In this post I want to show you how to set your prices.
I’ve been in a nice hotel in Brisbane for the last couple of days recording a brand new mini course. One of the topics covered was pricing, which is super, super important to get right. If you don’t get pricing right, you could be under charging, go broke or burnout, so it is really, really important.
There are so many different methods you could use to set your prices, it’s quite easy to get lost and feel unsure, and I don’t want that for you. So I thought what I could do is to show you five methods of ‘how to set your price’.
Method 1: Just Guess
The first method is, you can “just guess”, and that’s the one that a lot of people use, and it’s not always a bad thing. But usually, for a lot of people, they don’t have the confidence to charge too much. So, their guesses tend to be on the lower side, so they’re more likely to under charge. So let’s not do that!
Method 2: Go with a Percentage Increase
Method number two is you can just go with a “percentage increase” every year. So perhaps it’s like inflation is a couple of % per year, maybe that’s how you put up your prices. Maybe you’re one of the brave people that puts up their price a little bit every time they get a new client or customer, and just see where the resistance kicks in on the part of the customer. If you are signing up every single client and customer you talk to, then that probably means your prices could go a bit higher.
Method 3: Check out your Competitors
Method number three is to have a “look at what your competitors are charging”. Say if they’re charging X amount, then you should probably charge that much, or maybe a little less, or maybe a little bit more. Think about the little more option, there’s always going to be a premium provider in any market, and it might as well be you! It’s usually a bit easier to be a premium provider because you’ve got plenty of money left over to do things.
Method 4: Cost Plus
The 4th method is “cost plus”. Think about what your costs are to deliver the product or service and then you add an amount over the top. Now this can work out really well, so long as you get that plus bit right. Can you imagine if you did cost plus, say on a $100 product or service and you add maybe 10% to it, so that’s an extra $10. If you haven’t included all the costs, then that $10 is not a very large amount of money, and you could quite easily go broke selling that kind of thing. So making sure you include all our costs, and you’ve got a decent plus on top of the key there. At least that’s better than guessing, and it’s better than just some random percentage increase each year.
Method 5: Value Based Pricing
Finally, method number five is “value based pricing”, and this is the one that I usually recommend. It’s kind of the opposite of cost plus. You start with the cost and you add a little extra. Value based pricing is you go out and you find what’s the value that my customers or clients get from the product or service. Then you set your price in relation to that value. You don’t charge them all the value they get, because then there’s no value left. For example, for what I usually do for my prices, I normally like to say somewhere between 5 and 10 times what I charge my clients, is the value that they get out of it at a minimum. Generally value based pricing means that you charge more than many of the other methods, which means that you’ve got plenty money left over from marketing growth projects and not going broke. This is particularly important!
I’ll talk more about pricing in my other videos. Out of all of these five methods, the one I recommend the most is “value based pricing”. So that’s five ways to set your prices, which I hope helps you.
What about you?
How did you set your prices? and are you going to use the different method now?
Which of these five are you going to choose?