How to Set the Price of Your Products and Services

Posted on July 10, 2013 by Abbie Widin, One of Thousands of Business Coaches on Noomii.

There are so many ways to figure out how to set prices.

Some recommend cost price plus a profit margin.

Others look at competitor benchmarking.

Still others want to add on your time, cost of client acquisition.

These approaches are sort of okay, but they miss the point.

The people who are buying your product or service care diddly-squat about your costs.

In my experience, people pay for only one thing.

Your ability to tell a story around value.

You need to create a perception of value that is greater than the price you are charging.

You also need to remember that you are in business to make money.

Even if you are a heart-centred healing practitioner, you need to be responsible for your own financial health. You need to generate an income so that you can keep doing good in the world. The bigger your business, the more people that you are able to bring your goodness to. This means that you need to get your head around charging for what you do.

But going back to value, think about the variation in different categories. You can have a $370,000 Maserati or a $15,000 Suzuki. Both will get you from A to B. Both have got models with 5 seats, come in a variety of colours. Both can carry luggage and the Suzuki costs a whole lot less to run and maintain.

For watches, a $40 Seiko keeps better time than a $65,000 Rolex.

The key takeout is that people aren’t paying for the actual feature of travel or time accuracy.

As you think about how to set pricing for your services and products, make sure that you understand:

How do you create value in your customer’s mind?

Tell a story.

You need to provide a solution that makes your price seem really reasonable. Focus on what the end benefit really means to your clients.

If you are a physiotherapist, you don’t want to be fixing up a little girl’s twisted ankle. You want to talk to her or her parents and find out that she wants to be a dancer. You want to help strengthen her ankle over the long term so that she can add her unique beauty to the world of dancing performance.

I would pay $88 to get her ankle fixed. I would pay thousands to see her dream of dancing come true.

How can you paint a picture that raises the stakes of the game? If you are a life coach, you need to shift the framework from what it costs to have you speak to a client, to what goals it will help your client overcome.

Are you helping your client figure out what to do with her life? Or are you transforming her life by connecting with her values, finding her life purpose and aligning that with her passions so that she can live on a higher level surrounded by people who resonate with her unique message.

How do you know what value you represent to your client?

Ask.

Simple. When you are talking about their end goals, goals that are aligned to and supported by values, ask what that is worth to them.

How would it feel when they imagine that they’ve achieved their goals?

If it doesn’t feel like a million bucks, then you need to tell a better story!
How to present your package in such a way that the price of your product or service looks like exceptional value?

You need to become a storyteller, capable of drawing pictures, making them vivid and emotionally connected to your audience.

Once people know what end benefit they want, and they can imagine that clearly in their minds, and they know what it’s worth, only then can you talk about prices.

Don’t fall into the trap of talking about prices too early. Never apologise for them. And don’t offer to discount them!

Deliver the value that you’ve said you were going to deliver. Keep it vivid and emotionally-rich, and you will find that you have genuinely provided something that gives her incredible value.

Having said all of this, it is important to make sure that you look at your cost price and charge more than it costs you. You definitely don’t want to be losing money bringing your good works into the world!