For every single business owner, setting your price is one of the most important things you will need to do in your business.
Yet all too often, people simply don’t spend enough time on their pricing.
One survey from the US found that companies spend no more than 6 hours a year deciding on their price levels.
Unnecessary Fear
The problem is that there is a lot of unnecessary fear attached to pricing, especially for SME business owners and leaders.
People tend to believe that their prices reflect their self-worth.
So when a prospective customer chooses NOT to buy from you, the rejection can hurt deeply.
And in turn people get scared to talk about their prices because they don’t want to upset their customers or lose business.
Pitching your Prices
Imagine a scenario where you have a call with a prospective client, and at the end of the call they say, “This is great, your service is exactly what we need, but how much do you charge?”
And you respond nervously with a variety of price responses hoping that one of them will be OK.
Uncontrolled and unplanned responses to pricing questions come from a lack of understanding of how to use pricing to your advantage to help you win more business.
Typical Approach to Setting Prices
Unfortunately nobody gets taught how to do pricing properly.
The typical approach is to look around in the market, find out what competitors are charging, work out your costs, and pick a price somewhere in the middle using the “finger in the air” method.
Which basically means you are still guessing, and you don’t know if you’re under-pricing or overcharging for your services.
A Better Approach
A much better approach might be to offer a set of three price options with a high, a medium and a low price.
So for example a training programme or consulting project with 3 price options at either £10,000, £5000 and £3,000 – and you construct a package of services to justify the price of each option.
And when you present your prices like this to the buyer, it actually becomes easier to sell, not harder, because you just let them make the buying decision.
“Which one of these 3 options best meets your needs at a price you are willing to pay?”
And the high price option acts as a gravitational force, meaning that most customers pick the middle option because they perceive it offers the best combination of price and value compared to the other two prices.
Summary
To develop your pricing confidence, please remember the following:
- Firstly, always offer a set of 3 price options – because your will increase your chances of winning the sale.
- And secondly, make sure that one of those options includes a high price point – because you will be more likely to win the sale at a higher price.