Day 10

PRICING YOUR PRODUCTS

Skip To The Key Takeaways & Action Items

One of the issues I am dealing with in my new business is figuring out what to charge for my services. I know that the quality of my work can stand up to the competition, but since I am new do I need to just undercut everyone? Or will that undercut make me look like a cheap low quality option?

In order to get some guidance on the topic of pricing my services, I took part in a Mason SBDC workshop called Pricing for Startups. The instructor was George Siragusa, a business consultant and adjunct professor at George Mason University.

Many startups fail because of pricing errors, so the workshop tackled different strategies and pricing frameworks to help a business owner to make sure they don’t make a failing mistake.

Both market based and cost based pricing were discussed in the class. My company will be more along the lines of cost based and the market will help determine my prices. (new company where the services are offered by others).

I was excited to see a lot of principals from Lean Startup (currently reading the book) are included in determining your pricing. You really need to study the competition, both direct and indirect, and talk with customers to find out what they value. Determine your minimal viable product.

Here are a few other key points:

Often times people view pricing in relations to costs, but really, price is a statement of VALUE.
Create value with the other 3 P’s of marketing so Pricing will work.
Find the PAIN PONTS of the customer and eliminate them with your services.

And here are my other key takeaways and action items:

Key Takeaway #1: You can’t price your service unless you know the competition

I had a leg up on some other new businesses because for the past year I had been examining the prices of the competition because I was charged with hiring them. And while I knew a lot of the prices, services and quality of their work, I did not really dig deep enough.

My business provides a variety of different services, and therefore competitors have to be examined in each and every one of those realms. I also learned that my assumptions on who my competitors are might be completely wrong.

Action Items:

Create a Pricing Matrix With Different Categories
Compile Research on all potential competitors

Key Takeaway #2: Charging a price below the value of your work can be a negative thing.

While I have 7 years of experience, my company has 0. I know that the services I provide have a value that is not “bottom of the barrel”, but the customers may see that 0 and think otherwise. This is where having a permanent low price that is well below the competition could be a real negative.

Instead, the instructor suggested to offer a temporary low price. But instead of it being a cut in value, it is more like a trade off. I offer a lower price, and the customer agrees to provide some intense feedback that will help me set my regular price in the future.

I think this is a great idea, and I will implement it immediately for a limited amount of time. I don’t think any “customers” are reading this, but if they are, get on board early!

Action Items:

Develop experimental feedback pricing

The pricing workshop was another great class put on by the Mason Small Business Development Center. It had an immediate impact as I booked a client with the introductory feedback price right afterwards. I look forward to seeing how the SBDC can continue to assist me as my business grows.