Pricing is probably one of the toughest problems you will face. There is no pat solution when you are trying to price your goods or services.
Price = product + service + profit + image
Price will need to include:
- the cost of producing your product
- the cost of providing any needed services that may accompany the product.
- the amount of profit that you need to make in order to stay in business.
- you can play “image” into your price – are you trying to portray the best quality or the lowest price. This may also depend on your branding strategy.
Before you consider your image, take a look at your competition. What are they charging? If your USP (unique selling proposition) has nothing to do with your price, then you will want your price to be comparable to your competition. If your USP has everything to do with your price – for instance -LOWEST PRICE IN TOWN
BEST QUALITY IN THE NATION
then you will need to adjust your prices accordingly.
Price can be a direct reflection of quality or even perceived quality.
When we started our business, we talked about price a lot. First, we determined we would charge everything by the hour. Second, we had to determine what to charge by the hour. We didn’t have a lot of experience in certain areas when we started, but we needed to get clients and we needed to get experience. So, we checked on rates of our competitors, they were charging around $50 – $100 per hour. So we charged $25 an hour. We were cheap, that was part of our branding. We got a few projects under our belt, read a lot, learned a lot, and kept up with technology. Within one year we determined to increase our rates. We doubled them. We’ve stayed at $50 an hour for the last 2 years. This did not deter clients from giving us repeat business.
“My Dirty Little Customer Service Secret”
Much of our support is provided free of charge.
However, there is a reason for this, we have a peculiar circumstance to deal with. I work out of my home and I have three kids. How do you answer the phone and speak to customers and look professional when you have three young children? It’s difficult. In fact, most of the time, it’s not possible. Since I am the main contact for our clients, we had to have a plan to handle this issue and determine how it would affect the price of our services:
1. I have caller ID. I have voice mail, I have all the bells and whistles the phone company can provide. I can usually tell when a specific client is calling.
2. For first contacts with clients, I make sure that I have control over my environment and that I am not interrupted. Usually, I choose the time to call them. During this first contact, I don’t let on to the fact that I have three kids or even that I work out of my home. I hook that client in any way that I can. (oooh, that’s bad, but that’s business.)
3. Usually, at some point, during the second call, I tell clients, “I am available at any time you need me because I work at home, BUT, I also have three children. You will, at times, hear my children. This is a trade off, I’m available, but I have kids.” or something close to that. (Depending on the client, sometimes, I may tell them up front, if I feel it’s going to be an issue.)
4. This affects price. We don’t charge for any support that we give over the phone. If a client calls me and hears my kids in the background or the call is interrupted by my kids, the client would probably feel a little slighted if I charged them for that time. Therefore, it is current company policy to offer any support work that I do while they are on the phone free of charge. (And sometimes this can rack up to hours of time for one project.)
5. Once the client is “hooked,” they have never refused to do business with us.
6. I can’t say that we will always give away free advice over the phone. Perhaps, in the future, when my kids are older, we will charge for some of this phone time. Perhaps, we will continue to give it away as a bonus, as part of our excellent customer service. We may need to raise our hourly rates to account for the phone time that is an inevitable part of our services.
“Bad Customer Service is Dirty Business”
Here’s another dirty little secret, I overheard at a print shop. This one is an example of bad customer service affecting price and customer satisfaction. This conversation just blows my mind:
The Scene: An employee, we’ll call her Rosie, calls out sick. There is a job that is due out on the day that she’s out. The temp. person doesn’t know about the job, but the Manager (we’ll call him Roger) does know about the job, although he does nothing.
The job does not get done. Then the following day, the customer comes in and hand delivers a disk. On the disk is a change requested by Rosie, (it must be changed in order to run the job correctly.)
The following conversation ensues:
Customer: You’re going to charge me another $18.75 for something that’s a really quick fix, whether I bring you a new disk or not [whether he fixes it or the print shop fixes it]. The job is also already a day later than was promised. Could you forgo that charge?
Roger: That is company policy, there is nothing I can do. We have an $18.75 minimum charge for changes.
Customer: I send files to other companies around here and they don’t charge me like that. If a service bureau shop opened across the street, they wouldn’t charge me like this.
Later, the following conversation between Rosie and Roger:
Rosie: Well fine, if a service bureau shop opens up across the street, he can go there but he won’t get the quality of customer service he gets here.
(Her attitude is that simply doing the customer’s job is quality enough.)
Roger: Right. He isn’t a big enough customer to change the rules for.
Bad, bad, bad… You’ve got to provide good customer service (at the least getting a job out on time) to everyone, big or little. Not that you should give all your work away, but if you’re at fault – as in this case, the job was late through no fault of the customer – maybe giving a little will get you back a lot later, in the form of a return customer and referrals.