Tag Archives: Pricing

Pricing in the professional services industry is nothing else than a value we give to an experience.

When we spend, there are pain points such as getting the car repaired and there are pleasure points such as a manicure. Sometimes we love to spend money on an experience that gives us a good feeling about ourselves or improves our general well-being. You probably feel great when you can buy a bottle of champagne on a weekend trip or book a wellness spa instead of an ordinary hotel.

We are normally way beyond the basic needs of the Maslow pyramid. Most of the people I know don’t really know how much a liter of milk costs. We happily spend money on holidays and luxury items. Being in a managerial function, this is what you do. You slave away and on weekends and holidays, you indulge. You want luxury in your lives. I used to consider myself a “high maintenance chick” with a feel for quality clothing, weekend trips to NYC and a no-budget policy for daily expenses. I used to say that I apply Reaganomics to my personal life (I spent more than I earned).

Today, I am more sensitive to this topic. As a solopreneur, I learned what it meant not to have money at all. This was a healthy experience (which has now found an end). What about you? You just started your business a year ago. You still can’t pay the bills. You still depend financially on your spouse, your parents or in-laws or the state? Or maybe you are an expat spouse, who has not found a job yet?

I hope these four methods will help you put a price tag to your service offering.

#1 Create your Client

So, before you even think about service packages and pricing create your clients. Imagine you can decide how your client functions. Understand what bothers them. Understand how they would love to spend their time. Understand what their pain and pleasure points are. Keep an inventory and write down the story of your ideal client.

#2 Target the Threshold

For some reason it is always easier to pay an amount that is slightly lower than the next bigger amount even though the price might be ridiculously high in the first place. For example I accept to pay CHF 95 for a manicure but if it was CHF 100 I would not buy this service anymore. Target the next big number but then stay slightly below. You should do market research and find out what competitors are charging for similar services but your clients normally don’t just come to you because of your price. Often it is a mixture of trustworthiness, competence that you are eluding, recommendations and good reputation. If your service was interchangeable they would get it online for free.

#3 Package the Pain

The pain is in the beginning. I prefer to pay for packaged deals for example for a holiday and I prefer to make the payment a few weeks before the holiday. I have introduced this idea to my clients as well. For you as an entrepreneur, it means less minute-counting, fewer invoices, less hassle and better cash flow (if you can agree advance payments). BUT for your client: It means that they have the pain once and then for a long time they feel good and enjoy your service.

#4 Reduce the Rebate

In the beginning of our business we tend to work with a small group of people we already know. We give them better prices than our usual clients. While it is natural that you want to give a favourable rates to your family members and their friends consider the impact this will have on your annual turnover. Over time you need to reduce those rebates and freebies. I prefer to work pro-bono once in a while and clearly call it charity. I don’t like to work with clients who cannot afford me or don’t know how to pay for the coaching.

If you feel insecure about your performance or if you test a new service you can run a “pilot”. Ask potential clients and friends to spend their time and to give you feedback and suggestions in exchange for a “free ride”. Make sure that you communicate the real price value of a free service. In Switzerland, you have to have a price list. Even if you won’t share your prices on your website, you can send a price list to clients on request.

If you feel under pressure from larger clients, let them know on the invoice which services you provided in addition to what you got paid for. This happened to me in the early days when I was too accommodating in order to win a corporate client. I avoid these deals now. If you gave reductions or rebates in the early days of your business, reduce them over time or return to the price you have on your price list.

Let me know how you will you create a good pricing model for your services and contact me if you struggle.

 

Angie

 

#1 Psychologise* your Price

Price in the professional services industry is nothing else than a value we give to an experience. I have already mentioned that when we spend there are pain points (like repairing the car) and there are pleasure points (like a manicure). Sometimes spending money on an experience that gives us a good feeling about ourselves or improves our general well-being feels like a treat. You probably feel great when you can buy a bottle of champagne on a weekend trip or book a wellness spa instead of an ordinary hotel. Today we slave away so we can have more luxury in our lives. We are normally way beyond the basic needs of the Maslow pyramid.

But wait. You are an entrepreneur. You just started your business a year ago? You still can’t pay the bills? You still depend financially on your spouse, your parents or in-laws or the state? Well that’s normal but remember: You are not your clients. You have to separate your sense of worth from your clients. Usually we serve clients in a higher income bracket than us. We solve an issue that they cannot or do not want to solve themselves because either they are too busy with other stuff or they have enough money to buy your services so they can have more free time to play golf, hang out with their children or go on spa weekends to de-stress.

