Service-based businesses often struggle to find the right pricing strategy that gives them a competitive edge in their market.
Pricing for products is a little more straight forward. To make a profit you need to work out the cost of buying or making the product, and charge more than it cost to make it. Services are different in that it can be difficult to quantify all the costs that go into the provision of that service including intangible things like time and value that can be difficult to justify to potential clients without a track record of case studies to back up your expertise.
Because pricing for services is so hard, many service-based business making costly pricing mistakes. We made some of these mistakes in the early stages of starting up. We learnt our lessons and made the necessary changes to ensure we did not lose out or cause irreparable damage to our brand.
#The moment you make a mistake in pricing, you're eating into your reputation or your profits - Katharine Paine Click To Tweet
Here are some common pricing mistakes service-based businesses make and tips on how to avoid making them.
1. Selling the service and not the outcome
It can be a tough truth to hear but nobody really cares about your service. You may have the best service in town but whoever is seeking what you have to offer is more interested in the outcome(s) you can help them achieve. Can you take away a pain-point, amplify a good experience, minimise losses, increase profits, save time or even money? Buyers are interested in the value they get out of using a service. Put a price to the value.
2. Not stating costs before work begins
Nobody likes surprises especially where money is concerned. Sharing costs upfront is always the best policy. When random costs begin to creep into the client relationship because your company forgot to mention something very important, it could drive a wedge between you and your client, erode trust and destroy the relationship altogether. Even worse, the reputation of your brand may suffer for it. Never start working on a client’s project before costs are agreed. If the client is unable or unwilling to pay for the value your company offers, maybe they are not your target audience.
3. Arguing with the prospects about price
Haggling is draining and not necessary if your value proposition is clear and the target audience is right. You can include a ‘starting-from’ price in your marketing material or information pack to manage expectations. If you prefer not to mention your prices in your marketing material, the next best place to state the value of your offering is at consultation stage.
4. Being afraid of walking away from the wrong client
Not all money is good money to take into your business. Some opportunities will bind you to projects that drain your company resources. With a good competitive positioning strategy you will know who your target audience is and what your business needs to do to attract them. It’s perfectly acceptable to respectfully turn down projects that are not a good fit for your brand, or refer them to a more ideal service provider.
5. Offering many price options for one service
Have the right pricing strategy for each service and stick with it. Offering different prices to different clients for the same service can ruin your brand’s reputation if and when word gets out.
6. Offering discounts or lowering prices
Ever lowered price to get a client onboard and regretted it later? Lowering prices often gives the perception of desperation. It’s not uncommon to have disrespect creep into the relationship as clients begin to ask for more knowing that you were willing to reduce your prices to secure the relationship. Instead of lowering price, offer a bonus that adds value but does not eat into your costs.
7. Staying too long at the wrong price point
Research does not end when you launch your service, it continues to as your brand grows. Staying abreast of trends and shifts in the market is important for maintaining a competitive edge.
Need help pricing your services for profit? Book a consultation with one of our experts today to learn how we can help with your pricing strategy. We work with clients internationally. Book your consultation HERE.