Pricing Your Services

This page, called “Pricing Your Services”  is in response to Paul from Cornwall who was concerned about the price he was charging and he was worried it would put people off choosing him.

So today I want to look at ways to make sure you get more of the quotes you go for by ensuring that price is not a major part of the sales process.

Now I know that many small businesses feel totally constrained by price, and so did I when I started out in business in 2004 … you may well be thinking that you can’t charge more than your competition down the road for exactly the same services because otherwise you would lose all your business, but price really isn’t the issue that many business owners think it is.

If price were all that mattered there would be no Rolex watches, Apples computers or Porches in the world. It is how you approach the whole issue of price that matters, and here we will look at how you can make price seem like so much less of an issue.

When you go into a restaurant, do you only go for the cheapest item you can find? Would you go to a garage that said they would replace all your brake pads on your car for £20? In that scenario wouldn’t you think that price was way too low and just ignore it out of hand as a scam?

Pricing is a pig because on the one hand you have to make a ton of profit from your goods or services, and on the other you have to sell your goods and services to an increasingly smart consumer market. So, how do both parties in the transaction, both you the business and the customer, win?

The first thing you have to realise is that 10-15% of the population will complain about the price no matter what your prices are, or how low they are. Some people will just moan about the price because it’s hard wired into their DNA to moan about the cost of everything. That’s just the way they are so don’t worry about it and move on.

The second thing you have to remember is that there will always be businesses cheaper, and more broke, than you. Unless being the very cheapest in the world is your goal in business, which it probably shouldn’t be, you will have to learn to justify your prices because there will be always be cheaper businesses out there than you. Do remember the very cheapest businesses in any field are rarely in business for long.

There is a company local to me who I hate competing against in my carpet business because they are always far cheaper than me, but because they compete solely on price and they constantly strive to offer the lowest price, they have gone bust 3 times in 4 years. Competing solely on price will only ever result in a costly price war that will spiral out of control with all the companys involved working very hard for little or no money, or going bust.

So, if you are not the cheapest company, here are a number of ways to tackle the price issue.

Package deals – Why don’t you put a package deal together to make price less of an issue? Everyone loves a package deal whether it is a sandwich, crisps and drink deal, or flight, hotel and car hire deal, the whole concept is loved as a bargain. For you, the business owner, a package deal means you sell more goods for more money, it’s a great deal for the customer, and more profit for your company.

Apples to Oranges – Another way of making sure price is less of an issue, and one of the very best ways to put price in its place, is to ensure the customer is comparing apples to oranges with your competitors products or services. This means that, even if everyone in the world charges the exact same amount for the same product, if you package your product or services even slightly differently, the customer can no longer directly compare between the 2 competing companies. For example, say you are a plumber and there are 20 other plumbers in your local area charging £1000 for a fit a boiler. If you charge £1300 but include a free service after a year and a free extended parts and labour warranty, then your offerings are no longer comparable to your competition because the deals are no longer the same, so the customer cannot compare the prices in the same way. Comparing apples to oranges is a great way to stop comparison shopping.

Customer Service – Good old customer service is something that lots of customers will pay extra for and this will rarely cost you much additional money. If you do the basics right, like turning up on time, phoning if you are going to be late, providing a maintenance or service sheet, and other such basic things as this, you will be able to charge more. If you do what you say you will do when you say you will do it, have everything you need ready to go, are very polite and courteous and very professional, then people will pay extra. These things are very basic, but you will be amazed at how often they are ignored.

Level based pricing –  this is another great way of deflecting the focus from your prices. Level based pricing is where you break the job down into their various parts and charge more if the customer wants more parts of a transaction or better quality services. Then, if the customer complains about the price, you could offer to drop her down a level to a lower level of service that fits into her budget plans. Interestingly, most customers will refuse this offer and go with your original quotation!

