A lot of pricing articles warn online business owners about the dangers of setting prices that are too low. And I agree that you should definitely, 100%, always charge what you’re worth.
But what about the flip side of the coin?
Naturally you want to earn as much as you can and be competitive in your market, but how do you know you’re not pricing your services too high?
You can try to compare what others in your field are charging and use that as a benchmark, but then what? Do you meet their prices, or do you charge more because you have better credentials, a high-end brand, or more direct experience with clients?
Knowing what to charge in your online business boils down to knowing the value of what you personally are bringing the table… and avoiding the temptation to deviate from this!
Today I’m breaking down the most common overpricing pitfalls I see business owners of all kinds stumbling into, and I’ll give you some great tips on how to avoid them.
A bit of a heads-up: This post is a bit different from what you’re used to reading here, and it might make you squirm a bit. Sometimes what we need to hear isn’t always in line with what we want to hear, and it’s my job to give you the advice you need.
(You know I care about you too much to give you anything less than the straight-up truth!)
If you want what’s best for your business now and in the long run, then you’re definitely ready to hear what I’m sharing today.
The Perils of Overpricing
I see so many solopreneurs who have amazing potential and great businesses fall into the trap of overpricing their services. It’s frustrating to see, because I know that unless they rethink their prices, their businesses aren’t really going to take off like they should!
How do bad prices happen to good businesses? Well, they are usually a result of:
- botched comparisons with others in your field,
- a misestimation of the value of your collective skills, and/or
- a misunderstanding of your relative position in your market.
This is an especially common thing among people who have built up considerable experience and/or expertise in what they do (copywriting, photography, naturopathy, counseling, etc.), but who have only just started their own businesses or are taking their brick-and-mortar or offline businesses to the online world for the first time.
But actually, this problem can occur at any stage of your online business, particularly as you experience growth and gain more knowledge or credibility.
The pricing pitfall at play here is that we’re tempted to price our products and services at the height of one particular ability – such as the level of service we can provide, our knack for closing sales, or our ability to market to large numbers of people – rather than taking honest stock of all of our abilities and setting the price at the lowest common denominator.
That last part is super important, so I’m going to say it again:
You have to honestly evaluate all of your skills and set your prices at the lowest common denominator – not the highest!
Here are a few examples of all-over-the-map pricing behavior:
- People with new online businesses charging rates to rival what more-seasoned ones in the same field charge before they have the online marketing know-how, sales chops, one-on-one client experience, and/or reputation to support it.
- Solopreneurs with impressive resumes (years of experience, plenty of credentials) setting their services up as “premium” or “high-end” in their marketing and pricing before they have built a name for themselves.
- Skilled practitioners with a scattered, disorganized, or even non-existent customer experience basing the prices of their services on their level of technical expertise alone.
- Experienced online business owners raising their prices as their exposure and reputation grows, without taking the time to stay current in their field or increase their value in other ways (skills, training, etc.).
The result is the same for all of the people mentioned above: by setting their prices too high too soon, they’re actually limiting the long-term growth and profitability of their businesses.
Making it online is all about building up trust in your target market, and that requires experience and skills in marketing and sales and customer experience and whatever service you’re providing.
If you value one of those things above the others and set prices to the highest bar, your business will suffer because you’ll scare off potential clients or (even worse!) fail to deliver to the level your clients expect for the prices they’re paying.
My Personal Recommendation for You7 Reasons Why Charging Premium Prices Could Completely Backfire on YouRaise Your Prices Only When Your Skills (All of Them!) Can Support It
If you’re new to online business – even and especially if you have experience in the same field in an offline setting – you absolutely have to start from square one and build from there. There are no shortcuts here, even with lots of experience or great credentials.
I’m not saying those things aren’t valuable (they absolutely are!), but they just aren’t the most important aspects of pricing right now as you start your online business.
Here’s what is important: Getting clear on who you want to help and how, developing a bite-sized offer with a modest price tag, building your list, and honing your online marketing skills.
Once you do all that and gain a bit of trust and credibility online – i.e., once your marketing skills catch up to your experience and credentials – you can raise your prices to match (that’s your new lowest common denominator!) and shoot way ahead of the rest.
The same basic advice goes for everyone else falling into one of the categories above: Work on improving all of your various skills and only set your prices to the level of your LOWEST COMMON DENOMINATOR.
As you build upon your less-than-stellar skills and reach the level of that thing you really kick ass in, you’ll have your new lowest common denominator. Woohoo! Time to raise your prices!
My Personal Recommendation for You3 Mistakes All Newbies Make When They Create, Write, and Sell Their ServicesThis Sucks, I Know. But You Really Should Do It Anyway.
I know this “lowest common denominator” thing isn’t an easy pill to swallow.
If you haven’t already slammed your computer shut and thrown your arms in the air in frustration, your brain is probably busy churning out objections like…
“I’m already worth more than a $99 bite-sized offer!”
“I can’t lower my prices because I have a premium brand!”
