Do you ever wonder how to price your products/services? A lot of business owners do! There are a few different things to think about when you’re pricing, and I’ve organized the most important ones below for you. Being the best and charging the most is my Number One recommendation.
Be The Best And Charge Accordingly
Being the best and charging the most is something I always recommend to our clients, because having a truly unique selling proposition, and being the very best at what you do – in every way – is the way to have the most profitable business and happy customers. As opposed to being “mediocre” or “not that impressive” as a business, being the best and charging the most means that you: have the happiest staff, and most effective systemized business, make more profit, have happier customers, retain more customers, and sell more to customers – new and existing!
Aim Offers At IDEAL Clients
Remember to craft your offers for IDEAL clients: when you’re looking at presenting your offers, whether it’s on your website, social media, or in person, keep in mind that you should be tailoring them for your IDEAL clients. Don’t try to “be everything to everyone” or it will be hard to reach your ideal clients. Also, remember not to price or present offers based on what YOU would like unless of course, you are a perfect example of your ideal client persona.
The way the world typically prices is called Cost-Plus Pricing. This involves calculating your costs (including direct costs as well as overhead costs per item/service) and then adding an amount (percentage or dollar amount) to come up with the final price. Ensure you include the overhead per item when calculating this! Also, calculate your break-even cost per item/service or for each day that your business sells. Once you’ve calculated this, you know how much it costs to simply keep the lights on. You obviously want to sell things at a much higher price than your break-even price!
Break Even Formula
=Indirect overhead expenses / gross profit margin %
=$ sales you need to make to break even.
But remember you want to do WAY more than break even!!
Competitive pricing is setting your prices based on the competition’s price, or trying to beat it. This is not a smart strategy. Don’t try to play the game of lowest price – no one wins that game as you and your competition continue to undercut each other and eventually go out of business! That said, checking on your competitor’s pricing and other facets of their business is expected when you do your strategic or marketing plan, and as long as you’re doing the other things I’ve recommended, it’s good to know what they’re charging as a part of the bigger picture.
Value-based pricing is my personal favourite, and one of the ways you can “Be the Best!” When talking or writing about your products/services be sure to include all of the exponentially-larger-than-cost values! For example, our business coaches help business leaders make exponentially more profit, have much happier employees, and many more valuable results.
We list all of these things, including having the leaders achieve their specific goals every time we present an offer. Make SURE that you are truly being the best, and creating the MOST VALUE in the market, so that you can charge the most! This means starting with your leadership, your employee happiness, the cleanliness and organization of your physical locations AND online store, the happiness of your clients, and many more things.
If you’re going to be the best and charge the most, there are SEVERAL more things I know you can find in your business to improve. Then you will feel great about charging the most, because you really are creating so much more value for the clients. Never lower your price, always add value. *Remember the value needs to be truly valuable according to your ideal clients, not you!
Add Value Rather Than Reduce Price
Price skimming means starting high priced then adjusting as the market evolves (includes more competition, products become more commoditized, etc.). As I’ve said, I’d rather you continue to add value and always be the best so you can charge the most! Remaining the best means changing with the market, and your ideal clients’ preferences.
Higher Prices Attract High-Quality Buyers
Penetration pricing means you set a low price to break into markets (I prefer you GIFT or offer a “temporary special price” instead if you feel you must do this). If you start out low priced, you are setting your brand up to be a low-priced brand and it’s hard to come back from that. Low prices attract people who like low prices. High prices attract high-quality buyers who are happy to pay high prices for great quality, value, guarantees, and incredible service. You want these people.
*An important note: you must know what prices the market will bear, so do your research.
So do your calculations, know your numbers, know your competitors, but my advice is to is stick to value pricing after you make sure your margins are high enough!