When you are new to the marketplace, pricing your product or service is an important and multilayered process. You don’t want to over-price and scare off customers, but you also don’t want to underprice and send a message that your service is cheap. Your customers are smart enough to know that they usually get what they pay for. Take pricing extremely seriously, and take your time with it. Here are a few things to consider.
There are a few steps to ensure your product or service is properly priced.
Define your financial goal.
Then everything in the business needs to orchestrate around that financial goal. Ask yourself the question, “Is my business a kind of commodity?” If the only difference between your product and someone else’s is price, and not service, then you have a commodity and it becomes very difficult to differentiate yourself from that individual.
If you don’t have a commodity, look at the competition. How competitive is the market? How many other companies do what you do?
Is it a need or a want? When it comes to pricing, you have to determine if your product is a “need” product or a “want” product. A want product is generally an emotional buy for someone. A need product is something people don’t buy until they feel they absolutely need it.
There is a two-step process when selling need products.
- First, you have to educate people as to why they need the product so they have a tangible reason for purchasing the product.
- When you’re talking about a need product, you are generally talking about a product that can make a significant difference in an individual’s life. The difference when it comes to pricing is the potential outcome for the client or the perspective buyer. Can you put a financial or monetary figure on that outcome? I find that the amount your customer will pay is determined by their desire for change.
Forget everyone else’s pricing. Determine the pricing based on your goals. The most important aspect is the value your product or service has for the consumer. Put a financial marker on that outcome. Once you’ve done this, you just have to convince the client that the value you can offer them is well worth the price.
Sell with confidence.
In order to accomplish any sale, you must convey confidence, in yourself and your product, to the customer. You have to realize that not only is the customer buying the change they want, but they are also buying your ability to help them accomplish that change. If you’re not confident, you’re not going to convey that ability and chances are they won’t buy.
To have that confidence, you have to be sold on the product or service yourself.
- You’re worth the money.
- You will be influential in a conversation that helps someone make a purchasing decision that is going to help transform his or her current situation.
Be confident enough to ask for the sale and for the money. Remember, the worse that can happen is they say no.
Justify your price.
If you are going to try to take your product and justify the sale of it, you may struggle at the beginning. Remember the confidence we mentioned in the previous section! Another good practice is to find someone else to sell what you are offering. If you can get someone else to say how great you and your product or service is, people will be more inclined to buy. An endorsement from someone can be proof to the customer that your product is worth the chance.
Should you discount?
Discounting works relatively well because so many people are programmed to buy when they see the word discount. But, when you are talking about products or services that provide tremendous value, rarely is that discount going to trigger a buy. The moment your pitch moves from value to knocking off 30 to 40 percent, your value will seem untrue. If you want to discount, look at what each person wants to get from your service and reduce the price to make the barrier of entry a little bit easier.
You have to be careful when pricing. When you find your right price, the only thing between you and sales is you and your service. If you believe in yourself and what you do, convey that confidence to your potential customers. The price will always be right.
Image credit: CC by Abu Afnan