There is a lot to think about when it comes to deciding how much you want to charge for your products or services.

For business owners, it can be tricky to find a healthy medium between being competitive and making sure you’re generating profit.

Plus there’s a lot you need to consider when deciding on the amount you want to charge, which I’ll cover in the points below!

In order to find the best strategy to price your products or services consider every point below and always aim to gain a deeper understanding of your customers than your competitors, this will always work to your advantage.

Here are 10 tried and tested approaches we have used to assist hundreds of business owners with setting prices for different products and services.

1. Don’t have too many different price options

If you have too many different options, your customer will likely feel overwhelmed and find it more difficult to decide what to buy.

If your options are clear and it’s easy for them to make a choice between your different offerings, then they will be more likely to proceed with a purchase.

In Dan Ariely’s book Predictably Irrational, he shares an interesting experiment in which jams were offered at two different market stalls. One stall offered many different flavours whereas the other stall only offered a handful of flavours.
Contrary to what you might think (that having more options would be more likely to have a flavour for everyone and therefore sell more jam), the stall with less flavours sold a significantly higher amount of jam! It appears that customers felt overwhelmed by the huge selection from the stall with lots of options and found it difficult to make a decision, many deciding not to buy at all.

So consider limiting your options to make it easy for a customer to know how to proceed with a purchase.

If you do have a large range of offerings, wherever it’s possible add a recommended product to assist the buyer with making their decision, or offer a step by step process for them to decide which option is right for them.

2. Create a contrast in your pricing

Customers will usually want to settle for the middle ground, so if you can create a price option which is in the middle of your other options, this will likely become your best seller.

Another pricing strategy is to make a very high-priced offering, so that your regular prices feel more affordable in contrast. A high-end offering also helps your brand to be perceived as high quality, even if you never actually sell your premium product or service. Just the fact that you have it, can create a perception of being more high-end.

3. If you sell a service, try to make it tangible

Try to make services more tangible. For instance, a consultant could put together a framework to visualise what their service includes or create a program or course, so people can get a feel for what they are paying for.

4. Add value to your offering to increase prices

If you’d like to increase your prices, but are concerned about putting off your existing customers or generating less new sales as a result, you could look for ways to increase the value of your offering. For example if you sell bicycles then you could add on a maintenance package/membership or training. If you sell consulting, you could consider offering extra resources such as an exclusive membership website, or a bonus planning session.

5. Know how much value you can add

To help set your pricing you need to consider the impact that your products or services have. If your products are hair ties, then you’re going to have a much lower limit on your pricing than a corporate consultant for example, who can assist to add hundreds of thousands in additional profit for corporations.

All of us want to protect our money, so you need to show customers how your product can deliver more value than the money you’re asking for.

Selling the dream is a real marketing strategy! Let’s imagine you’re selling coffee beans. You’ll want consumers to feel as happy and beautiful as the models who are drinking the coffee in your ad every time they have a sip … so I get that much value for only this amount of dollars! SOLD!

6. Do the math and know your numbers

Work out your fixed costs to get an idea of how much money you need to operate comfortably. Expenses could include rent, employees, website hosting, internet subscriptions, software etc.

Then calculate your variable costs for each sale. These might include things like meeting room rental, welcome packs, materials, commission based sales staff, postage etc.

You need to set your pricing with the knowledge of the numbers above, so you can set them high enough to cover all of the above costs plus make a profit, or you might find yourself working for free or even worse, working hard for a loss.

7. Review competitor pricing

It’s worth reviewing your competitors pricing, and be sure not to price yourself out of the market. This will be impacted by how much value you can add to a customer as mentioned in point 6, and be aware that customers in some industries will be more price sensitive than others.

8. When you raise your prices look after existing customers

Most of the time if you just increase your prices by a small amount, say no more than 10%, most customers won’t be bothered and you’ll likely not receive any feedback at all. However, if you have a very price sensitive customer base and are worried about losing repeat customers due to a price increase, there are two ways to help.

One is to add more value to your offering, for example give them something extra to help justify the price increase as mentioned in point 5 above, and the other is to continue to look after existing customers by offering them the old prices, while new customers pay the new higher rates.

This also gives you the opportunity to tell your existing customers that you’ll honour the old price for them, so they know they are being looked after and getting a good deal as a loyal customer. This is a great way to build customer loyalty.

Most people have a fear of increasing their prices which holds them back. It’s very common and we have worked closely with hundreds of different business owners who felt that way. But the good news is that once prices are raised, there’s usually little or no decrease in sales, just more cash in the bank at the end of the day.

9. Use the numbers 7 and 9 in your pricing

There have been several studies and books written on the use of the numbers 7 and 9 in pricing and how they increase sales. In our own research we have tried to prove this wrong and haven’t been able to!

It’s like magic, prices which include the numbers 7 and 9 just seem to sell more. If you have a look at the big brands who price their products based on huge amounts of data, you’ll see the use of 7 and 9 all throughout their pricing. If you don’t believe us, check out Apple’s pricing for their latest laptops, check the price for a new Porsche or Mercedes and you’ll see 7s and 9s everywhere!

10. Consider how your pricing will impact your perception

When you’re setting your prices, keep in mind that cheap often means poor quality and expensive means high quality. It’s not always that simple, but it’s worth considering how you want to be perceived, because your price will impact the perceived quality you offer and the perception of your brand.

Written by Christo Hall