paid less. This brings up the question: Should freelancers lower their prices just to please the market and risk losing money in the long-run? A problem I see is that people under-value their work too much and to the point where it's really not worth doing anymore. I would much rather keep my prices a bit higher and continue to provide outstanding service, rather than depreciate and devalue myself. Should we let the market determine how much we're worth, or should we tell the market how much we're worth and let it up to them to decide if what we're saying is true?


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