How to shape your service offering and pricing – Our five rules of playing the price game

#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.

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