This piece is part of our Small Business Basics content series. Today’s piece by Jaimie Garnett is about how to price your services—and the importance of understanding their true value.
After you read, share with us:
How did you figure out how to price your services? Has it changed?
“What do you do?”
Our choice of profession is a constant topic of discussion for the three minutes of small talk at a networking event…or, really, every time we meet someone new.
Even though this question is broad, what the person is really asking is essentially, “What service do you provide?”
And the reason this question is so intriguing to me is that we tend to answer it in the shortest and fastest way possible to get the, “Oh, that’s cool,” response. We purposefully downplay what our strengths and gifts are and how we help people so that we can move on to more small talk.
Similarly, I see this exact scenario play out when entrepreneurs and small businesses are asked, “What is your business?” The quick response, the downplay.
And what is even more interesting—this seemingly innocent question that we provide the baseline of information for—can lead to follow-up questions about finances, salaries, price per hour….“Well, that’s interesting—I didn’t know you could make a living doing that!” And even then, we haven’t even adequately answered the question on anything more than a superficial level.
So how do we change the script? We strategize and communicate effectively.
Strategizing your core offering, being able to communicate it clearly, and determining pricing based upon value is a critical step in your business growth.
And here’s the thing—whether we are responding for ourselves or on behalf of our business, the question of, “What do you do?” should not be about us. It is about our customer and how our product or service offering solves a problem for them. After all, the customer is who we are here for.
Every product, offering, or business should solve a problem or add value. If you aren’t sure if your business does that, try answering these questions:
- What are your customers’ pain points?
- Where is the customer in their journey?
- What are the ways in which your product or service delivers value to your customer (does it save time, money, add fun, etc.)?
Then, use this information to craft your pitch.
At a very baseline level, you can use a template of,
“I help [insert customer information] fix/solve [insert problem or pain point] so that they can [insert value].”
This method is a quick and easy process to communicate your offerings and your value.
Once you’ve identified the problem your company/product/offering solves, then comes another tricky part: how do you price it?
To determine pricing, consider the problem you solve and how involved you are in solving it. How much value does it add to your customers’ lives? How much are they willing to pay for you to solve that problem?
Your pricing should reflect three key insights:
- The market
- The financial gains your work produces
- The value your customer sees in your work/product
How clearly you communicate the results your work/product/service provides will directly align with value in the customer’s perspective.
Product offerings and pricing are not static. Consider the below:
Let’s say you own a coffee shop, and your customer purchases a $8 specialty caramel latte. While the customer wants the coffee, what they are really buying is a short-term experience that inspires them to “get going” in the morning (or at any point in the day, if you are like me). In trade for the short-term “boost of energy” experience, which is the specialty caramel latte, you solved a problem for your customer that they were willing to pay $8 for.
But what if that same customer gets tired of paying $8 for a drink every day of the week? They may become interested in learning how to do it themselves. You have the opportunity and capability to teach this skill during an educational class that creates a longer-term value. And because new skills can last for a lifetime, your price point can reflect that lifelong learning. What if you charged $80 for the class and had space for up to five people to attend?
Your portfolio of offerings, your pricing, your key areas of focus, can and should evolve as you grow professionally, as you continue to evolve your product and offering, and as the market evolves.
Next time you are at a cocktail party or networking event and someone asks, “What do you do?” respond with the problem you solve for your customer. I guarantee it will change the typical response you get. And when they find value in that service, you can be sure their next question will be around price. A transformation of the original script.
Jaimie Garnett @jaimie
My mission is to empower local entrepreneurs as they build and scale unique retail and service-based business concepts in Wichita. I challenge owners to tackle big dreams, increase profitability, build systems, and scale sustainably.
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