Pricing is a topic I discuss on a daily basis with my students. How much do I charge? It is ok to raise my prices even though we are in the middle of a pandemic? Pricing can be a double edged sword but it does not have to be.
There are tactics you can use to know how to price what you are worth but also not price yourself out of the game. Pricing is critical. It can either get you the new client or not. Check out these tactics and see how your pricing can bring in new clients.
If you want to be a thriving agency that rises up by having competitive and accurate pricing, check out these Value Tactics
1. Higher Prices
People perceive more expensive goods as being higher quality, and generally that’s a good assumption to make. A study from Stanford told subjects that they were going to try five different kinds of wine. But in reality there were only three types, they tried two of the wines twice. The differences were the prices they assigned to each wine, ranging from $5-$90. What they found is that higher prices led to increased actual and perceived value!
They rated identical wines differently, saying the more expensive one tasted better and was more enjoyable. The pleasure center in their brains even showed more activity when they were drinking what they believed were the more expensive wines. This means that by setting a higher price, and following through on expectations, you can have happier and more satisfied clients. The key is that you must deliver on what you say you’re going to do because of the correlation between price and quality.
2. Minimize Perceived Risk
Decreasing perceived risk naturally increases perceived value. Having warranties and guarantees help people feel more comfortable buying your services or products. It makes the hefty price tags seem less permanent. This is especially important with bigger, more daunting, purchases. Free trials is another way to minimize perceived risk. And what better way to convey the value you have to offer than by letting them see for themselves.
GoToWebinar says that over 40% of people who try their services upgrade to a paid version, and many software companies have conversion rates well over 60%. Having free trials gives consumers the impression that you’re confident in your services, which must mean they’re good.
The truth is that when people are looking to spend a good bit of money and make an investment in something big (like hiring your agency for their business) they are probably going to do their research. They’re going to shop around and compare, so why not do the comparison for them? This allows you to frame your agency in a positive light when stacked up next to competitors.
Showcasing your best features and assets in comparison to your competitors pitfalls and shortcomings is a great way to rationalize a higher price tag. Alternatively if you’re the cheaper option you $4000 price tag won’t seem so bad when compared to your competitor's $7500 price. A potential drawback with comparisons is that you are telling customers, who were perhaps ready to buy from you, that there are other options out there. This could cause people who weren't intending to shop around, to look elsewhere. So be wise with your comparisons.
4. Implied Value
If you’re giving away a freebie, or bundling services together for a discount, make sure people know how much value they’re really getting. You know the go-to phrase, “Valued at $$$!” This explicitly lays out the value for people and can correct any misperceptions they have on the value they’re getting. If you have a package that sets up a website for $5000 dollars that can seem incredibly expensive to some buyers.
But if you mention that it includes 90 days of membership set up fees, ten customized graphics, and SEO optimization then it’s a $5000 package valued at $8500! (Wow what a deal!) Ultimately the “valued at” price is an arbitrary number since they’re getting it for a different price or completely for free. But consumers like deals and discounts because they like the idea of getting more than what they paid for.
5. Price Formatting
There’s a lot to be said behind the psychology of a price, one of the biggest influences is simply how a price is written. Why does $1.99 seem so much better than $2.00? Our brains read from left to right, so when we see the number 1 first we automatically assume the price is closer to one dollar than it is to two dollars. A study at MIT showed that women's dresses were more likely to sell for $39 than for a cheaper price of $34. The power of 9 is a powerful thing!
Now this is best for discount pricing, but if prestigious pricing is the goal you may want to consider ending your prices in a 0. Take a look at any jewelry store, the original price is $500.00 while the discount is $359.99. Removing the cents altogether can be a strategic move to make if you don’t really need them. A package for $19.00 seems more expensive than a package for $19, even though they’re the same price. The longer the price appears, the more expensive it’s perceived to be.
6. Higher Purpose
We’re not saying that you have to be a non-profit, or donate half your proceeds to a cause. But associating your agency to something that serves a higher purpose can do wonders when it comes to framing your agency in the mind of a consumer. This could be simply sending out an email blast showing your company volunteering at an event, having an eco friendly office or processes, or actually making a charitable donation.
Having the confidence to know your worth and your value is key to winning the pricing game. Being able to price your services so they bring clients to you instead of your competitor can be challenging but having the right tactics can make sure you are the best choice.
Poor pricing models give away hard-earned profits. Lowering prices to make new business come is is not always the best strategy. Remember having stable and steady cash flow from good pricing is the life's blood of every agency. Taking pricing seriously and strategically allows you to have the time, money and motivation to invest in the future of your business and life.
Happy pricing and as always reach out to me with any questions.
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