“Pricing is actually a pretty simple and straight forward thing. Customers will not pay literally a penny more than the true value of the product.” – Ron Johnson
While running a business or working on your own, what matters is the money you make at the end of the day. After all, who wouldn’t want to earn more? The question is quite subjective, but the general consensus is that most will seek ways to maximize the money they are making.
One of the common tactics used to attract customers is to lower the price. However, even if your offerings are better than your competitors’ and are priced irresistibly low, there’s always a chance that your consumers may be heading away rather than to you.
You may be asking yourself why this happens. Why is it that people pay a heftier price for something that is mediocre? What is worse is that despite not being satisfied with the results, they would give that business another chance.
Now all of this can be confusing, but you should understand by now one of the unspoken rules of business: pricing does not depend on quality. Unless you are Apple, you cannot charge premium prices for your products and expect people to purchase them just because of the quality. There are various factors that customers take into account when deciding where to take their business.
Whether you’re running your own business or working as a freelancer, it is important that you price your services right. It could make a huge difference to your bottom-line and give you a great chance of maximizing your earning potential.
Here are some pricing tips that can help you earn more.
Price Based on Value
What is the value of your work to the client? This is a crucial question you need to answer for every client who requests your services. In the services industry, you cannot stick to a standard pricing policy. This is because each client will have different uses for your product. You will need to infer what your solution will be used for,so that you can set the price right. In this regard, you need to understand how valuable your work is to the client.
For instance, if you are a freelance web designer, you have to know whether the site you are designing is the client’s main website or just a landing page for selling their products. The main website is more important to the success of their business; therefore it will be much more valuable to the client. So, if you charge more for designing these pages, your client will be willing to pay the higher amount.
Break Down Your Services
It is very important that you market your services as different products. Continuing along the lines of the previous example, you can charge different amounts for the basic website layout and the logo of your client’s business. This is something you have to make clear on the invoice you send to the client as well as the website listing your services.
Charging separately serves two purposes for you:
- Your client will know how much they are paying for each service you render. For instance, if you just quote a single figure, the client might ask you to clarify why you are charging that amount. Try as you may, most customers are going to think you are ripping them off unless you detail your expenses.
- Most clients might not require all of your services. They may want you to design the website but not the logo. In such a situation, your pricing will make things quite clear while saving your time and efforts.
Offer Several Options
One advantage of breaking down your services is that you can create several options for your clients toselect from. You can offer different packages, like basic or premium, each with a different price. This way, your client can select the one they feel serves their needs. However, there are certain things you need to keep in mind while creating service options:
- The price of each package should be unique. If you can get the customer to pay the smaller amount, they might end up buying the entire package impulsively, particularly if the difference in price is not much.
- Offer options for the clients to choose from. This way, you can easily break your services down into different price groups.
- Charge a premium price unless you feel increasing the price will lead to over 50% of your customers turning away.
To find out more about offering several pricing options, you can read about this interesting experiment of an eBook pricing model that resulted in $100,000 in sales.
Don’t Lower Your Margins
A common mistake new web design freelancers is lowering their profit margins just to avoid losing their customers. The general practice is that you offer the client an estimate and then they decide whether it suits their budget or not. Yet, more often than not, you will hear that the estimate is out of their range. This means that either they cannot afford to hire you or that they feel your services are not worth the price you are asking for.
If you want to work with the client just for the sake of securing their business for the future, lowering your margin is not the right way to do so. Moreover, if the client cannot afford your services, it probably means that your potential client isn’t the right one for you. Instead, simply ask the client to reduce the volume of the work you have to do. Also, make it a point to recover your fee in the price at the outset so that you don’t have to bear a loss. However, there’s no harm if you make exceptions for clients you feel will add value to your portfolio.
How about Adding Discounts?
Discounts are a tricky territory. Even if you feel inclined to give a discount to attract more clients, you shouldn’t offer one to everyone who places an order with you. The key is to see whether or not the client is worth giving a discount. If the client is reputable and working with them is going to boost your profile, it is a good idea to offer a discount so as to not lose out on their business.
The key factor to offering discounts effectively is context. Rather than advertising that you will offer a 10% discount to anyone who opts for your full range of services, offer discounts to clients who pay upfront. This not only ensures that your cash flow is smooth, but also eliminates the risk of the payment being deferred. What you can also do is present a large discount percentage on one of your secondary services.
These are some pricing tips you can follow to make sure your clients pay you the price you deserve. Otherwise, working hard will not be worth your while. You have to ensure your efforts are rewarded justly and you earn to your potential.