How to price an online service

[Danny]

Hi,

I'm planning on starting an online business that is targeted at small and medium sized professional services firms.

I'm having trouble deciding on a pricing model - should I go cheap and aim for a large volume of sales, or is it better to charge a higher price and have fewer sales?

Another consideration is that I'm still a full time employee, and so cannot devote as much time to this idea as I would like. That makes me think that a lower price/higher volume model would be best, as it will presumably be easier to sell.

Any thoughts and comments would be greatly appreciated!

Thanks,


Danny

[LeelaCosgrove]

Firstly, lowly priced is not necessarily easy to sell ... strangely, I've often found it easier to sell $30,000 products than $97 / month products.

Why?

Because when I talk to people about $30k - there's one of two reactions. Either they can afford it or they can't. If they can't, I'm not talking to a client, I move on. If they can, it's a conversation with someone whose got $30k ... that's a much more interesting conversation than with someone who is squabbling over $97.

Now on top of this - if you don't have much time ... are you able to fulfill high volume sales? Don't forget that even if you're selling something like software the amount of time you'll spend on marketing, sales, and follow up is huge.

I am a writer - I no longer do any of the writing for my business myself, I co-ordinate 20 sub-contractors to do it for me. I think I'm busier now than I ever was when I was doing the work myself! Marketing, sales, co-ordination - it's terribly time consuming. But then, I have a large volume of clients. When it was just me, I only ever had 4 or 5 clients at a time ...

Of course, it's hard to give you real advice without knowing what you're selling ...

[Rachel Reeves]

I was charging less than I desired. I felt bad charging more due to the type of clients I had (mainly not for profits). I have just done a major price rise (or what I would call major) and guess what, I haven't had any trouble retaining these clients.

I have heard from a good many people that their business sales actually increased as they put the price up and also once they started sub-contracting to other people as Leela has spoken about. I think also that someone who is willing to pay for quality services are better people to work for as they would be more likely to have the funds there and make the payment at the end of the day, correct me if I am wrong here...

[MissieK]

I agree with the others - charge a higher price. You don't want to undercharge yourself, and especially as you are still working full time, you may not have the time to fill a high volume of orders.

Melissa

[BrightBiz]

Danny,

I found this a huge problem when meeting with my first few clients. I knew the first 2 clients and so priced myself quite low to build portfolio and it was sort of a "mate's rate" thing.

One thing I learnt was that businesses expect to pay for quality. One friend told me she "felt bad" only paying me what I quoted, which ok, was pretty cheap but not THAT cheap I thought.

The biggest struggle is with having the confidence to believe you are worth an amount and sticking with it. I was once told by a mentor to take the price I was happy with and double it or triple it and if they accepted the first price I was home free, if they were worried, then I had room to move with fees because I'd gone in high in the first place.

Perhaps you know some business owners who are friends and you could discuss this more specifically with them as to what their preferred price point would be if you're not happy with going into further detail here.

Either way, good luck and I'd definitely start high if I were you

[Linda Cerzs]

Hello Danny:
Your question is too hard; I think nobody has a perfect answer for your question.
The only one able to answer it is you!
Linda Cerzs
New York

[BrightSpark]

If this is going to be a truly online service then once it is set up the hard work is done. You have the site receive the requests, the site sends out either a link or an email with a link for the customers to get what they have just purchased. From then on your job is to get and maintain the visitors to the website.

[ray_223]

Pricing is very complex and I think it's a little unwise to suggest you charge more for a product or service we have no idea about.

Your pricing should be based:
* The value your customers will gain from using your service,
* The industry you marketing to,
* What competitors charge for a similar service,
* The market size, and
* What you would like to make as profit.

As important as the price is the bigger issue is where do you position your product in the market? The strengths and (any) weaknesses will probably determine the price.

[beancounter]

Contact your "competition" and see what rates they are charging -

With an online service you can afford to build a few different websites and have a different price point on each - and test the market that way

As Leela says, dealing with clients that will pay a higher price is much easier - there's a "perceived value" of your product

Have a look at "Two Dollar" shops - you know you'll get "junk" there, and not worry if it deosn't last long. You go to other stores, pay more for a better quality product and expect it to last longer

You'll find clients that grumble about your pricing want you to discount and end up being more trouble than they are worth - so don't worry with them. Your price point will attract a certain type of client that value your services

[Dani]

Hi Danny

When working on pricing; especially for a service either online or not I consider three things:


*What is an hour of my time worth (especially becaude I too work full/time) & how many hours will this take me?

* How does that compare with my competitors prices? do the research.

* Who are my target market and what considered competive for a quality service?

I hope this helps a little bit