Pricing strategies: Deciding on price setting
Price setting is tricky for new soloists to master. Do you charge on a project, daily or hourly basis? Do you base your pricing startegies on what others charge, what you’d like to earn or what you think the market and/or prospect will bear?
The answer is, usually, a mix of all these things. And a lot of trial and error.
I’m willing to bet that more soloist angst has been expended on price setting than on any other element of the marketing mix. After all, pricing strategies have a huge impact on our income and whether we’ll be eating caviar or crumbs.
Unfortunately, practice doesn’t make perfect. When you’ve been in business for a while, you need to regularly look at your pricing strategy and make sure it keeps pace with the value of your offer.
Do you know what your competitors’ prices are and how they are set? Have you considered the price elasticity of demand for your offer, or the maximum and minimum you’re prepared to charge?
Many years ago a client was actually kind enough to suggest that I increase my prices by more than 50 percent. Naturally he told me this after I’d finished his project, but it was still one of the most valuable pieces of business advice I’ve ever received.
"A universal truth is that while prospects always want to achieve the lowest price, they don't usually like to sacrifice value."
Another fellow veteran soloist, who currently spends a good chunk of time servicing a longstanding customer paying half her regular rate, has realised she’s worth more. She’s now getting feedback on the value of what she does, defining her ideal customers, and structuring her business to attract and accommodate them.
Want more articles like this? Check out the pricing strategy section.
Whilst I certainly don’t claim to be an expert on price setting in your business and industry, I do know a thing or two about persuasiveness and presentation. And a universal truth is that while prospects always want to achieve the lowest price, they don’t usually like to sacrifice value.
It’s often tricky to get prospects to tell you how much they want to spend. This isn’t just because they don’t want to tell you, often they don’t actually know. All they know is that there’s work to do or a problem that needs to be solved – pronto.
If you’ve done your homework though, one thing you usually can infer with some accuracy is what the prospect doesn’t want to give up. Based on what the prospect most values, you can offer a choice of options which encourages the prospect to think ‘how’ rather than ‘if’ to buy from you.
In this example, there is a choice of three packages – premium, medium and budget. The items the prospect values the most (E and F) are only included in Option A. Other packages have been created by removing features or benefits from each one progressively. You will often find that prospects trend towards the middle to upper end of the scale when you employ this tactic.
Option A – A, B, C, D, E and F $5,995
Option B – A, B, C and D only $5,295
Option C – A, B and C only $4,795
What pricing strategies have worked for you? What cheeses you off about price setting or reviewing prices? Let’s hear your views.