Did you know that most businesses simply don’t charge enough for their products and services? And did you know that sales tests have shown that price is one of the most compelling factors that determines the success of a sale? Is your price right?
So, why don’t folks charge enough? There’s several reasons why businesses or coaches don’t charge enough. But it’s important to keep in mind that undercharging and even recklessly overcharging is dangerous. And the worst thing you can do is not charge at all (with a few exceptions).
There are three main reasons businesses don’t charge enough:
- Not sure about the value they bring to customers: Sometimes this one may seem tough to quantify. But there are several ways you can bring value to customers. For instance, you can offer a speedy service, be an expert in your niche, or offer dedicated service. There are many, many ways you can provide value.
- Lack of confidence: We all get a little shy from time to time, I get it. But if you’ve seen your products and services have a positive impact on your customers’ lives and make them feel good, you have no more excuse to be shy.
- Think they will price out of the market and lose customers: Let’s see. How about we talk to Starbucks, Lamborghini, The Ritz-Carlton, Tiffany & Co, Rolex, or Apple about this one!
Are You Making these 5 Pricing Mistakes in Your Marketing?
Pricing is just as much a marketing consideration as the colors in your brand. Price is a perception of value—period.
Let’s look at a few pricing mistakes below.
Pricing Mistake #1. Thinking price is the customer’s most important buying factor.
Ok, pricing IS important, but it’s by no means the most important factor. Not by a long shot. If you’re giving people what they need and want, and are making them feel good by way of offering them intrinsic value such as:
—then you’ve already won the war. There are many other ways to make customers feel good besides what’s listed above. But you get the picture.
— Angela Murphy✏? (@justpositionit) March 27, 2017
Pricing Mistake #2. Thinking you have to match or underprice in a competitive market.
We all may think our products and services are commodities, but there are ALWAYS ways to differentiate and charge higher prices. Refer to the list above in point #3. How are they differentiating?
There’s hundreds of ways you can differentiate.
A few examples are:
- Offering a niche service
- Offering speedy service
- Being the only one to offer something
- Having unique branding
- Entertaining people
The list can go on.
Pricing Mistake #3. Not knowing the cost of your product or service.
We’re all in business to make money, and knowing what your true costs are is critical to pricing correctly. I’ve seen it. Many businesses lose money on a sale because they don’t truly understand their costs.
Granted, there are instances when you’ll take a loss on a sale for specific marketing and business reasons, but in no way should you operate in this way. Calculating your costs can be complicated, but here are a few things to consider when pricing your products and services:
- Labor costs
- Sales discounts
- Marketing and advertising costs
- Cost of raw materials
- Packaging costs
- Shipping costs
Disclaimer: The information in this article is intended to be general information and not tax or legal advice. Every situation is different. Please consult your tax advisor or CPA.
Pricing Mistake #4. Always thinking that dropping the cost will result in more sales.
Yes, we all love a sale, don’t we?
BUT, when you lower your costs, you cheapen the perception of your quality. Now, there are strategic reasons to lower your costs initially—after all, that first dollar from a customer is always the hardest to get. If your strategy is to lower the cost of entry, only to upsell at a later point in time, that strategy may be justifiable.
But lowering your costs for costs’ sake is the fastest way to go out of business.
Pricing Mistake #5. Thinking you’ll get better clients if your prices are lower.
Wrong! This can actually have the opposite effect. You want clients and customers who actually value your work. This will help you avoid dealing with customers who can never be satisfied, are cheapskates, or who will want refunds—or even worse, those who will file lawsuits.
When pricing your products, think about the type of clientele you want to work with.
The Bottom Line
Price is a perception of value. Develop boundaries and understand your true costs of the products you manufacture or the services you provide. One of the best ways to justify price is to demonstrate your value.
You can do this through:
- Thought leadership
- Case studies
- Social proofing
- Branding and more
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