How to price your services so you hit the sweet spot that maximises your revenue AND delivers exceptional value to your clients?
On the schedule today, we have … a visit to Goldilocks in the house of the 3 bears.
We’re figuring out how to get the porridge just right. Not too hot, not too cold.
In our breakfast bowls? The price of your services.
When you get your porridge (sorry, pricing) right, it will propel your business towards success and growth.
Get it too hot or too cold and it will lead to missed opportunities either way.
Unfortunately, the decision on how to price your services doesn’t come easy to most business owners. Yet, it’s unavoidable at certain points in our business journey.
If you ask me, the most testing moment by a mile is when you’ve been charging hourly rates, and the time has come to move beyond that.
But, as with anything, you just need to know how to do it.
How To Price Your Services?
It’s good to remember that, beyond the dry numbers, pricing impacts…
attracting your ideal clients
your position in the market
So today, we'll uncover how you can find that “just-right porridge”; the sweet spot that maximises your revenue AND delivers exceptional value to your clients at the same time.
But before we do that, I recommend going back to episode 91 where we talk about Pricing Models . It’s the perfect starting point that will give you the background for this episode about how to price your services just right.
Pricing Strategy For Service Business
Let me paint a very common picture. I think there is a good chance you will recognise yourself.
Mary is a new service provider, starting out on her own. At this stage, there is no team in sight.
Mary has talent galore.
Like most new service providers, to get her business on the rails, she sets the pricing of services based on …
the minimum viable product
In case you’re not familiar, minimum viable product (or MVP) means Mary sets her pricing, so she covers her cost plus a tiny bit extra. It speaks, it’s below the competition’s price point.
It’s how it’s done, right!?
Let’s just say it’s what most people do. That’s why I said you would probably recognise yourself.
BUT… this pricing strategy for service business comes with A MASSIVE PROBLEM.
Because the clients Mary will attract are the ones who chase the lowest price possible rather than the ones who appreciate the value she brings.
In the longer term, it’s a disaster waiting to happen.
There is a LOT of merit in considering value-based pricing models at the very START of your business journey.
But in case you missed that boat (like Mary did), NOW is second best.
The Thing With Value-Based Pricing And The Word TRUE
So about value-based pricing.
The only way to charge value-based pricing is to know your value. Your true value.
I’m putting an emphasis on “true” because, as business owners, we don’t always understand or even think twice about some of the added value our services bring to our clients.
Here’s an example from my own business.
For years, I knew I was doing an excellent job in organising exceptional events. I was reliable and offered quality.
What took me some time to understand was that on top of the exposure and the return my events bring, for my clients who organise an event maybe once a year, THE STRESS IS THROUGH THE ROOF.
And I was taking a lot of that stress away from my clients. But to me and my team, it’s business as usual, so I was taking it for granted!
What I’m saying is that the benefits of the services you offer can be both tangible and intangible. And when identifying your unique value proposition (UVP), you need to consider both.
Tangible benefits are quantifiable and measurable, such as increased revenue, cost savings, or time efficiency.
Intangible benefits are more subjective and emotional, like improved peace of mind, reputation enhancement, or personal growth.
Step 1: Identify Your Unique Value Proposition for Value-based Pricing
With all that said,..
- How do you figure out the intangible benefits when they are subjective?
- How do you know what you don’t know?
Short answer: YOU ASK!
But not just anybody. You ask your ideal client. Because these are the clients you want to attract.
There are a few ways you can use to find out the specific outcomes, benefits, or transformations your client's experience as a result of working with you.
To identify your true value so you can charge value-based pricing, you can use…
- surveys ( a questionnaire send to your client)
- Interviews (a 30 minute phone invite),
I use a questionnaire at the end of each project as a part of my offboarding process. But you do you.
The important part is to…
Ask the right questions
Look for patterns and common themes in their feedback.
Then, articulate these values in your value proposition.
This is the base to work from for pricing your services.
Step 2: Test and Iterate Pricing Strategies for service business
Once you have pinned down your value proposition, it’s time to figure out which of the models would be appropriate for your business. There is no one size fits all. Especially not with pricing your services.
Make a shortlist. Then it’s time for some trial and error.
Pricing optimisation is all about testing and iterating your pricing strategy. This is essential for finding the ideal pricing model that
- maximises profitability
- fosters customer satisfaction
Think of this similar to A/B testing, which compares two or more pricing options to determine which performs better.
- Create variations in your pricing structure, such as different price points, packaging options, or payment plans.
- Randomly assign them to different customer segments.
- Monitor and measure key metrics like conversion rates, revenue, and customer feedback to identify the most effective pricing strategy.
Step 3: Draw Conclusions
Pay close attention to client responses and feedback regarding the price of your services. The conversion process is prime time for this.
It’s important to realise it’s not always the dollar value that needs tweaking.
- Sometimes clients don’t understand exactly what they are paying for. This is a sign you may need to work on the messaging.
- Sometimes it’s the packages that don’t quite work how they should.
- Sometimes, … you’re just not dealing with your right client.
Monitor customer behaviour, such as conversion rates, average order value, or customer retention, to gauge the impact of pricing changes.
Some Final Tips To Pin Down Your Ideal Pricing Strategy
1. Consider Value-Added Offerings
Explore the possibility of introducing value-added offerings or additional services to justify higher price points.
I’m thinking about…
- complementary services, especially when you are packaging your services
- exclusive resources
- enhanced customer experiences that can be bundled with your core offerings.
The thing with value-added offerings is that you can be smart about it and promote “additional services” you normally do anyway.
This is not something you HAVE to do. It’s just something you can consider when you want to demonstrate the value you add.
2. Regular Evaluation And Adjustment Of Your Pricing Strategy For Service Business
With pricing optimisation, the work is never done.
It’s not a onetime decision. It requires ongoing evaluation and adjustment to stay aligned with market dynamics, customer preferences, and business goals.
Set up regular intervals to review and reassess your ideal pricing strategy. Use the data and insights gathered to inform adjustments or refinements.
3. Seek Expert Advice
Industry experts, mentors, or advisors with experience in pricing optimisation
can offer valuable insights.
You can bounce off ideas so you can make informed decisions.
They can help you identify blind spots.
They can guide you through the process because they have done it all before. Multiple times.
They can help with unique challenges or goals.
They can give you long-term advice so you can stay ahead of the game.
If any of these support options sound appealing to you, YOU CAN REACH OUT TO ME.
With plenty of years of experience as a business owner AND in coaching, I can provide tailored advice on how to price your services and drive greater profitability and success.
Just get in touch!
4. Look At The Bigger Picture
This is the point where, although mighty important, I also want to remind you that the pricing strategy for service business is just one piece of the puzzle.
Your messaging around your brand promise and the value proposition you offer are equally crucial in converting leads into clients.
By aligning these elements, you can create a cohesive and persuasive narrative that attracts your ideal clients. It positions your business as the go-to in your niche.
Do You Want Some Help With That?
With all that said, go out there, present your prices with confidence, and demonstrate the unique value you bring to the table. Your ideal clients are waiting to experience the exceptional services you offer.
But of course, as you continue to refine your ideal pricing strategy and messaging, don't hesitate to seek expert advice and leverage the resources that are available, like this podcast and blog.
You don't have to navigate this journey alone, reach out a book a call with me.
100 Is Looming!
We are knocking on the door of 100 episodes, I can't believe it!
So I want to ask you ... as a regular reader of the blog, how would you like to celebrate the milestone? Send me a message with your suggestions here.
I’m curious, WHAT WOULD YOU FIND VALUE IN?