My friend and fellow business coach Deb Boulanger invited me to join her on a Clubhouse stage and share insights about great pricing strategies and some mistakes that many coaches and consultants make. We had a great talk and got many excellent questions from our audience.
Today I’m sharing a few biggest mistakes I’ve seen experts make when they are pricing their consulting & coaching and DFY services. I’m going to start with the consequences of pricing a service too low, since that’s oftentimes the most common mistake professionals make.
What's in this article
Missing out on the pricing psychology & branding
Your service has a value to the buyer. If you price significantly low, it could indicate that your service has no value. Also, your pricing affects how your clients perceive your brand and business, and what kind of clients you attract.
Thinking that low priced item is easier to sell
More often than not, low-priced items are in fact more difficult to sell. For sure, it depends on the product / service, but when selling professional services, not many wants to buy low. People are investing in themselves and they want a high return, which rarely is the case with very low priced services. Professionals want the best, not the cheapest. The best and the cheapest rarely co-exist. If your client wants it fast, then you must factor in that too.
Not understanding the pricing elements
Growth eats cash, and if you constantly price low, you won’t have any margins to grow your business. Your pricing should cover your expenses to deliver the amazing service, for example time, tools and inventory, the value your client gets, the amount of time & money you have spent to build your expertise, the cost of acquiring this and at least one more client, all your other costs related to keeping your shop open, your bonus for being a business owner; an awesome risk taker who builds something wonderful impacting the world, and then taxes.
Not factoring in the volumes required to make a great income
Regardless of what a “great income” means to you, it’s important to keep in mind what kind of volumes are required to sell services or products with a low price point. You should know the industry benchmarks to be able to tell what you can expect. For sure, some individuals and companies totally blow up all the normal benchmarks, but more often than not, they are great indicators to calculate what you should expect.
Here’s a simple mathematic formula:
If you want to make 100k selling your 100 EUR service, you need to sell 1000 pieces. Let’s say you start from scratch, and decide to take the funnel building route to sell your service.
Let’s say your sales conversion is 1% (not uncommon at all). You need 100 000 people to your funnel. If you do organic marketing, you most likely already gave up. If you decide to take the paid ads route, then you need to calculate what it costs you to generate 100 000 leads.
Maybe you manage to get a lead for 1 EUR? Well, you’ll be paying 100k to make 100k. In this case, you’re breaking even, which COULD be a strategy if you have a back-end profit product in place.
If your lead generation cost exceed 1 EUR (which in many cases will be the case), then you’re already bleeding.
If your conversion is less than 1%, you’re bleeding.
Let’s try the same with a 1000 EUR product.
You need to sell 100 pieces.
If you convert at 1%, you need 10 000 leads. If you generate leads at 1 EUR pop, you pay 10k to make 100k. Better, wouldn’t you agree?
This works IF you generate leads at 1 EUR pop, and convert at 1%. If you don’t, then this might also results in red numbers.
Let’s say you sell your amazing service at 10k. You only need 10 clients, and even if you convert at 0,5%, you still need only 2000 leads. Even if you pay 10 EUR pop, you will be spending 20k to make 100k, and you only have 10 clients to take care of!
Yes, that got a bit nerdy, but it’s the math you should consider when pricing your services!
Having only one high-priced service
If you only have one service at a high price point, you might be missing out on business that is not yet ready to buy your service. So to avoid this, you could design a Get-Foot-In service, that is easy to sell, easy to buy, and easy to deliver. This service must be linked to your main service so that the only logical next step is to sign up for your main service.
Inserting their heads into the clients’ wallets
You cannot, and should not be the one who’s deciding whether your client can or cannot afford your service. It’s theirs to decide, and the only thing you can do is to demonstrate the value they get, and what they miss out on if they decide not to engage your services.
Procrastinating the prices forever
Procrastination is the easiest way to kill progress. Get started with a price that feels good to you, and test different pricing options until you find the sweet spot that makes you and your client. feel good about the investment.
If you want help to package your services into product and programs, let’s have a chat!