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 you: 7 Reasons Why Charging Premium Prices Could Completely Backfire on You
Raise 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.
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 you: 3 Mistakes All Newbies Make When They Create, Write, and Sell Their Services
This 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!
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!
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!