Are you charging what you're worth?
Are you charging what you're worth?
How to avoid the pricing danger zone
We’ve already covered the steps you need to take to sell your high-ticket offer. Now, it’s time to address why it’s so important for you to follow these steps. Selling your services at a low price might seem like a strategic move to outsell your competitors, but it’s a slippery slope that could land you in a pricing danger zone.
NOTE: “Low” prices don’t always mean being the cheapest but also cover selling your services at a price that’s lower than what your services are actually worth.
Of course, there are ways to use low pricing strategies to entice your prospects which will also be covered at the end of this article.
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There is a phrase I want to bring to your mind; “If it’s too good to be true then it usually is.” This is not a phrase you want people to associate with your business, but there’s a risk they will if you’re charging prices lower than what your service is worth.
A service that promises to deliver high value at the lowest cost on the market doesn’t make people think they’ve stumbled across a once-in-a-lifetime opportunity. They are more likely to wonder, “What’s wrong with this service that they need to set the prices so low?”, “Where are they cutting corners to charge a price that low?” and “How will they sustain the service at these prices?”
It’s a popular misconception that people want the cheapest option. Don’t get me wrong - we all love a deal. But, what your prospects actually want is value for their money. If you show them that your service is worth the price you’re charging then your prospects will pay it. Undercharging will make them question the value and quality of your service, damage your brand and lead to poor performance.
Low Margins
Setting a price for your services is more complex than just wanting to offer people the best deal. The time, energy and money you are investing into these services has to be taken into consideration as well.
Even if selling your services at a price lower than what they’re worth is creating sales, how long will this sustain your business? Sure, you might be busy but you’ll have nothing to show for it other than low margins. Since the service you're providing is actually worth more than what people are paying for it, the money coming in won’t be enough to balance the amount you need to shell out to keep things running.
Moreover, if anyone can afford your service then anyone will be buying it. Why is this a problem? There is a high chance you’re going to miss out on the prospects you actually want to work with because all your time is dedicated to people who want to take advantage of a cheap price. You need clients who are loyal to your brand, not to your price.
Future Threats
Let’s say you understand the long-term effects of keeping your prices low. So, you plan to start low and increase your prices over time. There is merit in this method but starting too low in the beginning is going to make this strategy difficult for two reasons.
Extremely low prices, in the beginning, mean you’ll have to increase by small amounts to avoid putting people off. More often than not, this will still leave you with low margins and unable to afford the basics to keep your business running.
From your client's point of view, your prices will suddenly shoot up and, because these clients were only loyal to the price in the beginning, they will be likely to drop your service altogether.
This is why I referred to the threats of low prices as the pricing danger zone at the beginning of this article. Whichever way you look at it, charging prices that are not equal to the value of your service is going to leave your business backed into a corner with very little option for escape.
The correct way to set low prices
We’ve established that “low” prices mean charging below what your services are actually worth. So, there’s nothing wrong with increasing your prices over time as your business grows but this has to be done organically and not just because you set the bar too low to begin with.
However, once your price is set, this doesn’t mean you can’t use lower pricing strategies to get more eyes on your high-ticket offers. Of course, there is the tried and true “limited time only” discount approach. Once again, this strategy isn’t about just selling your service at a cheaper price. Discounting your services for a limited time creates the urgency and demand you need to draw in your ideal prospects.
There is also the option of providing a base-level service that still provides value but at a lower cost to you and therefore can be offered at a lower cost to your prospects. It will get clients in the door but ensure they are more receptive to a high-ticket offer in the future.
What’s standing in your way of charging higher prices?
Are you worried your prices are lower than what your service is worth?
Comment below to gain further insight from the Growth Titans community.