Wise words: The price you charge is how valuable you tell your customers your work is
Master your pricing with these 5 steps.
1. Calculate your costs.
Direct costs are costs of creating your product. This includes the cost of materials and labor.
Indirect costs are your businesses cost of operating and getting customers. This is your marketing, software, utilities etc.
Once you have calculated your costs, figure out your gross profit margin which is gross profit / revenue (there are gross profit margin calculators online you can use).
Pick a price that ensures a healthy gross profit margin around 35% to 50%.
2. Research your competitors and customers.
Look at your competitors’ prices and how your product is different. Don’t copy their prices but instead use their prices as a reference and see where your product fits into the market.
Focus on how much your ideal customer would pay for your product. If your business and USPs (unique selling points) are based on being higher quality, charging a low price will make your customers doubt your product.
Here’s The Customer-First Strategy That Makes Competition Irrelevant an article I wrote if you want for more on ideal customers.
3. Set your price based on value, not cost.
Your ideal customer is paying for you to solve a problem. Charge a price based on the problem you solve not based on just making profit or being in your competitor’s range.
If you solve a more specific problem or solve it in a better way than your competitors, charge more. When you raise prices, your business seems higher quality and gets more qualified customers.
4. Test different price points.
Test and change your price based on the previous factors like your ideal customers, your costs, and value you provide.
Different packaging like a basic versus pro or adding a more expensive service can help you see what works and gets a good response.
5. Try psychological pricing and discount pricing.
Use psychological pricing like anchoring and scarcity to make your offer seem more valuable and get people to buy more.
Try discounting or offering promotions and to see if it gets more people buying
Here’s The Four Most Powerful Persuasion Triggers, for a more in-depth guide on buyer pyschology.
The biggest mistake you can make is charging too little. Test different price points and don’t be afraid to raise your prices.
Until next Saturday,
Warren