Rob, a follower of our weekly show, Coach’s Corner, asks: “How can we decide the price of our service?”
Here’s my answer to Rob:
This is a very good question, because there are a few things that you need to take in consideration when deciding the price of your service. Number 1 is that you need to have a look at what the competition is doing. I hate answering with that answer, but it’s the truth.
You need to see what’s out there because you need to see if someone has already taken the position of the high end and the expensive or the “Ferrari position” in that marketplace.
You need to see if someone is already positioned as the most expensive value as a service provider in the market or if the market is more of an average to mid or low priced markets.
Always aim for the best
The first thing you need to do is, you need to research and see what’s out there and understand the positions. Research who is positioned at the high end, what they do, what they’ve done and what kind of brand they’ve built to be positioned at that level.
Then, look at what the cheap end of the market does and how not to position yourself as them, because you always want to be the “Ferrari” or the “Bentley”.
You want to be the high end. You have to own the high end market rather than competing on price. First of all, never compete on price and never price your products low. Don’t start with the premise that people don’t have the money to pay for your services.
In any market place, there’s always going to be people who are going to fly private and own a private jet and there’s always going to be people who are going to fly “Easy Jet” (a low cost European company where you can fly for $20).
Both ends of the market work, but being positioned as the high end solution is always more attractive. You make more money and you work less, because you don’t need as many clients and it’s just more attractive.
Those are the two things you need to remember: have a look at what the competition is doing and always try to take the high value or high priced position in the market place. For the pricing, it all depends on what service you actually provide.
Create a high value service for your clients
If you are a service provider that solves big problems, you can walk into a company and say “Okay, I can save you 10% and make you 10% more on the bottom line just by restructuring your employees”, that’s a huge value proposition, because for the right client, that can mean millions or even tens of millions of dollars and more money and revenue they could profit. If you can deliver a product or a service that has a high value, you can directly price your services at a much higher rate.
Being a bottom line consultant and charging on an hourly rate is stupid. You really want to go after demographics.
You need to see what results you can provide to your clients and how much of a transformation it has in their lives.
For example, you’re in the health market and you’re helping people lose weight.
You can price yourself selling $50/hour of personal training sessions and nutritional advice or you can say, “I only want to work with 5 people a year, but my fee is $20,000 or $50,000”. In that package, you actually follow the client for 12 months.
For the right person, paying $5,000 a month is nothing, because that person has the money. It’s just a drop in the ocean for some people. For other people, it’s everything they make in a year.
You need to decide where you want to be positioned in the market. I always recommend going high end, because that’s where you’re going to get the highest quality of clients.
You also need to see what are the results that you provide people with, how much of a transformation you give into their lives and how much is that worth for them. Let’s go back to the health example.
You’re helping your clients lose 20 kilos a year. If they’ve spent thousands or tens of thousands of dollars in pills and they’ve already wasted all that money without having results, you know that they have the money to invest and that they are a buyer, because they are committed to losing weight.
If someone has already spent $10,000 on a solution that doesn’t work, you can offer a product that’s superior.
It actually gets the results for the same amount or even double and some people will be happy to pay that because they know that they’ll get the answer. They know that they’ll get the results.
You really need to work on a value based proposition.
Your charge should be based on the result and not on the work you do, because the faster you can get someone from A to B, the more you should charge. Clients don’t want to be paying for months and years. They want to get their solution or their issue solved ASAP.
Do everything you can to assume the high end position. You generally need to become an authority.
You need to publish; you need to write a book. Do video shows, put out a lot of content to prove that you have the goods and then you actually need to see what kind of results you can get for people.
Then, charge based on the results you get and not based on the work you do.
If I walk into a company and one day I can generally increase the company’s income by 10%, 20% or even more, it would be stupid to charge at an hourly rate.
I really want to charge on a results based rate. I’ll charge a very high fee, because I know that the impact that I’m having is very high.