Tag: pricing

CGC - How to Set Your Offerings at the Right Price

How to Set Your Services and Products at the Right Price (& Why I Don’t Like Discounts)

When it comes to pricing, you have to think about your big picture – your overall brand, the competitive landscape, and how you want to position yourself in the broader marketplace.

You will want to create and review a pricing model for each offering you have within your business, whether it’s a service, product or both. For each offering, from a revenue standpoint, keep two things in mind: 1) how your offering fits into your business suite (which is all the things you offer), and 2) how you want to position that particular offering in the broader marketplace.

You’ve got to ask yourself: How much revenue do you want to generate with this offering? And how much of each offering do you honestly think you can sell?

Then you have to know your costs. This includes upfront costs, variable costs, fixed costs, and anything that’s an ongoing cost. What do your profit margins look like when you factor these into your pricing model?

(Note: When you’re making your cost/expense estimates, I recommend making a list of everything you need and then contacting vendors and resources for pricing quotes. If you’re just starting out, I highly recommend you do as much as possible on your own. It’s always best to start as simply and as inexpensively as possible. )

After getting clear with your budgeting, it’s all about running the numbers and making some predictions. If this makes you feel a bit overwhelmed, just remember that we are all making guesstimates. We all have to start somewhere when it comes to pricing, and these projections get us going. My suggestion is to underestimate what you’re going to sell and overestimate what you’re going to spend.

Now, a quick note on discounts: I personally do not believe in discounting.

I believe in providing as much value as possible for the right price, but discounting that price at any point is not recommended, unless you’re beta testing something, or providing a specific service to a valued client base. An example of the former could be when you first launch a new service and you want your current client base to give it a try in exchange for some valuable feedback. In this case, you can discount for a testing phase of your service. An example of the latter could be if you decide to customize one of your services differently for a particular group of people, or a particular client. I often provide a discounted rate of a customized service to a local wellness community that I work with. I’ve been a loyal member of the community since it first started, and I continue to work with the owners regularly, so the discount feels good, and I’m able to provide services for those who may not be able to afford me under regular circumstances.

To some people, discounting makes sense from a marketing and sales perspective, especially when you’re desperate for cash.

However, and unfortunately, discounts are most often perceived as, and representative of, the following:

  • Lack of confidence: If you believe in what you do, you should sell it at the standard price.
  • Bad precedent: You’re setting the standard. As soon as you lower your prices, your customers will start to expect it going forward.
  • Lower perceived value: Most people value something based on its price. Throwing in a discount tarnishes the value you’re trying to provide.
  • Untrustworthiness: Let’s say you’re trying to make a sale, but it’s not going well. If you’re selling your service at its regular price at the start, and then you quickly provide a discount at the end to win the sale, your customer is going to question your honesty.
  • All about the price: The last thing you want to focus on during a sales conversation is the price, and that’s exactly what happens when you offer a discount. It’s hard to sell something based on price rather than value.
  • Profit cuts: What will the discount do to your revenue? You have revenue goals, and the only way to meet them is to stick to your planned pricing model.

So, unless you’re testing a launch of a new product or service, or you’re very comfortable packaging a service at a discounted rate for a particular group, then you shouldn’t discount your services. In the end though, it’s all up to you.

Just remember to do what feels good.

CGC - Marketing through Your Pricing Strategy

Marketing through Your Pricing Strategy

Does pricing involve marketing? Of course!

When it comes to pricing, you have to think about your big picture – your overall brand, the competitive landscape, and how you want to position yourself in the broader marketplace.

With every product or service you offer, you have to ask yourself basic questions when deciding on your pricing model. You first have to consider your income. How much revenue do you want to generate with this offering? And how much of each offering do you honestly think you can sell? Then you have to know your costs. This includes upfront costs, variable costs, fixed costs, and anything that’s an ongoing cost. What do your profit margins look like when you factor these into your pricing model?

Once you have an idea of what your pricing model entails, you can begin to think about pricing from a marketing perspective.

Below are four pricing strategies to consider as part of the marketing of your offerings.

  1. Price anchoring: This strategy is mostly used during initial communication about an offer. Basically, you put a proposed price for an offer in the minds of your potential customers. Then, at the very end of your presentation, you surprise your customers with a reduced price. For example, when Steve Jobs was first showing the iPad, he put the price at $999, stating that this is what investors said it should be worth. Then, he surprised the audience by stating that $499 is the actual price. Immediately, it was perceived as a deal.
  2. Ending in 9s: This has often been described as a cheesy marketing tactic, but turns out, it actually works. A recent marketing study compared the sales of a woman’s shirt that was $34 one week and $39 the next. The $39 shirt outsold the $34 shirt by 24%!
  3. Options pricing: A marketer for The Economist did a pricing test to see how online and print sales would go if they offered multiple pricing options for subscriptions. They offered a web-only subscription for $59, a print-only subscription for $125, and a web and print subscription for $125. When people saw the value of print, they were more drawn to the last option. So, if it’s appropriate for what you sell, you may want to consider testing different pricing options, such as coach, premium or first class options.
  4. The rule of 100: If you ever decide to run a special sale or discount for your products and services, you want to do it the right way. Let’s say you’re selling t-shirts, and the sale price is $20, and the discount is either $5 or 25%. Even though they are the same, people view 25% as the greater value, which triggers more sales. Conversely, if you’re selling a necklace for $3000, with a discount of 25%, people view the absolute value of the discount (which is $750) as the greater value. Therefore, psychologically, people view percentage discounts as a greater value when the sale price is under $100. When the sale price is over $100, absolute values are perceived as the greater value.

Which pricing strategy will you try next?