Small Business Articles from Make-it-Fly®
Make it Easy for Customers to Buy
The Pricing Dilemma Part II
By Victoria Munro
Deciding what to charge for a product can be a challenge, but setting the price for a service can prove even more perplexing. Pricing is more art than science. There are no hard and fast rules, other than making sure you cover your costs (including all overhead costs) and make a profit. Many books have been written and much advice given on this subject, but there is no neat one-size-fits-all formula that’s guaranteed to work.
It’s obviously important to consider the potential lifetime value of a client, know your competitors’ prices, the demand for what you offer and how you want to be perceived in the marketplace. What you charge, as well as the quality you provide, can dictate how potential customers will view your company. You might choose to offer bare-bones bargains, as many new business owners do. Or you can decide to become known as a company offering exclusive, top-quality service at premium prices. In other words, you can position yourself as the Ritz Carlton or the Super 8 in your field, or something in between.
You can bundle items and sell more for less, announce occasional sales and/or offer special discounts. The possibilities are endless.
Design Packages that Sell
Clients want choices, but not too many of them. Offering too much variety complicates the buying process, forcing customers to make difficult decisions. Offering three packages can make buying easy for clients and boost your sales. People understand a simple three-tiered approach—silver, gold and platinum choices.
This might be the basic no-frills service. You may not make a huge profit here, but it allows new customers to try your service with little risk. If they like your service, they’ll be much more likely to buy more, perhaps at the next level. One important thing to remember is that selling a one-time service isn’t the goal—establishing an ongoing relationship with your customers is.
This is the most popular package—the one you really want customers to buy. Studies show that, when faced with three choices, we’re most likely to choose the middle offering. Not everyone is looking for the cheapest price. Adding a higher-priced premium package gives buyers a baseline to compare prices, and may make your middle package seen as more reasonably priced.
A premium offering might be the one that takes a great deal of your time, energy and attention. Offering a deluxe service can also discourage purchasers of the mid-level package from requesting extra free services that are hard to refuse.
Several years ago, I worked with a wedding photographer. She loved what she did and was very good at it, but hated dealing with mothers of brides who frequently asked her to wait around, taking far more time than originally agreed on. Her solution was to offer a four-hour wedding package at her regular price and another price for the entire day. Since she didn’t want to spend an entire day at one event, she set the “all-day price” (her premium package) at $25,000. To her surprise, two clients purchased the package that year.
Packaging your services at three levels can make it easy for potential clients to buy.
© 2005-2008 Victoria Munro.
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About the Author: Victoria Munro is
co-founder (along with husband Dave Block) of Make-it-Fly®
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