In case you hadn’t noticed, people can react very differently when faced with
same price for a product or service. In fact in most cases, we’ll never actually know what is in their minds when they consider a price and then decide to respond to it in certain way. So what does that mean for those of us pricing and selling our services out there in market?Typically, people who sell services go for an hourly rate. They use a process called “reverse competition” to determine what their rate should be. This is where you take a look at what your geographical competitors are charging, and you decide where in range you want to fit on spectrum of hourly rates. Inevitably, we choose a rate somewhere in middle, so we can say that we’re not most expensive, but neither are we cheapest!
What kind of message are we sending out to our clients with this approach?
We’re showing absolutely no differentiation from any other company – just sticking ourselves straight down line. In other words, we compete with everyone! Not a very prudent marketing decision.
So pricing simply using an hourly rate that sits in middle of spectrum is, in my view, a wasted opportunity to create a point of difference with your offering. Let’s think more broadly for a minute about what we are actually offering to your clients.
Regardless of what our specific offering is, we all offer some combination of: ·Quality ·Price and ·Service
QUALITY
Quality has become an expectation - minimum you need to be in game. It is similar to a high school degree - no one cares if you have one, but watch out if you do not. Quality is no longer an effective differentiator. So if you are going on about exceptional quality of your service in your promotional material and sales pitch, just realize that in your customers eyes, you are not differentiating yourself in any way.
After all, no sane company is going to advertise fact that work they do is of average or low quality. It’s all high, isn’t it?
PRICE
There is absolutely nothing positive about competing on price, unless you specifically position yourself as a low-cost provider. Certainly, there is a market for discount provider, but I believe this only works if you have a very high volume of transactions. As a service provider, only sensible route is to obtain premium prices for your services.
No matter what you charge, there is always someone, somewhere, willing to perform work you do for less money. Customers are value conscious, not price conscious. They look to do business with people they feel give them more than they are paying for. So goal for service provider is to make sure customer perceives full value of service, not simply price component.
Its accepted fact that many customers will equate high price with high value - especially when there is very little else to judge your value on.
Wise consultants know that if they price their services at low end of market, customers do not take their advice seriously. On other hand, if you charge rates on upper end of spectrum, customer will hang on every word you say and has a higher probability of implementing your suggestions. This of course has a proviso that you are offering a great service, rather than a mediocre one.
Sometimes biggest hurdle to get over when considering charging premium pricing is our own attitude. Do any of these sound familiar?
‘I can’t charge those prices – my customers will all walk away!’ ‘My service isn’t worth that much’
As long as you stay in that mindset, you’ll never make transition to high end pricing. You must truly believe value of what you offer - after all if you don’t, why should your customers? More on this below in a discussion about articulating value of what you do.
