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How to set your prices

Written by: Helen Dowling

Article Overview: 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. Helen Dowling from Exceptional Thinking (http://www.exceptionalthinking.co.uk) shows you how to get it right.

How to set your prices

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!



Good luck!

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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.
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":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?
Adjust Your Prices Canada! - I get annoyed when I go to the store expecting to get a deal only to notice that the store has not adjusted their prices. However, I do not think that lowering their prices is the only option, perhaps if stores provide the customers with extra "bang for their buck" or a unique experience when they visit their stored Canadians won't flock to the United States for better deals.
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?


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