In this post, we’re going to go over what a pricing strategy is, and why you need one. So let’s get to it!
Basically, a pricing strategy is a model or method that business owners use to price their products or services. Pricing strategies are critical for determining how much you should be charging, and identifying which parts of your business are most profitable and where you should be making changes.
Majorly empowering business wins, if you ask me.
Lots of different factors go into a pricing strategy – from the industry you’re in, economic conditions, how much competition is out there, how much your costs are…
Because these factors affect each business differently, each strategy is unique to that particular business. You can’t just pluck a strategy off the shelf, plunk it into your business and expect boomin’ results. The good news is that once you know how to put together a strategy that works for you, you can adjust it when conditions in your market change, so you continue to get paid.
Think of it as a roadmap to your pricing that will give you the confidence to make smart decisions about your pricing as your business evolves.
So how do you begin to put together a pricing strategy that’s going to help your business grow?
Well, first things first – it’s back to basics. Get to know your numbers.
To ensure you’re pricing your products or services appropriately, you need a solid understanding of your overhead (think service fees, advertising costs, taxes, rent… all those pesky bills you have to pay to keep the lights on) and how much you need to pay yourself. You also need a good idea of what your competition is up to so you’re not grossly over or underpricing yourself.
When you understand your overhead and baseline, it changes the perspective and allows you to clearly see what you need to be charging to keep the doors open, while feeling confident you can justify the prices that you set or change to clients.
Over the years I have come across lots of entrepreneurs who try to operate without a cohesive pricing strategy and I’ve got to tell you, they’re often underpaying themselves and overworked to the bone because they don’t understand their numbers.
I also know a lot of business owners also have some fears around raising their pricing because they think they will lose customers, don’t have the confidence to demand that higher price or are unsure of where to even start when it comes to researching competitor pricing in their market. Totally normal fears…and you can absolutely overcome them.
Start with the basics and set small, bite-sized goals for yourself. You don’t have to have all your work done by tomorrow. Take it one step at a time and build your confidence. Maybe today you figure out what you need to be making just to keep your doors open. Maybe tomorrow you identify the bills you’ve got coming up for the next six months. The next day start to figure out where you’re spending the majority of your time and if you can take any action to cut that down.
Your pricing strategy will also include looking at your competitors so you have a solid understanding of what everyone else is doing but don’t get stuck in comparison-itis. Every business is unique – yours included. Checking out your competitors is a great way to get a baseline idea of where you can think about pricing your services, but it can’t dictate your whole strategy.
At the end of the day, you’re offering a valuable service or product and should be compensated for it. Creating your pricing strategy and being able to adjust it as your business continues to grow is a great educational process that will help you get paid. Stop leaving money on the table and start working on your pricing strategy now.
Want to learn more about how to create an effective pricing strategy? My webinar 3 Secrets to Pricing for Profit is for you! Learn how to determine the right pricing for your offers and what to do when you’re afraid your audience won’t pay it—skills you’ll always need as your business grows and evolves.