What’s the “best” price? Or, Working for Peanuts
Someone once said that the biggest failure of small business owners is underpricing. I believe it. I struggle with this question on a daily basis. In my freelance writing business, I find myself trying to figure out what to charge for a product to:
a. Be fair to the client who says, “I’m on a tight budget” and
b. Be fair to me to get paid for the value I bring to the project.
People want value but they don’t want to pay for it. So you work for “peanuts.’
SEO Book has a recent post titled “Pricing to sell or selling yourself short” and they talk about pricing for professional services. It seems everyone has the same problem. I can tell professional and small business people not to underprice their products or services but I have a tough time pricing high enough to adequately compensate for my time and expertise.
If you’re trying to decide how to price your product or service, consider:
1. What is the competition doing? Are they raising or lowering their prices?
2. Can a change in pricing get you a bigger market share?
3. Can you create additional value perception?
4. Is the demand for your products/services increasing or decreasing?
5. If you are selling services, are there other ways you can receive compensation (barter, for example)?
I’d appreciate your thoughts. Do you feel you should charge more but you don’t know how to do it?
Related Stories
POSTED IN: Business Improvements, Finance, Marketing, Starting Up
2 opinions for What’s the “best” price? Or, Working for Peanuts
Des Walsh
Dec 13, 2007 at 10:04 pm
Those are five really good points. I’d be very wary with the last, especially as it’s often hard to get a fair exchange on barter, unless there is a real dollar value attached to the goods or services being exchanged and unless you are getting something you would otherwise want to buy and be willing to pay money for.
I believe there is a more fundamental challenge, especially for boomers who are becoming their own employers and only now having to price out their service. It requires asking “how much do I really believe I’m worth?” and then figuring out how to achieve that. I was told of one couple in a franchise who acknowledged they were selling the product at less than cost but said they had to do that to stay in business. What they meant was staying in fantasy land. But a lot of us professionals do that: allowing the customer to put their lowball price on our services by telling us how tough things are right now. Life’s tough: get over it. When people ask me my fees I ask: Is price the most important thing for you? (that’s a question about value and when you drill down there is often a more important issue, so you can come to the price issue later); if they push on the price and ask “how much” before we’ve had a chance to talk about the service, what their real need is etc, I answer “probably more than you want to pay” (usually a safe observation, but needs to be said with a smile) - if they still want to talk, you might have a prospect, but if they wilt and walk away, don’t chase them or you’ll regret it. And if they want to tell you about someone else who charges a lot less, don’t get sucked in. David Sandler, inventor of the Sandler sales system, used to say “cover up your belly button” - in other words, know your worth and have a posture of confidence that you know the value of your service and don’t do cheap. Economical is ok: cheap is for cheapskates.
My two cents.
Making Sure the Price is Right
Dec 14, 2007 at 9:19 am
[...] of Small Business Boomers wrote about pricing a product or service. Here are the five questions she came up [...]
Have an opinion? Leave a comment: