The Importance of Pricing Services for Small Businesses
Providing a service is something that seems a lot harder than putting a price on a physical product. Being able to get the right balance in your pricing will mean taking into account the expertise and time put into the service provided. You will also want to consider the perceptions of your customers. Whether just starting out as a service provider or looking to review current prices due to receiving more recommendations, you will first need to plan carefully.
The first thing you should do is to look at the market and look into your competitor’s services and how much they charge for them. If your prices are a lot higher than competitors you need to be able to justify this with being able to provide a better service or more for the customer’s money. The next step is to have a full understanding of your own costs both direct and indirect to ensure that you are able to budget accordingly. Charging too much can be off-putting, yet charging too little may keep customers coming back but not keep you afloat for very long.
To work out a price there are two methods you can use. The first is to assess initial cost plus your pricing. This will mean you working out how much time, effort and expertise go into the service, including overheads such as training and other costs if you have an establishment and then add the extra price which will pay you and any staff you may have. The alternative method is to do your research to ascertain what your worth is to your customers. In order to justify prices higher than competitors you will need to show why you are better and have proven results.
The best judge of what is a reasonable price to ask will come straight from your customers. Find out who they deem to offer the best service, you could do this through a blind survey and offer an incentive for partaking. See what customers expect including in the service for what they are willing to pay and compare your standards and prices with others in the same line of work. Think about gathering the evidence online as this is more likely to make customers answer honestly.
Once you have a figure in mind also take into account any recent inflation in price. Increases will be tolerated by loyal customers, however they will need to be justified and notified of the price increase ahead of time. If you do need to increase the prices see if you can offer any additional service so that customers feel the increase is justified.
The best timescale to review prices is every 6 months. The reason for reviewing regularly will mean that any price increases will be small and customers are more likely to tolerate small regular increases than a big increase after a few years.