How can you charge more?
Knowing what to charge for your product or service can feel like a tricky balancing act. You probably know what you’d like to charge. You may have an idea of what you think you need to charge. And then there’s what clients are prepared to pay…
The price people will pay for something is incredibly subjective. Some people will pay a lot for the same thing that others will only spend a little on. The difference is in the perceived value. Those people who will pay the higher price tell themselves that price is justified by the value they receive.
One thing is true; people will never simply choose to pay more for the same thing. If they think they’re going to get something different or better, maybe. But they won’t just choose to simply pay more.
What do I mean by “more”?
First, you can’t charge more than your clients are willing to pay – that’s a fixed limit. If you try, then by definition, they’ll go elsewhere.
You can charge more than you have charged in the past.
Once you have clients, you can increase your prices when you need to (in line with the cost of living, perhaps, or because you’re offering an enhanced service, or because the cost of providing that service has increased). It may not be well received but it is at least linked to the perceived value the client is getting or will get.
You can charge more than the market/competition.
However, you can’t just charge more because you want to earn more. You either have to deliver more value than similar products or services on the market, or deliver something different.
“People never pay extra. They buy something they want at a price that feels fair to them.” – Seth Godin
Fair exchange is never robbery
Pricing is the equilibrium of price with value. When these two are balanced, it’s a fair exchange.
The price is your indicator of the value of your product to the client. That price must match the value the client feels they will receive.
Value is important, then. And yet, value is all in the mind, and people value different things. Some value utility over appearance and have little regard for the status of what they buy. Others value appearance and perceived status with their peers over utility (which explains the world of ‘designer’ or luxury goods).
You can’t tell a potential client what the value of your product is – that’s up to them (subjective, remember?) But you can work on providing the value that the client wants, and has been led to expect.
You can use your marketing to signal and position in a way that indicates how you would like your product to be perceived – the value you intend to provide.
If you deliver on your promises, clients will feel they have received fair value. They might want more of the same. And they may well recommend your value to others.
Focus on the buying decision
Every purchase scenario is a choice with one of three outcomes. The buyer can:
- Buy what you’re selling.
- Choose to do nothing.
- Buy something else instead.
If your product and price meets their perception of fair value, then they are likely to say yes and buy what you are selling.
If your product and price don’t meet their expectations of value, they have two options: do nothing or do something else.
When the price is perceived to be too high, people will often choose to do nothing as they can’t make the exchange balance for them (the same can happen if it appears too low – on the ‘it’s too good to be true’ principle).
If there are clear alternatives to your product or service, they are likely to buy something else instead.
Part of designing your product and marketing it is helping people understand that there is no good alternative (you’re unique) and your product offers recognisable value (a fair exchange).
If you can satisfy these two criteria then the price you charge is likely to be acceptable (so long as it doesn’t exceed the perceived value!)
But… “I need to earn this much, so that’s what I need to charge”
To run your business, it is important to feel fairly and adequately compensated for your time and effort. However, the reality is that potential clients won’t view your product or offer in this way.
It’s an easy trap to fall into to begin with pricing when thinking about your product.
Just because you want or need to charge a certain amount, it doesn’t follow that people will pay that price.
Equally, they might be willing or expecting to pay more but by starting with the price, you’ve just limited yourself.
A matter of perspective
Pricing your product is simple as long as you consider it from the buyer’s point of view. Start with the difference you can/will make to the client and continue from there.
The cost to you of making or delivering something is largely irrelevant to the client because they’re focused on value. Your clients don’t care as much as you do what it takes to deliver, they care about the benefit they receive from the delivery.
Pricing can take time to get right but it is a lot easier when you have a product that is the perfect fit for what your ideal client is looking to buy. If you want to explore more about how to achieve this fit then consider my book, Reframing Marketing. It’s a practical step by step guide to making a product that your ideal client wants to buy at the price you’re offering.