How to Price Your Service to Sell
Finding the right price for your service is one of the keys to revenue growth. Pricing isn't the only consideration used by prospects, but it can be an immediate deterrent if the price is unreasonably high or so low that your services are perceived as lacking value. What can be done to avoid those two extremes?
Consider Pricing a Marketing Objective
Once you have identified your target market (and I'm sure you have done this by now!) you can begin to establish a pricing strategy to attract specific prospects. Let's consider a couple of brands for a moment: Porsche and WalMart. Porsche uses their pricing to attract upper-class, high net-worth consumers. WalMart prices its items to attract the masses of lower and middle-class individuals. Pricing says something about who you want to bring into your business and what kind of margins you expect to earn.
Estimate Demand for Your Services
Find the answers to the following questions: 1) How big is my target market? 2) How much money is spent on the services in my industry? 3) How much of the market can I expect to capture at different price points?
Many companies keep tabs on how consumers respond to different prices and they adjust their prices according to their desired level of demand. If you are a new service provider, estimates will have to do, but even a best-guess is better than no guess at all.
Perform a Cost Estimate
Regardless of where you price your service (high, low, or in the middle), you have to make a profit. Consider your fixed costs (rent, salaries, benefits, etc.) and variable costs (energy, supplies, etc.) and make sure they are covered at your selling price.
Find Out What the Competition is Charging
Perform a quick research project and find out what the "other guy" is charging. Based on how they are perceived and who they target, should your services be more or less expensive?
Select Your Price
If you have completed the tasks above, you've done enough homework to settle on a satisfactory price that will attract the right people to your business. Stick to it. There will be people outside of your target market who will ask you to bring your price down. It can be a tempting scenario in this economy, but you will end up dealing with clients who do not place enough value on you or your services. That is not a recipe for long-term, sustainable growth.