Hi there, Solopreneur!
😀 Welcome to issue #23 of Solopreneur Doorway, a weekly newsletter that helps you turn your skills into solutions people buy.
In issue #20, loyal readers voted on the most important goal they wanted to tackle in 2024.
The leading response was this:
Fixing and pricing your products and services
In Part I last week, we dove into the ‘how’ of building and fixing your offer.
This week, we tackle Part II and explore the pros and cons of three distinct pricing strategies that will compel your customers to buy.
If you have specific questions about pricing your product or service, drop me a note, and we can exchange ideas: email@example.com
💳 Pricing Your Product or Service (so your customers think it’s a steal)
Whether you’re looking for the ‘best price’ on flights to London, a new SUV for your family, or scuba lessons for your February vacation in Aruba, you’re going to consider price.
As an aspiring chef, I trek each week to 3 or 4 different grocery stores to find the ‘best’ price on avocados, leeks, and frozen blueberries.
When it comes to attracting your prospects and customers, it’s essential to remember that everyone is price-sensitive.
Before they hire you for a freelance project or buy your digital course, folks are going to consider your pricing structure.
Now, you know that any discussion on price has to consider it’s omnipresent counterpart.
🥯 A conversation about price that excludes ‘value’ is like a NYC bagel without veggie chive cream cheese. It’s incomplete.
If your product or service carries a high value, then I encourage you to price it at the top of the range. The opposite is not true.
If your offer or product carries little value and fails to facilitate a positive customer transition, then price is irrelevant. No one will buy it.
First and foremost, you have to bring BIG value to your customers and help them solve their BIG problem.
Yes, value is in the eye of the beholder.
Yet, while customer A might perceive value differently than customer B, they both agree on one price-value equation.
The value of your product or service has to be GREATER than its price.
Before we discuss the three proven pricing models, I suggest you carve out time to review the pricing strategies for your particular industry.
Get comfortable with the ‘accepted’ pricing model in your space and make sure you understand the pros and cons.
I guarantee these will surface via emails or discovery calls with your prospects, and you’ll want to know how to address them.
And while you’re diving into your industry’s most common pricing schedules, I’d also suggest you check out a few experts in behavioral economics.
☑️ Richard Thaler is my favorite.
As you develop your pricing strategies, evaluate your competitors’ pricing structures.
It’s not essential to mirror their approach or copy their model, yet you have to understand their price-value proposition.
Take your customer on a successful journey from ‘ouch’ to ‘outstanding’ and they’ll happily bypass your competition and purchase your service or offer at the ‘right price’.
💲 3 Proven Pricing Strategies that Compel Customers to Buy
⌚️ Hourly Rate
🎁 Package Pricing
💍 Value-based pricing
⌚️ Model 1: Hourly Rate
Examples: Professional Coaching and Consulting
Clients know your time is precious, and they appreciate it when you give it to them to solve their challenge.
While trading your time for money has drawbacks, the hourly rate pricing framework is straightforward.
The key in this model is to price your time at a rate that mirrors your expertise.
New law associates don’t charge $500/hour for legal work, and partners don’t charge $100/hour.
If you’re confident your education, expertise, and ability to solve complex issues are in the upper tier, then I encourage you to charge a higher hourly fee.
Transparency: Clients view your pricing schedule and can easily calculate the price for a specific period of work.
Flexibility: You can adjust your rates based on the complexity of the project and your industry expertise.
Income Limitation: Your hours dictate your revenue, and you have to be ‘on the job’ to generate billable time.
Client Concerns: Clients may feel the hourly rate lets you take on “extra tasks” to generate more billable hours and revenue.
🎁 Model 2: Package Pricing (aka Bundling)
Example: Copywriting, Freelance Writing, Web Design, SEO
Package pricing involves offering your clients various options for a fixed price.
If you are a web designer, you might have a “Basic Package” for $500, a “Standard Package” for $800, including blog posts and social media content, and a “Premium Package” for $1,200.
Each package might include all the options from the lower tier and then additional features.
In package pricing, you want to price each package so that your client easily sees the value of the bundle rather than an a la carte approach.
Incentivize your client to purchase a group of products or services rather than only one or two.
Predictable Revenue: Clients know exactly what they’re paying for, and you can project your revenue based on how many types of each package you can sell.
Upselling Opportunities: You can offer clients the ‘next level’ package as they expand their business and need additional services.
Flexibility Concerns: Not ideal for clients who want you to provide custom solutions
Overly Complex: If you offer too many packages, customers might ‘freeze’ and simply move on to simpler options from your competitors.
💍 Model 3: Value-Based Pricing
Example: Podcast Business
Value-based pricing focuses on the perceived value your service or product brings to your client. While all your offers must demonstrate high value, this pricing model requires extra attention.
For instance, if you operate a podcast business that targets high-end business coaches, you might charge a higher amount per episode.
Your consulting and podcast expertise could emphasize your high-quality production, technical expertise, script writing, professional editing, and expert guest coordination.
Maximize Profit: You can showcase your industry expertise and underscore your unique abilities; this option elevates your revenue potential.
Client Focus: Align your pricing with the client’s journey and help them go from basecamp to the summit. The value you offer for specific client groups justifies your price.
Subjectivity: If you are new to your industry, this model may be difficult to sell. Clients might balk at this pricing model if they consider your product or service to be ‘average.’
Communication is key. This model demands that you have a vibrant and powerful marketing strategy. Clients might wait longer to purchase your offers until they can clearly see the immediate and long-term value you offer.
💥 Go Deeper:
Handling Competition with Similar Pricing
If your immediate market has several competitors who offer a similar price for a similar product or service, differentiation is essential.
Consider the following pricing strategy options to ’stand out’ in a crowded sandbox:
Example: Web Design Business
After analyzing your competitors’ prices in the web design space, you might decide to offer a similar price range of $1,000 to construct a basic website.
You can differentiate yourself by providing a complimentary SEO audit or free copywriting for the home page.
Market Acceptance: Clients are familiar with the pricing structure for web design and will explore your value to see where you’re better.
Differentiation: When you add extra value to stand out for new buyers, you can separate yourself from the competition.
Potential Profit Squeeze: If you don’t keep an eye on your time and the extra costs, the competitive price approach with ‘extras’ may squeeze your profits.
Limited Pricing Power: Existing market rates may constrain your pricing flexibility and limit your margins. If you opt for the higher price option compared to your competitors, remember to underscore your value proposition as a problem solver for their BIG problem.
It’s essential to regularly assess and adjust your pricing strategy as your business evolves.
Airlines do it. Grocery stores do it. Gyms do it.
Keep an eye on the economy, your industry, and your competition.
Lead with value and make sure folks see that your price is a ‘steal’ compared to the value you offer.
🧠 If you’ve tried to reach your solo biz goals and it’s not going the way you expected, we can schedule an hour strategy chat.
I’ll bring you answers and the strategy to jumpstart your venture.
🔑Stay curious and keep opening doors.
Erik, Chief Strategy Fixer