You need to know your figures! If you don’t yet, check out yesterday’s post on how to do the math for your pricing. It isn’t all about the math though, it is also important to think beyond the numbers.
The psychology of pricing
The price of your products plays a HUGE role in the way people perceive your work. Despite what you might have thought in the past, your objective when setting your prices should not be about making the item as cost effective as possible.
If you set your price too low you are sending a message to your customers about how they should value your products. Try and look objectively at your prices, from your customer’s perspective. Consider what assumptions people might be making about your range based on your current prices.
Consumers are naturally drawn to more expensive items.
Higher prices create the perception of quality, exclusivity and value.
Taking this into account, you can expect as a retailer that a customer will in fact be more attracted to a well-positioned, well-marketed and higher-priced item than they would a “bargain” item where the focus is on quantity not quality.
Think of how a “bargain” item is often viewed from a customer’s perspective:
- Quick and easy to create
- Not going to last long
- The creator hasn’t taken long to make the item or it requires little investment from the seller to fulfil the service
- Having less benefit for the consumer
- It is an item or line not valued by the retailer
The money the customer requires to get your product or service and all of the benefits that go along with it, is the value that YOU set on your product. Simple as that.
You need to show your customers that YOU value your work, so that they can too.
If you under price your products you are making it easier for your customers to under value your work which often leads to lower levels of engagement and enthusiasm around the item. They are therefore less likely to become advocates of your brand.
Think about some of the high end items you have on your wish list. It might be a bottle of wine, item of clothing, handbag, holiday or camera. It might be your dream lounge suite or a new fancy computer. The high-end price tags on these brands play a part in creating the feeling of exclusivity of the item, as well as educating the market place in the perceived value of the product.
When it is an item that really matters, price only plays a very small role in the purchasing decision. If we want it bad enough – we save!
If your products are good quality and desirable, a price that is too low can be MORE damaging to your brand and your cash flow than a price that is too high.
Focus more on making your offerings the thing we want badly enough, instead of the most affordable.
So what do you charge?
Work out what your product is worth in your marketplace to your perfect customer. How desirable is it? How much are people willing to pay?
This works the same way for products and for services. Have a look around the market and see what other people are charging for the same kind of product or service. Let this guide you but do not let it determine your decision.
What value can you offer that they don’t? How can you get your prices closer to the top end of the market place?
Start playing with the numbers. What would it look like if you put your prices up by 10%? What about 20%? What if you doubled them?
Keep working your prices up, until you get to a point where it starts to feel uncomfortable, maybe even a little icky. That’s where you need to put your prices. It might not be where they should be long-term but it’s a great place to start if you are looking at upping your prices.
Then you need to stand behind those prices. You may be asked to explain them but never apologise for them. Your talents are valuable.
Tomorrow I will talk you through a few different ways to go about actually raising your prices and how to explain that to your customers.
Do you know where your prices sit within your industry? Are you at the low end? In the middle? Or are you already heading for the top?