Honor Services Office
How to Price Your Service
Pricing a service is highly complex. Here is how.
By: Honor Services Office
[size=4][font=Arial]Service businesses seem to be left out of the conversation when it comes to pricing, online stores and sales. These businesses are still affected by similar factors as their more affluent family member, namely products. If service businesses choose the wrong pricing strategy then the choice could be detrimental to the business. [/font][/size] [size=4][font=Arial]There are a number of pricing strategies one could use for their service business.These businesses lean more towards perceived value so while you have a lot of flexibility, there are risks.[/font][/size] [size=4][font=Arial]This article is designed to enable you to set your service pricing to meet your company's goals. Factors to consider when developing your pricing will also be listed.[/font][/size] [size=4][font=Arial][font=Arial Black]You are in business to make money[/font] This conversation needs to be had and is the cause of duality in many service minded people. In many cases your product is your service. People rely on your knowledge, skills and abilities to accomplish their goals. Your service is worth something and it is up to you to quantify and convey the value your service provides. A huge mistake service businesses make is to acquiesce to the counter-offer of those who undervalue the service. On the other hand the service business must keep pulse on the market to know when to show flexibility. "Know Yourself" is one of the first steps in the book [url=https://www.amazon.com/Peaceful-Selling-Sales-Techniques-Business/dp/0990983110]Peaceful Selling: Easy Sales Techniques to Grow Your Small Business[/url]. In this chapter of the book, Dan and Stan urge you to be yourself, yet sell your valuable service to people who are willing and able to buy. Understanding your sales approach is important but you must be aware of the risks centered on poor pricing decisions. There are three dangers to avoid when choosing a pricing strategy - under pricing, over pricing and complicated pricing. [b]Under Pricing.[/b] Pricing your service for too low a cost can have detrimental affects on your brand and your bottom line. Some business owners check out their competition and think undercutting is the best strategy when in reality they may be setting themselves up for failure. By lowering your price well below your competition, thinking you will increase volume, you may introduce the perception of being cheap or shoddy. [i]Value[/i] - Value is not just about low price. People do not want "cheap" they want the most for their money. Many customers are unwilling to purchase from you if the perceived value is not there. [i]Not covering your time[/i] - The saying is true "Time is money." Some business owners underestimate how long a certain project should take. If you quoted a fixed price and it was accepted by your customer, then every minute you go over is a loss of money. [i]Not covering your expenses[/i] - This is where reduced pricing hurts the most. Let's take the music service as an example. If you have to pay for shipping, set up, tear down and shipping again, all costs should reflect in your price otherwise you could be at a loss. [b]Over Pricing[/b]. Pricing your service too high can also have a negative affect on your business. Your customers are constantly shopping and comparing. If you have not done your homework to see what the market can bear, you may be at risk. Being above the threshold of the customer's desire to pay can decrease sales. In the article [url=https://www.honorservicesoffice.com/company/HonorServicesOfficeSales/FromMakingMoneytoGrowingBusiness.htm]From Making Money to Growing Business[/url] it categorizes three stages of business - Ideation, Institution and Increase. Businesses in the Ideation stage make the mistake of entering the market with an introductory price that is too high. They try to recoup their investment or expenses right away instead of doing it over time. Act like you are the customer. Would you pay for your own service at your price point? [font=Arial Black]How to price your service[/font] Put your target customers first. In the book [url=https://www.amazon.com/Plans-Prosper-Strategies-Business-Marketing/dp/0990983102]Plans to Prosper: Strategies, Systems and Tools for Small Business Marketing Success[/url] Victoria and Stan discuss how to define a target audience. Being aware of their needs will lead to a more complete service which should be included in your price. [b]Know your customer[/b] Business owners need to get used to taking time to getting to know their customer, especially micro-businesses. If your primary customer is frugal in every respect then your premium pricing may be a bit out of their reach. Understand your customer's buying habits based on location, check demographics, do research and send out surveys. Encourage your customers to fill in the survey by providing incentives you can afford. Family and friends are nice but possibly too nice. Your customer is who you should be speaking to. Learn what is important to them and price accordingly to their value. [b]Know your capabilities[/b] A Capacity Goal is defined as knowing what you are capable of doing within a certain period of time. Your customers expect you to be the expert so you should be able to estimate a project within an acceptable margin of error. Be honest with them. Do not take rush jobs you cannot complete with quality. Your customers respect you when you can quote the truth and stand by it. Keep timing yourself so you can automatically tell people just how large the effort is. Knowing what will go right is one thing, your customers also expect you to know what will go wrong. Your experience is your selling point. [b]Know the root cause[/b] No matter what the industry understand the real issue. Assess what your customer thinks the problem is then uncover what the real problem is so you can develop a true plan of attack. Ask the five why's to get to the root cause. For example: [i]The vehicle will not start. (the problem)[/i][/font][/size] [size=4][font=Arial][i]Why? - The battery is dead. (First why)[/i][/font][/size] [size=4][font=Arial][i]Why? - The alternator is not functioning. (Second why)[/i][/font][/size] [size=4][font=Arial][i]Why? - The alternator belt has broken. (Third why)[/i][/font][/size] [size=4][font=Arial][i]Why? - The alternator belt was well beyond its useful service life and not replaced. (Fourth why)[/i][/font][/size] [size=4][font=Arial][i]Why? - The vehicle was not maintained according to the recommended service schedule. (Fifth why, a root cause)[/i] By determining the root cause, a true estimate can be given. This applies to writers, gift basket makers and musicians as well. Ask questions that will enable your customer to have a better experience. [b]Know your competition[/b] List pricing may be deceptive. Do your homework and contact your competitors through secret shopping. Check out their total package for what value they are providing. Quantify their ancillary services otherwise know as the niceties that keep their customers happy. [b]Know your pricing strategy[/b] Premium pricing strategy establishes a price higher than the competitors. [/font][/size] [size=4][font=Arial]Penetration pricing strategy is designed to capture market share by entering the market with a low price relative to your competition. [/font][/size] [size=4][font=Arial]Economy pricing is when you take a very basic, low-cost approach to marketing, raw materials and expenses in order to keep prices low and attract a specific segment of the market who are very price sensitive. Bundled pricing strategy enables you to raise the price of a lower priced service and lower the price of a higher cost service providing an economical package that is attractive to your customers. Conclusion Recognize and add value to your pricing decisions. By understanding your customer, the market and the future of your industry, you can make the right pricing decisions that are attractive to your business. [/font][/size] [hr] [size=4][font=Arial]Honor Services Office wants to help you get set up for success. Sign up today and receive free email marketing assistance. Visit [url=https://www.honorservicesoffice.com/_mlm.php]Honor Services Office Offerings and get started today.[/url][/font][/size]