Survive and Thrive—Price to Profit

Let’s segue into the pricing thicket,  which is where accounts receivable begin,  if you think about it.  I confess that I struggled with pricing.  I offer an intangible service and I knew of no way to find out what my competitors charge for similar services.  Clients pay what they think we are “worth”, but how is that determined?

The received wisdom is that clients are very price sensitive  and that they are more so in this economy.  Fear drives many Freelancers to price conservatively,  yet experts advise against that practice.   Many of us need a smarter pricing strategy,  because we’re probably  leaving money on the table.  We  just don’t know how much.

Pricing that is based on what competitors charge,  hoping that number will allow  you to cover costs and turn a profit (“cost competition”),  is what almost everyone does when they can figure out their competitor’s prices.  However,  pricing specialists  warn that this is unwise,  because that price will not reflect your value to the client.  In fact,  prices that fall below a certain threshold can even steer prospects away from a business.

If prices are perceived as too low, clients will suspect that the service delivered must be inadequate.  In a service business,  delivering the service and meeting (or exceeding) expectations are the overriding factors— not money.  The money is always negotiable when it is demonstrated or perceived that the service will deliver the desired results.

What competitors charge is important,  but that should not overwhelm your pricing strategy.  Ideally,  price should accurately reflect the client’s perception of the value of  the deliverables.  But what might that be? Different customers can have very different ideas about what a service is worth,  sometimes based on their ability to pay.

It is therefore worthwhile to develop pricing strategies,  rates and service packages for different categories of clients,  e.g. corporate and nonprofit rates,  with service packages tailored to meet each group’s typical needs.

Think counter-intuitively.  People pay for what they value.  They pay a premium for what is perceived as high quality,  expert,  reliable and trustworthy.   A good reputation, excellent credentials,  impressive client list and referral from a trusted source also influence the price that clients will pay.  If you are holding several of these cards,  you can charge more and clients will be happy to pay.

A useful counter-punch for gaps in your bona fides is your marketing message.   Make your intangible service appear tangible to clients/prospects.  Describe your service as providing deliverables that will produce measurable outcomes.  Make it easy to understand what you do,  so that clients can relate your value to their business problem and can picture themselves as the beneficiary of your unique solutions.

When setting prices,  it is better to err on the premium side.  This will position you as higher quality and will support profitability.  Furthermore,  clients probably don’t know what your competitors charge unless they’ve hired for your category of service recently.

So what if you’re totally in the dark about your industry pricing norms?  If you have money to spend,  hire a pricing consultant.  If you don’t have money to spend, visit   Click products & services,  choose a category,  find a vendor,  click terms & conditions and peruse price and service lists used by firms that bid on federal contracts.  Also, you can learn what clients think of your pricing,  scope of services and delivery of services with a follow-up evaluation survey.  You may be surprised to learn that if you tweak a couple of things,  clients would be willing to pay more for what you do.

Thanks for reading,


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