Last week I asked if service providers should publish their prices. There were many good answers to that question, in the comments and on Twitter.
There were also many different opinions. That’s because there’s really no right answer. Every small business owner must develop his or her own unique pricing structure. Charge too much and you lose sales. Charge too little and you leave profits on the table. It’s a Catch-22 that leaves a lot of self-employed service providers scratching their heads.
I believe the art of pricing involves understanding these three variables:
- Different customer segments actually are willing to pay different prices for the same service.
- People usually buy anything they’re going to buy (whether service or product) based on emotion versus logic.
- Customers really appreciate knowing up front how much a service will cost.
Threading together all those variables (and with the help of my brilliant readers and Twitter friends), I’ve come up with this list of four unconventional ways to price your services.
1) Brand yourself as The Specialist in one very particular niche.
If you make yourself known as the go-to person for your particular service, pricing decisions become much easier. You simply command a premium price.
There’s only one you. Seriously. Only you can provide your service in the way that you do, and for some people, that way is going to be exactly what they need. So don’t be just like every other interior designer / personal development coach / tax accountant. Differentiate yourself by focusing exclusively on a very specific market niche, serve that niche very well, and price accordingly.
I’ll use my industry as an example. Seth Godin once wrote:
Take a look at just about any industry with many competitors–colleges, hotels, sedans, accounting firms (especially accounting firms). The websites bend over backwards to be just like all the others.…Sometimes, we try so hard to fit in we give consumers no choice but to seek out the cheapest [option.] After all, if everything is the same, why not buy what’s cheap and close? How about a site that says, “Here’s why we’re different.” And means it.
I discovered this particular problem when I was writing my About page. In the
delusional hope of finding some inspiration, I checked out the “About” pages for several accounting firms, and they literally all look the same. (Google “your town + CPA” and look at’ em. You’ll see what I mean.)
So I decided that I’d do something completely different. I decided to write a friendly and hopefully non-boring tax and business blog specifically for freelancers and entrepreneurs. I decided to focus exclusively on the needs of fellow small business owners like myself. No trusts and estates. No audits. No non-profits.
And even though I don’t charge “premium prices,” my clients and readers know that I’m The Specialist in helping cool, creative people manage their businesses and achieve their dreams.
IMPORTANT SIDE NOTE: This tip is based on the critical assumption that you’ve achieved whatever level of mastery is required to actually be a sought-after specialist in your industry.
2) If you’re gonna show your service prices, then show the whole kit ‘n kaboodle.
Quoting fixed prices projects confidence and experience, and gives your clients and customers a sense of certainty. It helps them overcome their fears about buying.
For some industries, fixed price agreements also allow you to get some pricing leverage mojo as you become more efficient at delivering your service. Remember how I said that you’ll ultimately earn more per hour working for yourself versus for someone else? This is the beauty of fixed prices over hourly rates.
Going one step further with this notion, presentation designer Sam Thatte made an excellent comment last week. He suggested going all the way and publicizing the full nitty-gritty details of your pricing. Perhaps create a menu of services, or a list of package prices with a separate menu of add-on services.
“Would you like some hot stones with your Swedish massage? That will cost an extra $10.”
“I recommend social media integration with this website redesign, and that will cost an additional $250.”
“I’ll be happy to prepare your IRS Form 1040 for the $250 I’ve quoted on my site, but if you own 13 rental properties from Kalamazoo to Costa Rica then it’s gonna cost more for all those Schedule E’s.”
See? Normal and expected in some industries, less so in others. But that shouldn’t stop you from laying it all out anyway. Which leads me to # 3.
3) Completely ignore what others in your industry do in terms of pricing.
Another excellent comment on last week’s post came from photographer Kimberly April who pointed out that most people working in her industry will ask to be contacted for a custom quote. But she said:
On my own website, I say how much my photo shoots are and the starting price of my prints. After reading your post I think I may change it to list all of my prices and not worry about what other photographers will think.
I think she’s on to something. Dare to be different, I say!
In my case, I show my prices on my site, unlike any tax accountant that I personally know or whose web site I’ve perused.
It’s hard times these days for people. Tax preparation is a commodity service. I stand by my own personal preference and strong conviction that people want to know up front what they’re paying for — especially when they’re dealing with a “professional,” or an industry they’ve deemed expensive, unnecessary, or frivolous.
Might this be said about your industry? Would publicizing your prices alleviate client fears about utilizing your service?
(As an aside, imagine a world in which doctors and hospitals display their prices! But as someone whose partner is a physician whom I occasionally help with insurance billing, I can state unequivocally that they don’t even know what they’re going to get paid most of the time. But that’s an entirely different story…)
4) Don’t sell your time. Sell value.
Tell me the last time your client said, “I’m really interested in buying that shiny new set of hourly rates you’re selling!”
No client ever buys “hours.” Clients and customers buy only one thing: problem resolution. If you understand and accept this fact, it becomes very clear that pricing your services by the hour is precisely the wrong thing to do. (Admittedly, I have yet to fully accept this concept myself.)
Instead, price your services based on the value you provide to the customer. What specific problem are you solving for them? What is that problem resolution worth to them? What are they willing and able to pay for the elimination of that problem?
And how the frack do you figure that out, right? By firmly clarifying expectations from the start so they’re more likely to be satisfied with the service you’ve provided. As small business owners, we must singularly focus on the value our unique solution brings to solving the pain of the customer.
This, in turn, is made easier by working with your right people. 🙂
See a trend here amongst this list? As small business owners, we will succeed by taking a few smart risks with our pricing, by being confident and a little bit renegade, and by ensuring that we effectively solve the problems of our clients and customers every single time (no matter what the price).
And now dear readers, let me know your thoughts. You responded so magnificently to last week’s post about pricing, I look forward to hearing your insights today.
Which of these four techniques most resonates with you? What would you add?
(Photo by walknboston)