“But I have 15 years of corporate experience doing this exact same thing – I’m not really new to this!”
I hear you, and I totally understand how you feel. I swear! But you still need to hear this advice for the good of your business.
Can you price your stuff higher right off the bat, rather than starting with a bite-sized offer? Yes, but it will take longer to gain traction because you don’t have the online marketing skills or strategy you need.
Can you decide to go with a premium brand and price things that way? Sure, but keep in mind that without clients, you don’t really have a brand. Meeting clients where you currently are won’t devalue you or your brand.
Can you value your vast client experience over your lack of experience in operating online? You can, but you’ll soon realize that effective marketing and sales techniques are absolutely essential to online success. How else will you make a name for yourself and actually get clients?
I promise that taking this advice – no matter where you’re at in your business – will get you where you want to go faster than trying to jump up a few rungs on the pricing ladder too soon!
Click to DownloadHow to Create the Perfect Bite-Sized Offer for Your Business
Still Not Convinced?
If you’re feeling resistant to this approach (I know it’s a tough one!), let’s talk it over in the comments. I’ll address each and every one of you personally!
Tell me…
What’s keeping you from accepting that this may be the way to go?
What fears are holding you back from pricing your products and services at your lowest common denominator?
What additional guidance can I provide to help you through this?
Fill me in on what you think about all of this and how I can help!
Excellent advice Jenny!
I found it to be spot on and not at all offensive. I know when I first started my coaching practice online, I did all of the above. After flailing around for a year, I lowed my prices as you suggested and now have a thriving business.
I think you never disappoint Jenny! Thank you for being TAO.
Xo
Susan
Thank you, Susan, for always being so positive and reflective of your journey. It’s been fun to watch you really go for it and build such a thriving business. Bravo!
Hi Jenny. Hmm. I’ve been offering my bite size at $200 for 1.5 hours, and then coupons for % off to special groups. Am I still in the right ballpark? Thanks
I generally suggest $99 BSOs for people just starting out — even if that means you’re massively over delivering for your clients. It’s great to make it a no-brainer easy yes for people to try you out. Then they’re super happy with what you deliver, give you a great testimonial, and even recommend their friends.
Of course if you’re getting a lot of takers at $200, no need to change.
Hi Jenny,
My BSO is similar to Eva’s – $200 for 90 minutes – what do you think of slashing the price by 50% for say Thanksgiving to see if that price works better? I believe, in general, you don’t advise on accommodating people’s requests for discounts and payment plans, but in this case – would it help me to figure out the right price?
Give $99 a shot, Saiisha and see what happens. It’s my go-to starting point for pricing for BSOs.
Jenny, you are so right, thank you!
Two years ago, I built a 10-week program and ran 2 pilots for $1000 and then $1500. While I was able to recruit 5 women for each pilot, that was only half of my goal. Since then, as I’ve been building my following for a bigger launch and really struggling with the business and marketing skills, I’m realizing that I could gain more traction with a couple of bite-sized offers that will allow me to work on the other skills that I really, really need to make this work!
I’ve just found you (Thank you Marie Forleo!) and I’ve already learned a TON from you. Thank you!!!
Lots of love + gratitude,
Stephannie Weikert
Welcome! So glad to have you here.
Yes, often it’s tempting (and often because we’re sold on it) to charge big prices right away. But we alleviate so much pressure by starting smaller and delivering great things for our clients. Give the bite-sized offer a try and see what happens!
Love this.
I understand that many people want to jump up too quickly with their prices, but…. I also think there are many of us out there who need encouragement to raise their prices to meet their financial and business needs. If you have a stellar service and you can assist with clients to achieve an outcome that they would not be able to achieve without you, then why play small? I am a fitness and weight loss specialist with a niche for women 45 and up. I have been struggling for years because of my low prices. I recently took the step to raise my prices and I am now doing better with less clientele. There are many things to take into consideration as an entrepreneur, the pricing one of them and it can be tough. Thank you for another side to the equation. Lesslee
Absolutely, Lesslee. Often people do need help raising their prices.
Check out this post here: https://jennyshih.com/2013/05/5-tried-and-true-signs-its-time-to-raise-your-rates/
And this one here: https://jennyshih.com/2013/05/steal-this-my-perfect-pricing-strategy/
I’m so glad you took the step and raised your prices and are working with higher quality clients. If your experience in all areas makes your lowest common denominator a higher number, then you’re perfect to do just that — and you get the great results you’re seeing. I’m happy for you!
I feel like I’ve done full circle with pricing, too low to too high and now kind of wiping the slate clean and working on a bite sized offer which feels much better for me. I’d like my prices to grow as I grow in confidence & experience & getting more results for people. Its much better to have lower starting prices and actual clients! I think my intuition has been telling me this and with a nudge from you too Jenny, I’m now listening. 🙂
Awesome, Maria!
