Pricing is something I often see new business owners struggle with in the first few years of getting established. There’s a perpetual fear of losing customers if they increase their prices. I’ve seen many a business owner losing sleep for months and tying themselves in knots over the decision. Finally they decide they have to make the plunge (usually when they realise that their business won’t actually make any money if they don’t or they’re so burnt out they’re thinking about quitting) and then they almost close their eyes, hike the prices up and wait for their customers to disappear in droves, terrified that this is it – they’re going to become yet another business failure statistic.
BUT… what I’ve actually seen every time is relief on their faces as the customers don’t disappear, and as a result, they finally feel adequately compensated for all their hard work, which in turn makes them feel good about their business and working in it, which in turn attracts new awesome customers (and inevitably they then say to me ‘I don’t know why I was so worried about it’). I do know why they were worried about it, and it’s a legitimate fear when you’re starting out, but what I’ve also seen (and experienced in my own business) is that as business owners raise their prices, they attract BETTER, EASIER, HAPPIER, MORE APPRECIATIVE customers… Customers who know what they want and are happy to pay for it without a second thought.
I was recently reminded of this lesson after an experience on Facebook Market place and it so closely mirrored what I see which business pricing that I thought I’d share…
So, I’m about to move house (yay!). The new house doesn’t have a garage so I thought I’d sell a few things. And as well as giving me some extra cash in my pocket, it gave me a reminder of one of the best business lessons I’ve received to date… Unless you are intentionally pursuing a low cost strategy for a product or service you’re selling at high volume with a cap on the level of service you offer, low pricing can send you broke (through wasted time and refunds) and take you to the fiery depths of customer service hell (with people who have a scarcity mindset and need more help than you can give them for the price they’re willing to pay).
So, what went down? In my listings I had a mix of more expensive items – a bed, a pram and a snowboard. All of these were listed over $100 – the bed was $350. And I had some cheaper items that I really just wanted to get rid of because they’re bulky and hard to store – a table, a cot and a kid’s chalk board – all listed for 10 bucks.
First to the more expensive items. The people who enquired about them were respectful, organised and had integrity (i.e. they did what they said they were going to do). They knew if they actually wanted the item. None of them screwed around. None of them wanted to ‘look before they bought’. If I asked them what time they’d be picking an item up, lo and behold, they gave me a time and then actually turned up. All in all it was a delightful experience and I got a wad of cash, $750 to be exact.
Now, flip side to the cheaper items… Oh my god – the AGONY. I had multitudes of people emailing about them. They would say they wanted to buy it but hours later message to say they’d changed their minds. They’d say they wanted to come and see it before buying then either not show up or if I asked them for a time they were coming all I’d receive back was ‘I’ll let you know’ and then I’d get long waffly answers about how far away they lived and how hard it was to get in to pick up the item or that they had to talk to their husband before they bought and then they’d just disappear. In short, they did not value the items or my time. All in all I got $30 and wasted a shit ton of my time (time I could have actually been making money in my business!). In hind sight, I wish I’d just taken these items to the second hand store instead (in fact, why didn’t I?! Note to future self),
Business pricing works this way too.
Now, I’m not saying there is anything wrong with starting out with lower prices to cut your teeth in the big old business world. I did. And at the time it gave me the confidence to put myself out there. I felt safe knowing that if I screwed up badly, the stakes weren’t that high (not that that ever happened, but it’s something we all freak out about)… The trick is not to stay there as you gain confidence (unless of course, again, having low prices is an intentional strategy). As my most trusted money person, Lynda James from Valo Financial would say, set your prices on what will give you a ‘good life’ business. A business that supports your lifestyle, that makes you feel good about stepping up in your business every day and one that attracts customers who are a joy to work with.
Happy pricing everyone!