Why price setting is important (and difficult)
The price is the money you ask for in exchange for the value you offer. There are several reasons why pricing is difficult:
- You operate in a market without transparency. Neither you nor your prospect knows the correct price. It may feel like you do or they do, but comparisons are imperfect and unless there is an index out there (like for gold or oil) that defines your price, nobody actually knows what it should be.
- Revealing the price is the point of rejection, which makes it emotional. Everybody is happy talking about value and gains. The happiness seems to wane when money comes into the picture. So setting your price can be emotional and feel risky.
- Without a clear understanding of your value, price is the area you have to negotiate on. It is easy to give away price in order to make a sale. But this leaves you unhappy – you may get the sale at a bargain price, but then you have to deliver. If your price isn’t high enough to make the project worth your while then delivering can be painful and you resent having to do it.
You deliver a valuable product/service. The money you ask for is the compensation for that service. If you focus on the money, you will always reduce the amount because you don’t know what the price really should be, you are worried about rejection, and it is the only area you can negotiate.
How to define your price
First, understand the drivers of price and then do the analysis to set a fair price for your offer. Part of this analysis is understanding your value and offer: know you are worth. This also allows you to negotiate more effectively because you can drive attention to the value your offer rather than the money you charge.
Go through the price-setting playbook, this will give you the tools you need to understand and set your price.
You can download the price-setting tool here, this tool is a combined “signature program,” because it links your offer to the price you charge.
Price Setting Tool