All the Factors that Play Into Your Pricing Strategy
Setting your fee isn’t just as simple as deciding an hourly rate.
While I have written some other articles discussing a specific pricing strategy, I have not covered the other pricing factors.
Yes, your total business expenses as well as personal expenses play into your pricing strategy, but there are some other factors that are frequently looked over as well.
You will see this trend across many industries.
For example, in the automobile industry, you will see that each brand has different price points based on a wide variety of factors. Some of these factors include the luxury status, how well known a brand is, or the size of the car. Each different factor can play a role in the pricing.
Applying the same idea to your branding will help you set your price point.
Here are some of the factors that play a role in how you price your products and services:
1. Market positioning.
Have you marketed yourself as an expert in your niche or a beginner? This is a huge factor when it comes to how people perceive you and what they’re willing to pay for your products and services.
If you want to charge high prices, you cannot position yourself in the marketplace as a beginner or someone who is not confident in your industry.
Take a look through all of your marketing and promotional material to see if there is any language that makes you seem unsure of your industry positioning.
2. Number of customers.
If you do not have a huge market of customers to sell to, you should take this into consideration with your pricing strategy.
You also should consider how many people you currently have on your list to sell to. If you have a great product but no one to sell it to yet, you might want to wait especially if it is a higher-priced product or service.
3. How long it lasts.
Does your product last forever or a short time? This applies to both digital and physical products. Sometimes information is only relevant for a short amount of time, and pricing should factor into that.
Is your information timeless or limited to a certain period?
Will this information be different a year from now?
Your reputation within your industry plays a huge role for how you price and promote your services. If you have been around for a few decades and your reputation is a big deal, you should price your services accordingly. On the flip side, if you are new to your industry, but charging higher rates than the well-known people in your industry, you could still pull it off but it would be a lot harder.
5. The results.
What results your products and service bring plays a huge factor in your pricing model.
Maybe you sell a product that helps a home get organized. Maybe you sell a service that helps creative entrepreneurs harness their passion and build a business.
The result of your product or service should be considered when you’re deciding your prices.
6. Pricing using psychology.
There are many psychological reasons that people seem to like different numbers at different price points. For example, $9.95 sells better than a flat $10.00, or $97 instead of $100. Be sure to study your customers and see what works for them.
7. Industry sales.
Sometimes during certain holidays such as Black Friday, customers expect to get a deal on products.
Go through your calendar and mark these days at the start of the year so you can prepare all your marketing in advance for those sales to come. It also helps to build excitement on your list for those sales coming up if you drop hints to them early on.