Featured Whistler Question newspaper column, June 13, 2017: How to Price Your Product or Service
The price you charge for your product or service is one of the most important business decisions you make.
Price is What You Pay – Value is What You Get
Setting a price that is too high or too low will limit your business growth. In other words, you need to price your offerings at rates that are attractive to your ideal clients, and that you can have a sales conversation that that will produce results. That means that your prices must translate into value for your clients. As Warren Buffett said, “Price is what you pay, value is what you get.”
This part can be confusing because people often think value means giving clients a great deal at low prices. Or they think that value is the length of time spent on a job, or the number of pages created, or perhaps the number of images used.
The Difference Between Cost and Value
The first step is to know the difference between cost and value. The cost of your product or service is the amount you spend to produce it. The price is your financial reward for providing the product or service. And, the value is what your customer believes the product or service is worth to them. Sounds simple but here is where it can be tricky – pricing should be in line with the value of the benefits that your business provides for its customers, while also bearing in mind the prices your competitors charge.
Key Questions to Ask Around Value
Best-selling author and professional speaker Michael Port asserts in his ‘Book Yourself Solid’ process that what matters to your client are the financial, emotional, physical and spiritual return on investment your product or service provides. Further, he suggests these key questions to ask around value:
- How much income will your service create?
- How long will what you create be a productive, useful resource for the client?
- How much pain will you relieve or how much pleasure will you create?
- How are you helping your client connect to their purpose?
- Will our work create substantial and long-lasting peace of mind?
If you are creating something that fulfills those needs, your clients will want what you have to offer if you also perfect your sales strategies. Selecting the right price point is one thing but you have to utilize effective selling techniques so you can have sales conversations that breed confidence and trust.
One tip is that if your price does not sit right with YOU, then you need to listen to that inner voice. Many people can advise how much you should be charging, and of course you will want to ensure profit but if you are uncomfortable with your prices, your selling strategies will fall short. That’s not to say that you shouldn’t be bold if your skills and talents substantiate a higher rate, but if you cringe when quoting a client on that price, it won’t go unnoticed.
With all the noise out there, it is important to remember that only you can deliver you. Your skills and service ethics are unique so know your worth and ask for it.
At Lighthouse Visionary Strategies, Cathy Goddard offers business and life coaching, workshops and the popular Whistler Open Forum Speaker Series. She is founder of Lighthouse Mentor Network, a mentor program nominated for Small Business BC Awards for 5 consecutive years. Cathy writes this column for the Whistler Question newspaper.