Pricing Your Services To Increase Sales
I have been diving deeply into pricing strategy and psychology lately as I roll out new packages for my coaching and wrap up b-school. There is a LOT of information out there; way, way, way too much in fact.
I was almost lost in a rabbit hole, but have found my way out, in large part to this little gem that breaks it down succinctly, and a few really relevant webcasts. As always, I’m on a mission to save you time and money and serve up valuable resources, so today, I offer you the highlights.
Although applicable to products and services, these pricing tips are best applied to service-based businesses — coaching, consulting, design, digital marketing, etc. — and meant for entrepreneurs, solopreneurs, and mompreneurs.
It goes without saying that you need to know your customer and know them well. Understanding what problem you are solving for them, what motivates them to buy, and using their words to describe the problem and solution is essential.
After that, it’s all about positioning, perception, and value, and value, my entrepreneurial friends, is the trickiest part of all for service-based businesses. Price and value are not the same things, but they are in a very serious relationship, past dating, probably engaged with a puppy, maybe married with kids, long-term commitment serious.
Pricing your services means adding the costs, plus margin, plus worth to your customers, and including the intangibles as well. In many cases, the value of your services goes far beyond the service you deliver, and is enhanced (or worsened) by a combination of the relationships you build, the trust you create, and the community you connect. All of it is the sum of the customer experience, and for better or for worse, can not be separated from you, your story, or your brand.
Pricing is not a one and done proposition; it’s an ongoing decision that you’ll make and evaluate over and over again, as you test (test, test, test!) different price points and packages, bundle them differently, get feedback, gain expertise, build clout, and enhance your story.
Stories create significance and value. Customers, clients, ambassadors, fans, and followers, all of your people in fact, will choose you because of your story. Your origin story, your client success stories, your brand story — it all matters. Therefore, as you think through the following tips, evaluate their utility in the context of you, your story, and your brand.
Don’t price similar items at similar prices. When customers have to do the work of figuring out which choice is better, they defer the decision due to analysis paralysis. Make your thing obviously better and price it accordingly.
Do put your most expensive offering next to your most affordable. Cognitive bias, called anchoring, means we evaluate something relative to another and seeing both options side-by-side makes the less expensive option seem like such a bargain.
Weber’s law says that a change has to be enough to be noticeable and inspire action, so the bigger the cost, the bigger the discount must be to be perceptibly better. And, if the price increases, it will be more noticeable when you are starting with a relatively smaller price, so plan accordingly.
People spend until it hurts, which means we are wired to feel good about purchasing until the cost exceeds the gain. If you can enhance or re-frame the gain, or minimize the pain, you’ll sell more. One way is to offer a sweetener to a bundle to make it more enticing, or to change the copy to focus on words that influence behavior and highlight the results in the context of removing the pain.
Weird But True
Prices ending in 9 perform better than prices ending in other numbers, whether it’s dollars, $39, or cents, $0.99, but whole numbers (dollars) tend to be more irresistible than prices with dollars and centers ($39.99).
Use numbers and symbols, not words, because fewer digits, even less commas and decimals, signal lower costs.
Comparing prices to competitors, or even substitutes, can backfire. Often the lowest priced choice is perceived as the lowest quality option, and even if it’s not the same, the comparison could put you in the same category.
More Than Money
Context is real too. Where a customer purchases matters, and if the environment or marketplace is upscale, customers will expect to pay more. Think about that next time you put off a website upgrade.
Saving money isn’t always the most important thing either. Sometimes it’s about enjoying the time using the product. That’s why experiences often seem more valuable (and memorable) than material goods, especially if the material good doesn’t enhance our self-image.
I try to remind myself that with my current customers. They aren’t just paying for my knowledge and expertise, they are paying for our time together, so I over-deliver throughout their journey. I want them to be delighted and engaged at every turn, feel good about their investment, and get what they came for.