No one wants to make a pricing mistake. Small business owners often have to order pricing labels so getting it right the first time seems crucial. Lately I’ve gotten some questions about how to price things, both products and services.
Fortunately, yes I say fortunately, there are no rules. That holds true especially if you provide a unique service or one that requires a great deal of expertise. However, if you’re offering the same service or product someone else is then you’ve got something concrete to look at.
Product Pricing Examples
For products there are many ways to research what others are doing to help you avoid the feeling you’re making a pricing mistake. Small business owners would do themselves a huge favor if they took 5 minutes to check these things out.
At both Amazon.com and eBay products are sold through an auction-style format (used products on Amazon, that is). If your audience can get the information they need (or an alternative product) from these sites, you can see what they’re willing to pay.
For instance if you’ve put together a book on pricing strategy, you could find out what other books in the market are selling for. You could check Clickbank and Kindle to see what similar information is being sold for.
Service Pricing Examples
If you’re selling a service, finding out how your competitors are pricing their services would be a great start. I would start with Google and the Yellow Pages and go from there. There’s no easy way to research service competitors.
In every industry there is a first. Here in Nashville I remember seeing, for the first time, a company that will install your Christmas lights, and another that will pick up the dog poop from your yard. These groups likely had nothing to go on in terms of competitors.
In the service world like lawyers and accountants, you have the opportunity to provide hourly and service pricing. If you’re an HR expert lending HR knowledge to companies, can you determine what you would get paid if you were hired as an in-house HR Expert? There are job tables you can use to see what a person in that position would get paid. That would give you an hourly worth of your time from a corporate perspective.
In the case of the Christmas Lighting installation guy, what do similar firms that provide service to homeowners get paid? Landscape architects, landscape installers, lawn people, house painters, interior decorators? These are all services homeowners hire to make their homes look good. What are homeowners willing to pay?
Price Doesn’t Have to Matter
So armed with some competitor pricing, you should be in a position to feel comfortable that you won’t be making a big pricing mistake. Small Businesses also have the advantage of being able to change prices should they need to be. (Just don’t raise them for the customers who supported you when you were just starting).
Now’s the time to take a good, hard look at what your example products and services are offering. Take a look at the perception they are giving and the actual value they are creating. Where do you fit in that picture? Will you be giving your customers a great deal more value? Or not really?
When you’re looking at value, take into consideration your expertise on the issue. If you’re a painter with 23 years of experience and certified in 17 faux techniques, you should be able to extend that knowledge to the consumer and price yourself higher than college students trying to get summer work.
The key there is to make sure your customers understand the value you bring to the table – and how that translates into a superior finished product.
Value is also the volume on information, the specificty, the presentation and the long term value the customer gets. Starting with your example pricing, you should be able to raise your price with every additional point of value you can add.
Pricing as a Marketing Strategy
Pricing can also be a marketing strategy. Look at BMW and Mercedes in the United States. Here they are marketed as luxury and priced accordingly. Some of those same vehicles in Europe are taxis and delivery vehicles. The high pricing has increased the perceived value and appeals to a clientele that wants their choices to reflect their personality.
If your goal is to build a customer list, then employing a loss-leader pricing strategy might make a lot of sense. In fact we often allow our affiliates to make 100% of the price we’re charging so they’re more motivated to sell. Some might consider that a pricing mistake. Small businesses, however, do it all the time. Think of the Entertainment Coupon Book, Buy 1 Get 1 Free specials and more. All of those are ways to drive customer list growth.
Pricing should be strategic based on all of those things (and perhaps your cost of goods as well). Arm yourself with some information and then price according to your goal.