4 ways to get your #pricing wrong.
I have posted before about my ideas about getting your #price right, in particular about how to reach the actual price for your products or services.
But in THIS post I want to just point out a few things which might get you in a bit of trouble with your pricing and how to avoid them.
Please note: I am mostly speaking here about pricing for professional services (consulting, speaking, mentoring etc) as opposed to pricing of physical products which I don’t have as much experience with.
Here are four ways we can get our pricing wrong:
1. Mess around with it.
One of the biggest temptations — and I reckon pitfalls — of pricing your own services is to have your price be dynamic in nature. That is, one price for someone, another price for someone else.
Recently, I was approached to do some consulting with a big multinational company that has a lot of capital and huge budgets. The pricing structure I gave them was the exact same pricing structure I give everyone else. I could have probably charged a lot more and taken advantage of the fact that they are a huge company, but instead I played the long game (as I tend to do) and considered how much other work my association with them could get me (which it since has).
I don’t really think charging some people more than others is greed, it’s more like opportunism. Either way, I think it can be a mistake for your brand and your business.
Your price is your price because, presumably, you have reached that number based on a lot of rationalising and market pressures and costs and so on. Don’t mess around with it.
2. Work left to right.
I have posted a video before about how consultants and people who offer an hourly rate in particular find their pricing and how often they work from left to right in their thinking.
What I mean by that is, they think OK if I charge $200 an hour and I do ten hours in a week then I will make $2,000.
I think the other way around.
If I want to make $100,000 in consulting fees over 12 months and I just want to work for 10 hours per week — AND take 4 weeks off work with no consulting, then I need to charge $208 per hour. ($100,000 divided by 480 hours which is 10 hours per week for 48 hours).
You can mess around with those numbers to suit your own timetable and commitment but working right to left gives you a lot more clarity around how much effort you will have to put in to get your desired result.
3. Make it complicated.
The price is $97 but if you are an Australian resident you need to add GST to that, if you are from the UK please add VAT, if you are paying by credit card add 1.5% but if the credit card is American Express then add 3% … argghh.
If you are not sure how much your services cost, the market certainly won’t be able to work it out, and they probably won’t try very hard to work it out either.
4. Undervalue yourself.
This is one of the biggest and most common ones. In almost every case, professional services and consulting prices are determined by our own sense of self-worth. And, since precious few of us REALLY believe in our own value or aren’t fearful to announce it to the world, this results in a lot of consultants not charging anywhere near enough for their services.
As the very clever Andrew Griffiths says, “someone has to be the most expensive and it might as well be you”.
Nobody is going to hear your price and then say, “geez that’s not enough for what you’re doing for me, here is 30% more”. But they might say to themselves, “geez this person should be charging a lot more and they’re not so maybe they’re crap”, and keep looking for someone else.
If you are in the enviable position of being able to determine what someone pays you, instead of working on a salary that someone else has decided for you, make the most of that great opportunity. Charge a price that’s relative to the value you know you can deliver.
To quote another clever fella Warren Buffett, “price is what you pay but value is what you get” and unfortunately if you get your price wrong, nobody will ever experience the real value you offer.