Quit Thinking Small - Part 3
Do you find yourself reluctant to update your pricing because you are afraid you will lose customers? While you need to be aware of the market value of your service, your pricing also needs to reflect the value of what you are delivering. If you are delivering above average services, you shouldn’t be charging bargain basement prices. Learn more in this week’s blog.
Last week we talked about the limitations you put on yourself with the “We tried that before and it didn’t work” mentality. This week we are examining the final statement in this short series: “No one will pay that much for my service.”
Pricing can have a huge effect on your cash flow. It takes just as much work to acquire a low paying client as it does a higher paying client. A low paying client will often expect just as much or more than a high paying client. That is a recipe for getting burned out and having a bad reputation.
When you are determining your pricing, you do need to look at what your competitors are charging. That makes sense, but you can’t go by price alone. If you have a full service business, you don’t want to be charging bare bones prices. Make sure you compare service levels when you are comparing pricing.
No matter what service level you are providing, you always want to do your best work. If you have multiple service levels, don’t let your quality go down with your price. Lower paying clients are often more vocal about what you are doing than higher paying clients. They can give you great word of mouth advertising or they can hurt your reputation. I am talking about your normal clients here, not the occasional customer that is hard to please and vocal about it.
If you have multiple service levels, give your customers a little more than they would expect for each level of service. It typically doesn’t cost you much, but is great for your reputation and your business.
Once you make sure you are delivering high quality results, don’t be afraid to offer a higher service level with a higher price, even in situations that seem to be dominated by low cost & low quality. People will pay more for a quality service that delivers on the promises made. They also will usually be more forgiving if you have an occasional issue. Just make sure to resolve the issue quickly and resume delivering your high quality services.
You cannot charge bargain level prices and continue to provide above average service. You may get a lot of customers, but will wear yourself out trying to continue delivering the service. In the long run your business will suffer, especially financially. You will get frustrated because you are working hard, but not seeing the financial reward that you should.
When your prices are higher, you don’t need as many clients to make the same amount of money. This gives you extra time and capacity at the same expense level. Your good reputation will help you acquire more good clients.
You may have to fire some customers. That is not a typo, I said that you fire them. Don’t be afraid to lose some customers, especially ones that you provide great service to, but can’t seem to make them happy. You will be much better off not working with them. It is OK, you can’t serve everyone anyway. Work with customers that appreciate you. You will be motivated to continue delivering good service and will have less negative word of mouth.
By charging the appropriate amount for your services, you help your cash flow. You get more for each job and can make the same revenue with less work than you can with inappropriately low pricing. This gives you more capacity without adding staff, yet bringing in more revenue with lower expenses!
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