What Should I Charge? Let Your Process Set the Price!

Pricing is a sticky area for many service providers. During competitive research, you may find that pricing varies wildly between suppliers, even those with similar offerings. Feeling confident about your own pricing is hard when faced with so many subjective opinions, ideas, and formulas. 

In today’s video ProcessDriven CEO and service provider herself, Layla Pomper tackles the big question, what should I charge for my service? She also explains how improving your process allows you to add more value for your customers and increase your prices. 

End Awkward Conversations About Pricing 

You’re not alone if you feel uncomfortable and lack confidence when discussing pricing with potential clients. You could have the utmost confidence in your sales pitch, but it all flies out the window when asked for a quote. It can feel like trying to feed a wild animal by hand. You don’t want to make any sudden movements and frighten them off. 

If you come in too high, they may balk at the price. Too low, and they may question the quality of your offer. How can you find the pricing sweet spot?

How to Create Value-Based Pricing for Your Services 

Looking at pricing from a business process perspective means using formulas and processes to determine the right price for our services so we can feel confident in every quote (timestamp 01:20). 

Let’s start with a basic pricing formula:

Price = Value - Risk

Let’s say there’s a lottery ticket with a $100 prize. If the ROI of $100 is guaranteed (100% odds of receiving the $100 prize), most people will pay close to the total value to make a small return, say $99.99. But the riskier a purchase is, the less people are willing to pay. 

If the odds change from a sure thing to one out of 1000 people, your $100 lottery ticket’s value drops to just a dollar or two. 

Most things come with inherent risk. If you hire a designer for a website that could potentially bring in 10k in sales, many factors determine whether you will actually achieve those results. Your marketing, advertising, operations, and even your web host’s reliability can factor into your website’s success. So, while your website may have 10k in potential, there’s no promise you’ll see those earnings or when. One month? Five years?

This is a great starting point, but things get much more subjective when considering your customer’s perception. 

Let’s adjust our formula to account for our customer’s perceived value and risk. 

Price = Perceived Value – Perceived Risk

Know Your Customer Profile: How Perception Influences Pricing

A customer profile, or avatar, is a way of defining your target audience. You need to understand your potential clients’ values, desires, and challenges to convert them into paying customers.

Here’s an example of perceived value and how it affects pricing (timestamp 05:00).

It’s the same offer and experience; nothing has changed but the customer profile and perceptions of value and risk.

While you cannot change your customers’ personalities or values, you can influence how they perceive your offer, managing their expectations of the overall value and inherent likelihood or risk involved in receiving it.

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Improve Your Processes to Increase Value and Decrease Risk 

What does all of this have to do with processes? We can increase our customers’ perception of our offer’s value and lower perceived risks by adjusting our process so they are willing to pay more. 

We can use three levers to influence the perception of fair pricing. 

1. Increase value.
2. Improve value perception.
3. Decrease risk.

The adjustments don’t only go one way. If you want to reduce the value of your offer and lower the price, you can do that too.

In the video, Layla discusses the following methods of adjusting value and how they can impact your service pricing (timestamp 12:50). These are not the only effective options but rather some ideas to inspire changes to your own processes. 

Six Ways to Add More Value to Your Offer:

• Anticipate challenges and build roadblock prevention into your offer. 
• Communicate risk-preparedness during offer value delivery.
• Proactively share the next steps in the process to offset buyer’s remorse and worry.
• Increase offer value by making the experience more or less interactive, depending on your customer avatar. 
• Speed up or slow down the process, whichever your customer values more. 
• Create reusable assets like workbooks, templates, checklists, courses, or guides.

Just remember that a process is never one and done. There are always occasions to apply new knowledge and improve your systems to meet your and your customer’s changing needs. As a final step, ensure your process includes opportunities for feedback. The best way to find out what works in your service and what doesn’t is from your clients themselves! 

Do you enjoy business systems, processes, and organization? Visit our YouTube channel for free ProcessDriven tutorials and other video content designed to save you time and help you work more efficiently.