How to Set Credible Prices for Your Offers
Your business purpose should include credible prices for your offers. But what is a credible price? Here are a few things to consider:
Your Confidence
Your prices increase as your confidence grows. You need to understand the value of your offer and it is possible, when you start with a new offer, your prices will be lower than you would necessarily choose.
But your confidence may not be a reliable guide to the value of your offer. You may be better (or worse!) than you think.
There is no upper limit to what you charge and something I ask my clients to do is design an offer for which they can charge £100K. I don’t expect them to sell one of these! It helps to think about what you could do for someone able to pay that amount.
Most businesses have more than one offer. Getting the right price structure in place, so that customers can try you out before committing to a high price is part of the challenge. I’ll return to this in my next post.
This is about confidence because you need to get off the hourly rate and charge for the value of your expertise. If you charge an hourly rate you effectively tie your business to your competitors’ rates. You also do not account for preparation time or the training and development you’ve paid for in the past.
If you don’t think your offer has value, why should your prospect?
Your Business and Lifestyle Needs
You need to cover your costs. Say you set out to make £25K per year. To do this you need more clients and so you aim to maximise sales. Soon you hit the most clients you can manage. You are still way off your target income.
What are the options? You can
- increase revenue by increasing prices,
- find more time by employing staff, or
- develop new offers that automate delivery or offer more value.
You can see your pricing strategy is bound to evolve as your business develops.
Value of Your Offer
This is the other side of the problem. If you know how much you need to charge, is this something the market will bear? This depends somewhat on what your competitors charge but remember customers choose you for a variety of reasons.
- Your solution to their problem – this may be similar to your competitors.
- The niche you occupy – your location, the market you aim for, your business story, the types of offers you make, etc
- Your worldview – do they feel comfortable working with you?
- Benefits from your offer – the way you explain them may be attractive to prospects.
Each needs consideration as you set your prices. As these factors change, they present opportunities to increase your prices.
Your Competitors
You need competition because if there is none, you probably don’t have a market, unless you have found a new market.
The knack is not to compete for exactly the same market but deliberately seek to separate your prospects from the rest of the market. You do this through the stories you tell and the worldview you promote.
Competitors can make brilliant collaborators. You can work together to increase size of the pool of prospects and then fish for the prospect who finds your offer attractive.
Do not be worried by competitors who undercut you. They won’t be around for long. Your market is the people who can afford your prices.
Marketing
A lot depends on how you market your offer and manage your prices. I shall go into this in greater depth next time.
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Please comment and let me know what you like about this post. What would you like me to write about further?