Pricing services is more difficult than pricing products because while you can often pinpoint the exact cost of making a physical product, it’s much more subjective to calculate the worth of a service that incorporates advice, expertise or time. However, you are able to use some of the same underlying pricing guidelines to fi gure out your costs and operating expenses plus your target profit when setting your price for services. Don’t undervalue or undermine your work, but set it at the premium it deserves.
Setting a Price
- Cost-plus pricing – This is a standard method of pricing in business. First, determine the cost of providing a service, and then add an additional amount to represent the desired profit.
- Competitors’ pricing – Be conscious of what your competitors are offering for similar service in the market, and make a decision about setting your prices in relation to these – whether above or below.
- Variable pricing – Where your service prices are negotiable with each client and the work they require to be completed.
Charging the Fee
- Charging an hourly rate – Preferred method by many businesses as it ensures that you are achieving a rate of return on the actual time and labour you invest in servicing each customer.
- Charging a flat fee – In our tough economic times, many businesses are concerned with keeping costs down and may agree to hire your business for services only on a fixed-rate or flat-fee basis.
Remember to regularly test the market for new services and prices. Try out new prices, new offers, and new combinations of benefits and premiums to help you sell more of your services for a higher profit. Often the perfect time to do this is when quoting a price to a new customer.
Always be wise about raising your prices however. As you test the market with different prices and offers, monitor your competitiveness and profit level. There are risks to raising prices, particularly when your customers are going through tough financial times.
For assistance with pricing your services or any other marketing related advice, please contact Deborah from Clarity Marketing on 0411 139 811 or on [email protected].