Saija Mahon // March 14 2016
How to get your pricing right and charge what you are worth
When you start out in business, it’s quite hard to initially price your products and services right, never mind trying to make a real living out of being an entrepreneur.
The numbers tell one story but the potential prospects tell another. We try our hardest to fulfil the demands of them all:
• ourselves – in order to start out and continue in business
• our prospects – in order to keep them coming back to do business with us
• our accountants – in order for them to be able to sustain our business nobody wants to be the cheap date as the saying goes; pay peanuts, get monkeys.
Nobody wants to be a cheap date. Nobody wants to lower their prices to the ground just in order to beat the competition. However it can be a catch 22 situation, especially if starting out in business. We want to gain clients, we need to gain clients, and the first strategy to gain them is to go lower with prices. You may not have the authority, awareness and ‘brand’ recognition yet that you usually need in order to charge what you’re really worth.
You are starting out, therefore unfortunately more often than not your prices will start from the bottom too.
This approach however represents two initial challenges
1. how to increase rates and/or prices later on as you gain share of voice, authority and market recognition
2. how to ensure you won’t be recognised as the ’99p store’, the cheapest in the market, with most likely a fairly low quality service stamp tagged to your brand
You need to have a concrete long-term pricing strategy in place, which takes into consideration the starting point, establishing your business and the long haul, growing business. This may mean that in square one when launching your business you have ‘launch promotions’ in place for a certain period of time. Ensure your growing target audience and customer base are aware of this. Ensure they know you are not just a cheap date but that you are however willing to give a few dances out for free in order to waltz forever.
You also need to calculate and have a plan for growth. Consider overheads, expenses, cost of sale metrics and other elements that may have to impact the pricing of your products and services.
Be open and transparent about any changes to rates to your loyal customer base. Always explain why rates and prices may change. As surprising as it may sound, customers are ready to pay a little bit more for a product or service that they really appreciate, love and trust.
Remember who were there first; don’t only offer incentives for ‘new customers’
More often than not, a lot of marketing campaigns seem to focus on ‘new customers’. Promotions are only valid if you are a new customer, you get additional benefits, features and service if you are a ‘new customer’. This is a strategy that keeps on confusing me until this day. I strongly believe we need to remember our roots, how we got to where we are and who helped us to get there.
You are in business because of your customers.
Treat them equally, offer them all equal opportunities to participate in loyalty schemes if relevant.
Do not leave anyone behind.
The ecosystem that keeps on giving (but only if you are)
It’s important that we see ourselves, our business, products and services and ultimately our customers, as parts of a very special ecosystem.
We all have a purpose and role to play, there’s not one without the other. There’s no growth without a healthy functioning of the entire ecosystem. Keep your business healthy, keep your customers happy and aware of anything and everything happening in the business, and keep the monkeys away.
A strong, flourishing ecosystem and business model is based on solid roots, long-term functional plan and consistent inclusion of the community that we like to call our customer base.