One of the things people have been asking me a lot about this month is how do you go about setting your prices for your business. It’s not an easy thing to do for any business and I can definitely see why people struggle with it. There tends to be two main reasons why people don’t increase their prices:
1. They have looked at the competition and feel that if they price lower than the competition, they’ll get more business.
This, by the way is a complete myth. It’s more likely that people will question why your service is so much lower than the competition and think the quality of your product or service will also be lower.
2. They don’t feel confident in asking what seems a lot of money to them for their products and services.
Let me explain. Suppose I was selling life coaching – the going rate for this is about £50 per hour for telephone coaching. If I thought that £50 per hour was a lot a money and that I couldn’t afford to pay this, chances are I’m going to struggle justifying why other people should pay £50 per hour.
Fundamentally, these reasons and setting prices itself is about CONFIDENCE. Confidence that your products and services are good enough to justify the prices you’ve given them; confidence that people will pay these prices; and confidence that the quality of your products and services will justify these prices.
Tips to help with this?
Well, it’s all about improving your confidence.
Step 1:
Do some competitor research on prices. This will help you to believe that what you’re charging is realistic for your market. Now, when you do this you’ll probably find that some people charge low prices, some people charge high prices and most people will be in the middle. Your prices initially should be about average with your competition – no lower and no higher.
Step 2:
Start making yourself into an expert in your field i.e. by writing articles, giving speeches, talking on the radio etc. People will generally expect to pay more for the products and services of an expert.
Step 3:
Start gradually putting your prices up. Write to all your existing clients and inform them that the prices from x date will go up. Tell all your new clients a higher price. Yes, some of them may leave you, but think about it this way. Let’s say you want to get to £100. If you usually charge £20, you’re going to need 5 customers to get you to the £100. If you put your prices up to £50, you’re only going to need 2 customers (therefore you can afford to lose 3 customers) and if you put your prices up to £100, you’re only going to need 1 customer (you can afford to lose 4).
I’m not suggesting you make this jump immediately – the trick is to gradually put your prices up.
Step 4:
Play around with your prices and have some fun. Running a business is not meant to be serious all the time – be creative with it. Try a buy one get one free offer and see what happens; give discounts out till the end of the month and see what happens. Double your prices and see what happens.
Remember – it’s your business. If you don’t like something, change it. If you love something, keep doing it!
I’ve got loads more information about how to set your prices and why people buy in the first place in my e-workbook “Getting your marketing right” – you can find it at: www.exceptionalthinking.co.uk
Good luck!
Helen Dowling runs Exceptional Thinking (www.exceptionalthinking.co.uk which gives help and advice to people who are starting a business and existing small businesses who are wanting to market and grow.
To learn more about this author, visit Helen Dowling's Website.
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