If you’re self-employed, whether newly launched or a few years in, I’m going to wager a bet and say one of the most critical decisions you can make concerns your pricing strategy.
Whether it’s a question of what to charge, or how to change your rates so you are earning more … pricing strategy is one of those things that just keeps rearing its challenging head.
Well don’t worry, because you’re not alone. I’d even go so far as to say that pricing strategy is THE main topic that I discuss with ALL of the clients I mentor. Partly, of course, because we all became self-employed with the intention of earning an income … and so getting our pricing right is a fundamental part of making our business a success.
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And of all the clients I do mentor, the main reason pricing strategy is usually a problem … when they first come to me … is because they are stuck in that age-old belief that they have to charge based on their TIME. Whereas, in reality, they need to be charging based on their VALUE.
The problem with day rates, hourly rates, even “package” rates that have been calculated according to the time it will take … is that they’re focusing on how long it will take to do a job.
In practice, WHAT you’re able to do is far more important than HOW.
Plus, when you’re charging according to your time, you will always be constrained by the number of hours available to you … meaning you’re always going to be sacrificing either time, or money.
So, how do you charge based on your value?
Well, there isn’t a one-stop answer for that one, and our signature programmes are geared to helping people work out how to do exactly that.
But as a starting point, here are a couple of distinctions that have made people a LOT of money….
Pricing strategy based on you vs pricing based on your solution
What is the most important consideration when you’re buying a service, or a product?
Put yourself in your clients’ shoes. In fact, better yet, put yourself in your own shoes on an occasion that you ARE the client….
Let’s say you’re doing some home improvements, and you need to make a few small holes in a wall, in order to hang a shelf.
You go to your local hardware store, and they present you with two options: an electric drill, or a hammer.
I suspect you won’t think too long about it….
Sure, the hammer will enable you to make holes – but probably not the kind of holes you need in order to hang your shelf properly. Making holes with that hammer is in fact probably going to just make far more of a mess.
The drill, on the other hand, serves your purpose exactly. You’ll be able to create a neat hole to the exact size, and in the exact location, that you need.
So you choose the drill. But … you haven’t chosen the drill based on price. You haven’t even chosen the drill based on it’s branding, or the speed with which it will achieve your end goal.
You’ve chosen the drill because it provides the EXACT SOLUTION to your problem.
No other consideration is really necessary.
So flip that analogy to fit your service-based model, and you realise that it’s the solution you are able to provide that is the critical factor, so that is what you need to focus on.
It doesn’t matter how long it takes you, it doesn’t matter where or when you learned to do it … offer a clear solution to their problem and THAT becomes the “decision trigger”. It’s all about the VALUE of what your solution is able to offer your client.
So how do you reflect that value in your pricing?
Or more to the point … how do your customers define that value?
Well this is the other important thing to remember … different people value things differently.
If you were considering learning the guitar, would you buy the most expensive, top of the range guitar to get started with? Or would you buy a cheaper, perhaps second-hand one … to test it out and see if you actually like it, or indeed, are any good at it?
For many people, it would be the latter.
On the other hand, if you’re a professional guitarist looking for a new guitar, are you likely to go for a cheap bottom-of-the-range guitar, or a higher cost but higher spec model? More likely the latter.
Which only goes to show that every customer defines value differently.
Value all comes down to the specific need, or problem, of each individual client. And the top-of-the-range and bottom-of-the-range models are never going to present the same value to the same person. Yet they will always both have their market.
So again, when setting your own prices you don’t need to be adapting your service, or your prices, to suit the client … you need to be finding the client to suit your service. Because to that client, your price isn’t the consideration – your service is.
So – focus on the SOLUTION you’re able to offer, and target the clients who NEED that perfect solution, and your focus has already started to switch to the VALUE you’re able to offer, and away from the TIME it will take you to do so.
Interested in knowing more?