Cup of Joe: It’s All About The Benjamins
So, a few days ago I was on Twitter and a friend of mine asked her followers how much she should pay a designer for a new logo. My response was, “well, pay them what ever they invoice you for.” She then explained that this designer didn’t know how to price his logos and needed help. I remember when I first started my business I had no idea how to price products. I used to spend days analyzing the market, comparing other products and thinking of different marketing options. And then one day I realized how simple pricing really is.
I was talking to a potential client over the phone and they asked me if I could give them a ball bark figure on how much their project would cost. At the time I already had several clients and didn’t see myself getting to their project for awhile. So I figured I would try something different with them. I ended up sending them a quote for about 3 times what I had ever charged a client, thinking that they would look at the quote and I would never hear from them again and that would be history. In a few hours they emailed me back and said that they thought the quote looked reasonable and they wanted to move forward! I thought to myself, wow! All I have to do is ask for it!
Now I realize that the correct price for a product is the highest amount that your market is willing to pay. And, the only way that you can find out what that amount is, is by asking for it. This type of pricing method is called Value Based pricing. With Value Base your price reflects the value that your market places on the product.
Now sure I know what you are thinking. Isn’t it dangerous to price yourself to high? Aren’t you afraid of pricing yourself out of the market? To answer these questions let’s take a look at Wally World. Here is a corporation that’s motto is “Always Low Prices”. When Sam Walton coined that phrase in 1962 he wasn’t just launching a insightful marketing campaign, he was in fact laying the groundwork for their future pricing structure. Walmart’s dominance is dependent on selling at low prices at high volume. As a result their stores across the world are always packed.
But do you really want to be like Walmart? I mean, sure they do a lot of business, but it’s all at very low profit margins. Now, let’s take a look at the other side of town and the shops on main street. These are the locally owned mom and pop joints that maybe your neighbor runs. These shops can’t compete with Walmart’s prices and as a result they do less business. Can you guess which business model I would rather have? Well, if you guessed the local mom and pop shop, you win! Running a business that caters to the market’s lowest price point will guarantee a steady flow of consumers. But you really need to ask yourself, do I really want to do business with the cheapest folks in my market? Trust me, you don’t, they are annoying and will eat up all your time and money.
So how can you start getting paid more for your products and services. Just start asking for more. Sure you run the risk of losing potential customers, but in the end the ones that agree to pay premium prices will leave your business truly valuing their time with you, which in turn, turns into referrals and other opportunities down the road! So start asking for more and quite trying to be the “Wally World” of your industry!