#2 Create your Client

So, before you even think about service packages and pricing create your clients. Imagine you can decide how your client functions. Understand what bothers them. Understand how they would love to spend their time. Understand what their pain and pleasure points are. Keep an inventory. (I run a regular list of the 10 most annoying items when moving to Switzerland and one of the 10 most cherished items. These lists are discussed in trainings. Most participants instantly get it, some don’t. I prefer to work with the ones who connect. I also prefer to work with clients who get my humour BTW.)

#3 Target the Threshold

For some reason it is always easier to pay an amount that is slightly lower than the next bigger amount (even though the price might be ridiculously high in the first place). For example I accept to pay CHF 95 for a manicure but if it was CHF 100 I would not buy this service anymore. So target the next big number but then stay slightly below. Obviously you should do market research and find out what competitors are charging for similar services but your clients normally don’t just come to you because of your price. Often it is a mixture of trustworthiness, competence that you are eluding, recommendation and good reputation. If your service was interchangeable they would get it online for free.

#4 Package the Pain

The pain is in the beginning. In the meantime I prefer to pay for packaged deals. Slowly I am introducing this idea to my clients as well. For you it means: Less minute-counting, less invoices, less hassle and better cash flow (if you can agree advance payments). BUT for your client: It means that they have the pain once and then for a long time they feel good and enjoy your service. J

#5 Reduce the Rebate

In the beginning of our business we tend to work with a small group of people we already know. We give them better prices than our usual clients. While it is natural that you want to give a favourable rates to your family members and their friends consider the impact this will have on your annual turnover. Over time you need to reduce those rebates and freebies. I prefer to work pro-bono once in a while and clearly call it charity to having clients that cannot afford me. Also, if you feel insecure about your own performance or if you test a new service you can run a pilot and ask people to spend their time giving you important feedback and suggestions in exchange for a free ride. Make sure that you always communicate the real price value of a free service. If you get squeezed by clients let them know on the invoice which services you provided in addition to what you got paid for. (Don’t let them squeeze you all the time though.)

 

Task: How will you create a good pricing model for your business?

 

*I do not think “psychologise” is a commonly used verb but this is actually what you need to do.

 

...you need to have built trust to your clients before you launch new ideas.
…you need to have built trust to your clients before you launch new ideas.

As a business owner you have a lot of chores and tasks but your main task is to fulfill the needs of your clients. What frustrates me is when my bank, my supermarket or my other service providers do not seem to “get” what I need. What frustrates me even more is when I give feedback that they are just defending the status quo. When I invite them to have a conversation with me they do not listen…

But ACHTUNG: As entrepreneurs we might fall into the same trap.

We are often convinced that what we do is relevant and helpful for our clients. A few of our clients will not be 100% satisfied because we fail to notice the signs that scream “Hello, you are not giving me what I need.” Sometimes they simply had different expectations.

When is an idea ready to be launched?

When you are planning to launch your business for the first time or you are planning to launch a new service or product you might want to get together a small group of clients to “pilot” the service or product.

What type of relationship do you have to have to your potential clients?

Before you invite your clients to “pay” for anything you need to have built your credibility and a relationship of trust.

Why is it so hard to spend time and money on a course?

I know from my own experience that even though I would like to participate in a lot of courses the decision about spending time and money on learning and growing is often not a priority when we have to pay rent, food, children’s needs. Think of how much you would be willing to pay and under which circumstances. What would you need to go through or suffer from before you spend money on your own learning or a service? (It is a different story when your employer pays for it.)

What is a good price?

Price is a hot potato. You cannot undersell your service because you are running a business but at the same time you need to make it easy for your client to spend the money for what you offer. It needs to be reasonable but a no-brainer.

Global Mai 13 _071
Price can be a hot potato.

How well do you know your target market?

In order to judge what price is right you need to know your target market and their spending habits well. One example: I am happy to spend 100 CHF on a good manicure or a good wellness massage but I am not happy to pay 100 CHF for a credit card or to get my car repaired. Some expenses we are very happy to have as they make us “feel good”. Others just seem to be random and a waste of our financial resources. You get the idea?

How is Marketing related to this?

A secret of Marketing seems to be that it makes us “feel good” about the expenses that we do not necessarily want to have. You find tons of videos on youtube where Marketers will explain how they “sell” us a negative and convert it into a positive.

My advice is that you speak a lot to your clients in person and always have a pilot before you launch a product or service. Let me know what your experience is.