I get asked a lot about setting prices. With virtually every client, this discussion surfaces. Here’s what you need to know about pricing your products and services.
Bad Pad Thai:
Friday night I was working late. As such, I ordered take out.
Pad Thai is one of my favorite meals, and there’s a new place that I order from occasionally.
Thirty minutes later, I picked up the Pad Thai. It cost $15.
But I was disappointed. It wasn’t super warm. The container was small. And the flavor was just OK.
I immediately thought, “Next time, I’m just going to Chipotle.” I’d rather have an $8 burrito.
It wasn’t that I had an issue spending $15 on Pad Thai. The issue was that it didn’t seem worth the value. And as a result, I’m going to be spending far more money on burritos and far less on Pad Thai.
Charging Lots of Money:
One of the most successful clients we’ve worked within the past two years is a manufacturing operation. And they paid us a lot of money to work with them.
But we’re getting incredible results. Our team is happy. The client is happy. We’re looking to renew soon.
When I originally sent out the proposal, I was a little nervous. It was tens of thousands of dollars for a few months of work.
Would they say yes? Would we be successful?
Part of me wanted to reduce the price. Maybe then they’d say yes.
But I stood my ground. As a result, they take our work seriously. We take them seriously as clients. And we’re seeing massive success in the organization.
So….what does this mean?
Pricing properly is all about perception. It’s a perception of value. Is the price greater than or equal to the perceived value you’re providing? Price/Value can shake out in three ways:
- If your price and value are perfectly equal in the mind of the customer, they will feel like they are getting a fair deal.
- If your price is high and perceived value is low, the client will feel like they are getting taken advantage of.
- If your perceived value is high and the price is low, the client will feel like they are getting an amazing deal. And they will tell their friends.
If you want to charge higher prices, you have to change your perception of value. It’s not about price. It’s about perception.
I’d happily pay $20 for good Pad Thai, but would only be willing to pay around $10 for that restaurant’s Pad Thai.
We have no problem charging clients a lot of money, but we also provide a lot of perceived value. If we didn’t, they’d never work with us. And many of those $10,000+ dollar clients send us the most referrals. Because they perceive us as valuable.
Remember: ***The easiest way to change your pricing is to change your perceived value.***