Pricing is a tricky business!
How do you know when you have landed on the right price? How do you know when it is time to raise your price? Lower your price? Pricing isn’t always intuitive. And these questions don’t have easy answers, but I have 3 questions I ask myself everytime I set a new price or consider changing an old price.
- Is the product or service selling well now?
- Am I covering ALL of the costs involved in providing the product or service?
- Do I feel like I’m leaving money on the table?
Let’s look at each of these one at a time.
Is the product or service selling well now?
If it is, then sometimes it is best to leave well enough alone. However, if years have gone by and you’ve never raised your price, then you need to do so. The price of everything goes up over time and people expect small incremental price increases every now and then. While you may not want to raise your prices annually, every couple years is a good timeframe to try on for size.
If your products aren’t selling, then you’ve got a few things that may require your attention and you will need to put on your investigator hat to determine if you have a messaging issue (your offer isn’t resonating with your ideal customer), a traffic issue (not enough eyeballs are seeing your offer in the first place), or a pricing issue.
If you determine that your message is good and the traffic is there, then you will want to play around with your price. Most people’s gut instinct is to lower their price on a product if it is not selling. However, the problem is usually the opposite – that your price is not high enough. A low-priced item is often devalued in the eyes of your customer. Inside their head, they are thinking, “with a price this low, it must be inferior quality or not effective or long-lasting.”
A couple years ago, I was selling an antique Duncan Phyfe dining room set on Craigslist. I had no idea what it was worth, so I listed it for $400. It sat there for a week without a nibble. I told my husband I was going to raise the price and he said, “Don’t you mean ‘lower the price’?”
“Oh no,” I replied, “I want to raise the price and see if I get more interest in it.”
I set the new asking price to $1200 and the dining set sold in less than 6 hours. Why? Because the perceived value went up with the higher price point.
Before you ever consider lowering your price, consider raising it first. It may be that your ideal customers cannot see the value of the item because the price is set too low.
Am I covering ALL of the costs involved in providing the product or service?
If you are not able to cover all the costs involved in providing your product or service, then it’s time to look at both your expenses and your pricing.
Look at all your expenses and see if there may be a way to lower the costs involved in creating your product or providing your service. Sometimes “trimming the fat” is the best thing to do in such a situation. However, you may find that you cannot trim your expenses without lowering the quality of the product or service you provide.
If that is the case, then take another hard look at your pricing. Perhaps it’s time for a price increase, and possibly a significant one, as long as the market can bear it.
With minimum wage going up this summer in many places around the country, everyone is expecting the prices of commodities and luxury items alike to go up considerably. Now would be a good time to raise your prices to not only cover your expenses but to leave you a good margin of profit.
Do I feel like I’m leaving money on the table?
Maybe your product is selling well and you are covering all your expenses with a good margin of profit and yet you still have this nagging feeling that your pricing is too low and that you simply are not charging enough for the value you are providing.
This is another good reason to experiment with raising your prices. Especially if what you provide involves quite a bit of your time. If you create courses or provide coaching or consulting services, make sure that you are charging enough to reflect the value of what you are providing.
This brings me to a final point, if slightly unrelated. If raising the prices on your products or services is something you really feel that you cannot do without undermining your offer, consider adding to your product line with some one-on-one or group coaching. Education has a high price tag these days. You are an expert in something. Teach someone else to do that thing and charge accordingly. Your time is worth a premium and should be charged accordingly.
I recently suggested to someone that she ought to consider consulting as she has nearly two decades of experience in a specialized field. I also told her that she shouldn’t charge less than $250 per hour. This does two things right off the bat. It weeds out those that can’t afford you so that you aren’t trading time for money all day long. Consulting becomes a special thing you do more occasionally, rather than regularly. It also puts a premium value on your time, which is infinitely valuable.
If you are a mother of children and running a business on the side, then your time is exceedingly valuable. Be generous and provide many free opportunities for your ideal clients. Freebies can take the form of short and quickly consumable checklists, guides, and sample chapters. However, always charge a premium for your time.
And that is how you tackle pricing like a pro!
Question! What is the most difficult aspect of pricing for you?