Great to know other people are also struggling with pricing. My struggle is that I get conflicting feedback – some people think I’m too expensive and yet many others tell me I’m too reasonable. Gaaarh! I think the bite-size offer advice is bang on. Gonna act on that right now. Thank you Jenny!
There certainly are a lot of opinions out there, so your confusion is understandable. I suggest listening to the small quiet voice inside that says “do that” (whatever that is) — and if BSOs are it, go for it. Cheering you on, Kathryn!
Great advice thank you!
I love how the bite sized offer simplify’ s things. We don’t need to be scrambling around trying to create multiple offers before we have the systems in place to really serve our clients and allow us to be our best. I’ve spent years creating chaos and stress for myself by trying to do to much too soon without the right structure and support in place. The bite sized offer is a great way to start and has allowed me to create just the right follow up offers that my clients really want.
Always start where you are with what you have to offer. If you’re new, small, bite-sized offers are the way to go. This helps you hone in on your skills, your client, your marketing and sales language — and helps you build the confidence that you can and will deliver great work for your clients.
I’m so glad it’s helped you. Thanks for sharing, and congrats!
I raised my prices for the first time this past summer and it has really gone pretty well. I have more energy around my clients and working with them because I feel like I can take time beyond just our session to work on their needs. My fear of lower prices is BURNOUT. I feel the road I have gone down more often than not is keeping my prices low and then working, working, working and just barely covering expenses. Is there a happy medium?
Check out the two posts I linked above plus this one: https://jennyshih.com/2013/05/steal-this-my-step-by-step-guide-telling-your-clients-your-raising-your-rates/
I think you might see that happy medium in there. Let us know!
Hi Jenny! Great post.
So, what comes up for me to ask you is what do you do when it seems like everything is at a standstill with the regular price point? How do you distinguish between just a business lull or slow period and when it’s time to lower your price or pull the plug?
Any insight would be appreciated!
Love you!
Great question! It’s all about applying a scientific mindset in your business. Have you done everything to make it successful, or are there things you could still do? Always evaluate that before you say “it’s not working” or “it won’t work.” Check this out for a few ideas: https://jennyshih.com/2014/01/learning-failures-wins-create-success-business/ And this: https://jennyshih.com/2014/01/exactly-experiment-business/
Jenny, you’re a breath of fresh air! I’ve been reading your blog for a couple weeks on the recommendation of a friend who did B School with you, and I’m enjoying every word. I’m new to coaching and I really really want to make it work. I’ve wondered many times about appearing to be underpriced (because people have this threshold of what appears to be “valuable” based on a certain price), while at the same time wondering if people are looking at my coaching package and thinking, nope, too much for me! Incidentally, I have two offerings, one package of three session for $165 and one single session for $65. I feel like this is a steal, personally, and I’ve had a couple clients pay this without a second thought, but only a couple! I live in a city where there’s a real running dialogue among wellness practitioners that people are “cheap” – it’s a salt-of-the-earth, working class community. Anyways, all this to say, there’s a lot running through my head right now about money and pricing, and I was happy to have your stroke of clarity through it all.
The most important thing you can do is not worry about what other people might think about what you charge and instead charge what feels SOLID within you. Because when you feel aligned with your prices, people feel it! The excitement or confidence or assuredness you have for what you do and what you charge will come through clearly. A solid felt-sense is way better than a “head game” around pricing.
Hi Jenny,
I loved your MIWO class and created a special on my website that’s been very popular. It’s for new customers only. Here’s the link to my Chaos to Clarity to Cash deal for $97 with worksheets and individual coaching time with me to get amazing female entrepreneurs out of overwhelm and stress and have a customized action plan at the end of it to use on their business.
Happy Holidays!
Hugs,
Karen
Jenny, In your opinion, how long does it take for someone who has many years of experience and has been successful in an offline business to start working online and build up to premium pricing ? I have been a licensed therapist and had a successful private practice for the past 6 years. I have completed certification as a coach and master coach and now need to start my online business. I am shifting my niche in a way that I know will make it much easier for potential clients to find me and I am excited to get my message out, I have already closed my therapy practice and am committed to having an online coaching business, but I need a realistic timeline for making this happen and getting buy in from my spouse. Thanks for your advice !
That’s a great question, Diann. The answer is, “It depends.” 🙂
It might be helpful to read this article which talks more about the idea of the lowest common denominator, so you can think about the various skills rquired to make your business work online and where you are with each one: https://jennyshih.com/2016/11/price-services-confidence-whether-youre-new-business-awhile/
The next factor to consider is how much time you have to uplevel your skills, like online marketing, for example. If you’re running a full-time practice and only have a handful of hours free each week to build your online presence and learn to market this way, it will take much longer than if you were to have 40 hours/week to dedicate to making your online business work. Make sense?
I always suggest my clients start out by assessing their skill gaps and the time the have to dedicate to closing those gaps. It can take 3-6 months if you can go at it full time… or years if you just have a few hours each week. (I’m not going to sugar coat it — that doesn’t do you any good!)
Hope this helps!