It has been a while since I’ve talked about pricing. So many of my clients and women in the Strategy for Creatives Facebook group struggle with these common pricing mistakes. Even when we value our craft, it can be hard trying to come up with a cohesive pricing strategy. When a lot of us first started in business, we had no idea how we should be pricing our offerings. Most of us looked at our competition and asked family or friends what they would pay, and picked a random number that “made sense”. We didn’t think about our target market or our costs.
Don’t Assume Your Target Market is Price Driven
Most businesses assume their target market is price driven. In fact, a lot of people I work with are scared to raise their prices because they don’t think that their target market is willing to pay more or can’t afford to pay more. They are making a determination about their target market’s willingness to buy. But, there is a lot that goes into the decision-making when it comes to spending mone. Price is just one of those factors. People take into consideration the value of what they are getting for the cost. They also look at the time commitment and whether spending a certain amount of money is giving them something such as more time or less stress. If you are constantly getting clients or customers that are complaining about your pricing, then you’ve actually attracted the wrong type of people. There are people who will buy at any pricing level. It depends on how you are marketing for that pricing level. You might need to reevaluate what your marketing is saying and if you’re communicating the value of what you’re offering for the price.
Trying to Compete with the “Big” Guys
For most of us, we will never be competition with places like Amazon or Target. Large “big box” stores like these have the ability to sell at lower prices and offer free shipping because of economies of scale. Items are mass-produced which means they have the ability to order in huge quantities which brings down their pricing (and increases their profit margins). You can’t compete with that if you’re selling products as a handmade business and you don’t need to. Focus your marketing on why your products cost more. Are you using better materials? Does it take a long time to create each product? Are they personalized? Show the value for your price. Selling a service? Remember that people are on different business journeys. Don’t compare yourself to the top people in the industry who may look like they are booking two clients a year but making $300k. They have a whole team that is
handling a lot of the work. Communicate how you are different. Again, maybe your service is more personalized or you have a higher touch point. Is your service one-on-one vs a group? Think about those things that differentiate your services against the big guys.
Asking What Someone is Willing to Pay
You’re probably asking the wrong people how much they are willing to pay for what you offer. Asking your friends and family, random strangers on Facebook, or on an Instagram poll is not how you determine pricing. You will often get people answering who are not your target market, who have no immediate need for what you are selling, and who don’t know anything about your brand. Your pricing has very little to do with what people will spend. Your price should be based on your expenses, your skill level, where you are at in your business, etc.
Thinking Your Self-Worth Equals Your Price
You and what you are selling. But your services or what you offer is very different from your self-worth. Pricing is based on things like overhead costs, your expenses, the time that it
takes for you to do something, the time that you put into clients, and the skill that you have. A lot of people think that because they’re newer, or because they don’t have the confidence in their business, or that they’re competing with so many people that they have to charge lower prices just to get their name out there or just to start booking people, and it’s coming from a place of insecurity in their business. You need to break the ties that you have between your self-worth as a business owner and what you’re selling and pushing in products and services. The two have absolutely nothing to do with each other.
You Don’t Understand Your Financials
If you have no idea what money’s coming in and what money is going out, you’re going to struggle trying to figure out how much you should be charging. Don’t avoid trying to understand the financial side of your business. You need to understand the costs and the expenses of what it takes to run your business in order to accurately price yourself, your services, and your products. Make sure that you have a good understanding of where you are in your business financials to figure out whether or not you are actually making a profit and what type of profit margin makes sense for your business.
Competitors Dictate Your Pricing
This is a big one that I see all of the time. Yes, you should be aware of what others in your niche are charging. It’s a good benchmark for comparing your pricing. But you don’t have any clue into the inner workings of their business. What do their financials look like? Do they have a team? What’s their skill or education level? We have a tendency to place our competitors on a higher pedestal than where they may actually be in their business. People can put on Instagram all the times that their program is sold but we don’t know if that’s actually true. Following competitors, when it comes to pricing, is not the strategy you want to use. It actually can hinder what you’re trying to do in your business if you’re just trying to essentially “keep up with the Joneses”.
We all make mistakes when it comes to pricing in our business. We’ve all charged way too little for what we are offering. But the important thing when it comes to running your business is learning, growing, and understanding that what you charge has several factors that should be considered in pricing. Making sure that you’re communicating your value is just as important as letting people know how much you cost.