Deciding on exactly how much to charge for your services is a serious task.
Charging too high may take your business out of reach of those you really want to serve, and charging too low means you will barely break even. Failure to break even means you will have to put those grand expansion plans on hold or if you are really dogged; you have to go real slowly.
The very nature of the modern world demands that we cannot really set high prices. This is 2014 and not 1814; these people have choices, loads of choices. The alternatives may not be as good as your business offerings, true, but your audience might not even care enough to stick around you long enough to find out exactly what makes you special if you charge high prices.
So, What can we do? How best to approach pricing?
There is really no final answer or even a set of best practices when it comes to pricing. It is a journey every new business owner has to go through. If well done, pricing could also be an innovation that can lure new customers to you.
Some game changing pricing that has changed the face of business recently includes things like pay per second for phone calls. Paying only for how much you enjoyed a comedy show (pay per laugh), Amazon has also started a new service to allow you read as many books as you can after paying a low fee monthly.
A careful analysis of these seemingly different cases tells us that in each case, these new pricings gave the customers more power, it allows them have the feeling that they are getting more value for their money and this is always a good thing.
On the other end of the spectrum, it is not really wise to build a business whose only UNIQUE FEATURE is that you charge low prices. The reason is not far fetched either; no matter how low you charge, someone else will always come along who will be willing to charge lower than you ever could.
When that happens, what do you do? Go lower? This is what we call race to the bottom, how low can prices in a market segment get as it all gets crowed.
And then, there are some funny scenarios, certain market sectors where charging HIGH is a sign of quality and your customers believe paying high fees is somehow a guarantee that you will do a good job.
I think the first key to all these is choices, you have to sit down and make some choices.
The first obvious choice is to ask yourself whether you would love to make $1 million from 100 customers or $1 million from 1,000 customers. This is what determines whether you are going into the high end of the market or the often crowded lower end of the market.
You also need to make a decision about the role pricing will play in your business, will it be part of your unique service proposition or not?
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