TTVB #004: From Undervalued to Valued: How to Price Your Products and Services RightMay 28, 2023
Read time 2 minutes
Are you leaving money on the table with your current pricing strategy?
Don't let your business's sustainability and brand perception suffer.
In today's newsletter, I will share pricing guidelines to ensure you're adequately compensated and maximize your earnings.
Let's dive in.
Rule Number 1: Emphasize Value Over Production Costs
Never base your price on what it costs you to provide your product or service.
Think about Apple.
Their products far exceed their production costs, and yet customers happily pay a premium because of the unparalleled experience and ecosystem they provide.
Similarly, if a client hires you to build a website that will guarantee them to make $50k, and it takes 4 hours, you could charge $10k or more - because paying $10k to make $50k is still a pretty darn good deal.
But wouldn't clients choose the cheapest option instead of paying a lot?
And this brings us to the following rule.
Rule Number 2: Differentiate from Market Averages
Basing your pricing on market averages is a race to the bottom.
Each competitor trying to undercut the other slightly.
This only happens if what you are offering is considered a commodity.
Don't do that.
You want to differentiate as much as you can.
Build a monopoly of one within your niche and you get to command premium prices without direct competition.
Rule Number 3: It's either premium, or it's free
Resist the urge to offer discounts.
It will undermine the value you provide and can confuse your existing clients.
They might wonder why they didn't get that discount.
If you want to help someone who cannot afford what you are offering, do it for free.
For everything else in between, never lower your rate.
Instead, reduce your output.
If a client is on a budget but still wants to work with you, don't lower your rate but offer them fewer hours, days, etc., in turn.
Because once a client can pay your actual rate, it will be much harder for you to raise the rate accordingly.
Aligning your services with budgets, without compromising on value, ensures you attract customers without devaluing your worth.
It also reinforces a self-image and solidifies what your services are worth.
Most of the principles here work best for freelancing business models.
But thinking about the value your product provides applies to all of them.
Price is what you pay. Value is what you get.
See you next week!