It’s All In The Mind – My favourite way to deflect the price objection is through perception pricing … which means that you’re making your prices tell a story about the quality of products and services the prospect can expect from you. Your pricing will tell your prospect that a cheaper price than the one you are quoting will be for a vastly inferior product or service and, if you are targeting the right customer, that will just seem wrong to the customer. You have to remember that the vast majority of customers want a great job doing, so many prospects will not be impressed by very low prices and most won’t want an inferior service or product, and your higher prices tell the prospect they can expect outstanding customer service and great products from you, though you do of course have to ensure you deliver on your promises.

Say for example you see 2 cars right next to each other on a car forecourt, and say for arguments sake they both look exactly the same, but one is priced at £6,000 and the other is priced at £30,000. Without knowing anything else about the cars, which is the better car? Or say one carpet cleaner charges £120 to clean a lounge, and another charges £20, without knowing anything more about the 2 companies, in your own mind who do you think is the more superior cleaner based on price alone? You would most likely think that the £20 cleaner is far less superior than the £120 cleaner wouldn’t you because if he was any good he too would be charging much more for his services wouldn’t he? Or you may think the £20 cleaner uses cheap equipment and chemicals and can’t actually be any good.  It is of course possible that this assessment is unfair … the £20 carpet cleaner may an incredible job, use the very best equipment and does the best job anyone has ever seen. But because he is pricing so low you probably wouldn’t choose him if you wanted a really deep professional carpet clean because he is not pricing like a professional, and the saying is cheap and nasty for a reason.

Demonstrate Value – What is essential if you are to put price in its place is that you demonstrate the value that your products or services offer the customer. Say for example you’re buying a watch for £10.00 and this watch is guaranteed for to last one year and has only very basic features. Another watch costs £12.00 but is made better so it has a 5 year guarantee and has a lot more advanced features. Most will see you get a lot more value from the second watch even though it is more expensive and it is your job to ensure that you get this value across when you go out and do your sales presentations. With the watches example, another great way of making price less of any issue is to have a good, strong guarantee in place to help soothe the customers’ mind about choosing you, and calm her nerves about what will happen if things go wrong. Part of the reason why some people will be very unwilling to pay a penny over the going rate is because of this fear of losing their money if it all goes wrong. If it does all go wrong, then they will be left with the shame of having to admit to themselves that they paid over the odds for your poor quality work and that would be highly embarrassing for the customer. A strong guarantee will add huge weight to your proposition and help ensure price is not their sole focus during your sales pitch.

Payment Terms – Another way to put price in its place is to explain payment terms, credit or financing if you offer it. If you charge more than your competitors it is great if you can offer to spread the cost for the customer to make their purchases easier to afford. Offering payment terms and credit facilities may well help you gain extra customers over someone who does not offer these facilities. Which is easier to afford, £1000 straight out or £333 per month for 3 months? If you decide to go this route, this needs serious consideration to ensure you can keep up with cash flow and make allowances for defaulters. Ensure you seek independent legal advice and get a legally binding loan agreement from a suitably qualified person.

Benefits Benefits Benefits – Finally, when you are doing a quotation, always remember to discuss the price at the very last moment once you have clearly detailed all the benefits and value that your service provides, and you have built the customer up to a fever pitch so she really wants your product. Remember that wanting your product is so much more of an exciting and powerful emotion than needing a product, so really work on building your customer up the excitement scale during your presentation as this will make price much less of an issue.

Learn to Close Properly – When you have stated the price, once you have asked for the sale, stop talking. Too many sales people will convince themselves that their price is too high and the customer won’t go for their price far too early and will start reducing the price, even before the customer has had a chance to talk! Your task as a sales professional is to ensure you place the value that your product offers as one of the major benefits that you promote during your sales pitch. As discussed earlier, the vast majority of customers want value and benefits, and your job is to prove the value your product offers is more than the price they will pay, and that your product perfectly matches the prospects’ requirements.

REMEMBER: It is NOT your job to prove that your product is the cheapest available, because there will always be someone cheaper (and more broke) than you. Your business has got to give you the good standard of living to pay for the risks you are taking by being in business. If you are not pricing right and making good money for your business then you may as well be working in a burger bar somewhere.

Learning to justify your prices is essential and discovering ways that you can honestly hide your prices in a sea of benefits and value is vital to running a profitable business.