The past few days have found me in conversations I haven’t had for awhile. And it’s not my favorite conversation. Makes me want to cry…or pull out my hair.
“I’ve been giving away my services,” says the client.
“Giving away.” That can mean one of two things: they really are giving away for free the valuable stuff they offer, or they aren’t charging appropriate prices.
Lots of people do this, sometimes with full knowledge and sometimes unwittingly.
Recently, we worked with a client encouraging them to raise their rates on just one type of product. It took them months of wrestling with this idea. They felt they would offend their loyal customers.
In the end they did it, and their gross revenue increased, of course. And, yes, a few customers complained, but it really wasn’t the worrisome issue they were wringing their hands about.
And look at this…their bottom line went up over 400% (because costs don’t go up so the price increase rolls right to the bottom of your profit & loss statement).
Now many people are super hesitant about raising prices (ladies, this is an issue of yours). They can’t imagine their clients will go along with it.
Grasp this, please…Pricing too low does your customers NO favors!
A very counterintuitive statement, yet it’s true.
Humans are funny people. We don’t always do the logical thing. Cheap prices encourage us to do things you, as the business owner, aren’t expecting and really don’t want to do.
Unexpected Thing #1–When you give away your services, you’re training your customers to wait for the discounts or expect things to be free.
They know your full prices will be reduced. You do it all the time. You know…Usually $1997, but until Sunday it’s $98!
Unexpected Thing #2—When you price low, you’ll find more people want to haggle with you.
I know this defies logic…everything here does. But truth be told, when you price low, you attract customers who are shopping for price, not value. Remember this point the next time you have a garage sale!
Unexpected Thing #3—People who want to pay less tend to be more work.
I’m not sure I can tell you why this occurs. It just does. Over and Over. For everybody. So I’m betting you can relate. Remember those clients who made you work way more than the service they bought. Vow never again.
Unexpected Thing #4—At some point in delivering your value too cheaply you’ll find yourself saying “I can’t believe I’m only getting $10 for all this work,” and you might start delivering poorly.
This point aligns with #3 above. Low price + way too much work + wayyy too much hassle = It’s Not Worth It At This Price (perhaps any price).
Unexpected Thing #5—You’ll attract customers you don’t want.
You’ll attract the people shopping for price, the people looking for a bargain, the people who want everything for nothing. They are not for you.
Customers who pay the proper, higher amount for the value you bring—the benefits you deliver—respect you and your work a whole lot more.
Go look at your prices. Are they a reflection of the value you bring? Or is it time for an alignment between your price and your value?