This is a huge shame because good pricing strategies is one of the most effective paths to a profitable business.
There’s a swag of research that shows that if a business raises its prices by just 1 percent, its profits (your income!) increase by an average of 11 percent. That’s a very healthy increase in profit for astonishingly little effort.
Furthermore, the same research shows that raising your prices has a greater impact on profit than increasing your sales volume. Compared to that 11 percent increase in profit from raising your prices by 1 percent, increasing your sales volume by 1 percent yields only a 5 percent increase in profit.
So improving pricing is more effective than increasing selling volume for the average business. But we’re not average, we’re soloists. Does the same apply to us?
You bet it does, only more so.
As soloists, many of us are selling our own time, and it’s a limited resource. Our time is finite. It runs out. We have to treasure it.
We don’t have the option of stuffing the pot with more work to make money. We have to be cleverer than that. We have to price our work properly, and that means higher.
Now you might well be wondering why so few people focus on pricing strategies, given that they are so important and so effective.
The first reason is because pricing is a mystery. We don’t know how to set prices so we pluck a (low) figure from thin air, call that our price and then work on selling, selling, selling volume.
The second reason is that we’re terrified our clients will leave if we raise prices. We listened to a tiny bit of Economics 101 – the part that said if you increase prices you’ll sell less. Unfortunately we didn’t progress to the advanced part of the course, which refuted that.
I’m not going to pretend that pricing is easy. It isn’t. But it’s not as complicated and terrifying as you think. In fact if you chunk it down into bite-sized bits it can be a fun, and profitable, adventure.
A good place to start is to think about pricing as two quite separate questions: How much should I charge? And, how can I be brave enough to charge it?
- Start by working out the price you want to charge. This is the logical, mathematical and analytical piece; and
- Follow that up by overlaying your price with stuff that makes charging it more palatable. This is the psychological, emotional and confidence piece.
How did you arrive at your pricing? Share in the comments!
Read the full ‘Pricing for wimps’ series:
- Your minimum hourly rate
- How to get the price you want
- Should I charge the same as my competitors?
- The four-letter words that backfire
- Should I give a quantity discount?
- Do I have to charge everyone the same?
- Your customers’ biggest fear
- How to price for speed
- Be the boss of your price
- Raising prices