Pricing is one of those aspects of business a business owner has to be very careful with.
I have on several occasions written about pricing and how important it is that you get it right.
I have also written about how to scientifically arrive at prices for your products and services.
The reality is most businesses are struggling not because of lack of sales in itself or because of unsellable products or services but because of poor pricing.
They are either not pricing enough to make money or they are pricing too high to get any sales in.
Others are having problems because they don’t include tax in their pricing hence having to take it off their profits leaving them with barely anything to survive as a business.
Pricing is not about merely putting monetary value to a product, it goes beyond that. Actually it goes a long way, talking about the product or communicating value beyond monetary value.
Pricing also segments your market involuntarily mapping out a niche for your products or services.
Pricing is like driving a manual car, you have to keep the balance on the accelerator just right or else the car ignites off or goes undesirably so fast.
Same applies to pricing of products and services.
Price so low and you will be perceived not to be of good quality.
Price so high and you won’t be affordable, so finding the perfect balance here is key if you are to get the right (paying) clients for your products and services.
Let me share with you a personal experience.
When we started our Business Management & Consulting firm (YOUNG TREPS), we struggled with finding the right prices for our services.
Service is on tricky thing to price for sure compared to products.
One of the hardest services for us to price was consultation.
How do you charge for time and information which are the main items of trade in consultancy?
We started with not charging for consultation thinking, making it free would attract clients whom we would then charge for services like tax help, business registration, legal structuring, business and Investment proposal writing and the like.
Yes, the lure of free consultation got us clients but it go us the wrong clients.
If it was fishing we had thrown a net into the lake to catch, then we were catching other marine animals but not fish.
Most of the people who came for the free consultations were never serious clients.
Then we decided to put a price (20k) to the consultation as a sieve to sieve unserious people from real potential clients.
When we did this, the quality of clients increase abit.
We then moved it to 50k and yet a gain the quality of our clients improved.
We moved it further to 100k and we started seeing real serious clients who understood what we did and how it benefited their ventures.
Clients who were ready to pay top price for professional services.
When we offered free consultations, we saw many clients but never closed down any sales.
The more we increased our fee, the less clients we saw but the more sales we closed and money we made.
We realised that by the time some one paid 100k for an hour’s consultation they were so serious about what it is they were trying to do.
Unserious people didn’t pay and we survived those. We also realised such clients valued what they did and didn’t believe in free things.
To them free consultation meant you didn’t know what you were doing or were rather just gambling around.
That’s when it actually hit me that our fee determined which type of clients we got because it communicated value.
It communicated competence, ability and knowledge of what it is we did.
So as you price your products and services keep it in mind that your prices say alot about you, the quality of services or products you’re selling,your ability and so much more.
Price builds market perception of your brand.
We have lost clients after they heard our prices. Some because they thought we were too costly and others because they thought we were too cheap to be good.
So the trick is on finding the right balance.
Jaluum Herberts Luwizza is a Speaker,Writer and Contributor with the Nile Post.He is also a Business Consultant at YOUNG TREP East Africa’s No.1 Business Management and Consultancy firm that helps people start and grow profitable businesses.