Pricing strategy for your business is an underused strategy. Pricing is not only a number you add onto your offer, but it is a connection point to your audience. Pricing has a powerful psychological effect on how potential clients view your business. If utilized correctly pricing strategy for your business can be a game changer on client attraction.
However, prices don’t come out of thin air. Prices have to be attached to an offer. Pricing is the ying to the yang of your offer. Because of this symbiotic relationship there are two type of suites in an online business. The first suite type is a product suite. Your product suite is the culmination of all services and products your online business. Your product suite over time will come to serve each level of your ideal client. As your business continues to scale the different offers in your products suite allows you to diversify your business income.
This is where creating a product suite that reaches each level of your ideal client comes in handy in pricing strategy for your business.
By creating offers for each level of your ideal client; you start to create a diverse product suite. This is because each level of your ideal client is likely going to have a different budget for your products or services. Generally speaking, the lower level the ideal client is, the less money they will be willing and able to spend.
Depending on your business; your ideal client differs depending on the level of knowledge they possess about what you serve. For example, if you are a business coach, the first level of your ideal client might be someone who is just thinking about having a business, or just started theirs. For this first level of an ideal client, opt-ins and free content is the best way pricing strategy for your business to get them on the hook. This will help grow your mailing list as well as gain trust in you as the provider. These opt-ins start diversifying your business as they work through your funnels.
Knowledge vs. Services Needed
If you’re a photographer or a creative, your ideal clients might not be based in the knowledge they possess, but which services they are in need of. For example, a mother who wants some quick photographs of her family of six before a massive fight breaks out, would be a lower-level ideal client because she wants fast and efficient. A higher-level ideal client might be a wedding, or someone wanting branding shots lasting an entire day. This differentiation of ideal clients will start to give you an idea of how to set up the next type of suite in your online business.
The lesser utilized suite is your pricing suite.
The first important note about your pricing suite is the type of brand that your business has. Your pricing suite combined with your brand is going to attract the type of ideal client you want.
The pricing suite brand types are broken into three parts; accessible, premium and luxury.
Pricing Strategy for Your Business: Accessible Pricing
Accessible is the lowest tier. Accessible does not mean cheap, or bad quality. Accessible pricing suites are heavily focused on creating an ethical brand that is affordable to all clientele. Accessible pricing in a product suite focuses on creating prices that make the customer feel very at ease handing over their money. In order to achieve this conducting pricing market research is a necessity.
This pricing market research will determine what the minimum and maximum price your ideal client can afford. For an accessible brand you want to be closer to the minimum price. Because the price point will be closer to the minimum price, it’s imperative that if you have an accessible brand that your product suite is very diversified. Since you cannot rely on large cash injections, you’ll have to ensure that your product suite is able to generate lots of new leads consistently. An example of an accessible retail brand is Aldi.
Pricing Strategy for Your Business: Premium Pricing
Premium is the middle level. An example of premium pricing in the retail sector is Apple. For premium brands, product suite pricing can vary. Your prices will largely depend on pricing near the maximum income cap of your ideal client. To determine pricing market research the previous paragraph has a quick overview. To get a little more in-depth I’ll share some of my favorite questions to ask when pricing a new offer.
Question 1: What have you paid in the past for (insert your specific offer here)?
This question works well when you have been in business for a while and are serving those who are a little further along. As these clients will likely have paid for a similar service in the past. You’ll be able to see what they’ve paid in the past which will give you an indication of how much you can raise the price.
Question 2: What value would you place on (insert your transformation here)?
This question will give insight into their value perception. The more value that is perceived, the more they will pay. Value perception is everything in premium and luxury brands. The ideal client will pay what they find value in, regardless of the price tag.
Pricing Strategy for Your Business: Luxury Pricing
Luxury is the highest level. When pricing products in a luxury brand, everything has to be directly cohesive to how much perceived value you want your brand to have. Luxury brands do not rely as much on pricing market research. This makes up the big difference between premium and luxury brands.
While premium brands want to be on the maximum income cap, luxury brands generally don’t take this into consideration. They set prices based on other luxury competitors and how they want their value to be perceived. This type of value perception comes from the pricing psychology tactic that higher prices mean more value to the consumer.
One big mistake is combining types of pricing suites. By combining types of pricing suites, it confuses your audience on the value of the offers. If you’ve ever seen a brand with higher pricing, then they have a product for under $20; you’ll probably be wondering what value the lower ticket offer is really giving. On the flip side; if there’s an accessible brand that suddenly has luxury prices, you would be so shocked you wouldn’t be expecting purchasing, and therefore, would not.
Pricing Strategy Case Study
To see this in action, here’s a direct example from one of my past clients.
She was in a premium brand sector. She consistently felt like her prices were too high and there was a disconnect with the type of audience she was attracting. She over discounted and though she had been in the industry for a few years was not attracting dream clients.
We worked on two aspects of pricing; strategy and mindset. Tackling strategy first, we worked on conducting pricing market research. Pricing market research will be the standard to base your offers on.
How to Conduct Pricing Market Research
She asked her audience as well as surveying her competitors for what they were charging. While doing this research, found out that she was on the very low pricing end of her competitors. So, each one of her clients had been price shopping her and had a very low value perception of her business.
Next we worked on scarcity mindset. This scarcity mindset happens when brand confusion exists. Instead of sticking to the brand type that identifies with our business (accessible, premium or luxury) we create all different price points just in case someone who is a little outside of our ideal client would purchase.
In each case, keeping your pricing suite consistent with your brand type will gain client attraction.
So, how I keep my pricing suite consistent?
Here are some bonus tips:
Avoid over discounting.
Especially if your business identifies as a premium of luxury brand. Over discounting confuses your ideal client of your value. If you have a 1:1 service that costs $10,000; but a course that’s consistently discounts for under $10 it does not give a consistent appears of value. This also applies to tripwires and opt-ins. Pricing needs to be consistent across all types of offers.
Keeping the technology side of your pricing suite is just as important.
The reality is that for a service-based business having a CRM that can be set up to automatically send and track invoices for you makes you look professional. HoneyBook has a fantastic invoicing feature for specifically this. You’ll appear more professional as well as minimize mistakes when sending our requests to new clients. Mistakes happen, but we want to ensure they are happening an infrequently as possible to continue to keep a luxury setting in the customers mind. After all, if you walked into Prada and didn’t get good customer service, would you still have a luxury opinion of the brand? Hint: probably not.
More than once you’ll get the ever-famous objection “This is too expensive.”
Keep in mind that this is a reflection of their value perception, not the worth of your business. If you’re a premium or luxury brand, there will be those who cannot afford you. Stick with your prices. Your ideal clients will purchase from you.
If you’re wanting to learn a little more in-depth about how price for your business, I have a free module just for you. This free module focuses on defining what underpricing is (because not all lower prices are underpricing) and how you can avoid it for your business. There’s quite a bit of mindset work in this module and it’s one of my audiences favorite. You can check out that link here.