Pricing Happiness Part 2: Raise Your Prices

We’re talking about pricing! Please see the first part of this series (& the lively discussion in the comments!):

Pricing Happiness, part 1: You Should Charge More

So now that we know the perils of undercharging and the thrills of charging what you’re worth, let’s see how you feel about your current pricing.

How many hours a week do you have to work to make enough money to live as you’d like? Is it more than you want to be working? If you feel like you’re never caught up, it’s probably time to either earn more and do less work, or delegate some tasks and raise rates to be able to do so.

Do you make about double what you could working for an employer? Remember that if you were employed by a company, you would have insurance, benefits, and taxes taken care of, and you need to manage all of these costs yourself if you’re self-employed.

What do your competitors charge? It’s good to do a check on this to be sure that you have an idea of what is generally accepted, but in most types of business, there are different levels of quality and service, and different levels of pricing. Don’t feel you need to match what anyone else charges, but don’t be clueless about what’s usual, either.

What kind of feedback do you get from customers about your pricing? Hint: if anyone says you’re not charging enough, take their word for it – your pricing must be shockingly low if people feel they need to speak up (we got this for years)! If you rarely get push-back on your pricing, that’s also a sign that you’re not charging enough. Do people say you charge too much? If so, are you getting plenty of other people who are happy to pay?

Do you have too much demand for your services? If you feel like orders are pouring in and you can’t keep up – ding! – time to raise your pricing.

When customers ask you for extras, how do you feel? Can you graciously accommodate them, or do you feel like they’re asking too much of you? If you can’t put extra work into a project for a customer (un-begrudgingly!), you’re not charging enough. You should charge enough that you don’t feel forced to cut corners with your work.

When is the last time you raised your rates/pricing? Do you make adjustments regularly, or have you been charging the exact same amount for years, as your skill level increases, your knowledge expands, and your efficiency goes up? The more qualified you are for your job, the more you should charge.

What are you nervous about?

You’re at the point where you know you should raise your pricing, and you want to do so – but now you’re holding yourself back with many worries. Women are especially prone to these type of worries, and I’d like to break them down and debunk them for you.

I know some of my upcoming debunking is going to be hard to believe (or you believe it’s true for other people, but don’t think it applies to you), but all you have to do is prove it to yourself by raising your rates. Do it correctly, and see what happens! If somehow it ends up a tragedy, something has gone wrong. You will need to increase your value to match your new pricing and have a way to get the word out to your perfect customers. If your value is clear to customers, your price will become a non-issue.

Worries:

• I might get fewer customers.
• I will feel guilty stating my prices to customers.
• People will push back when hearing my pricing.
• Our perfect customers won’t be able to afford us anymore.
• I wouldn’t pay this much myself for my services.
• I don’t deserve this much money; I’m not that good at what I do.

Do these sound familiar? Well, they are just stories that you’re telling yourself, and, happily, they are not true. We’ll figure out what to do to conquer these fears, er, “concerns.”

You can’t raise your rates substantially without making a few changes to how you do things and how you talk to customers. Unless you’ve been creating absolutely top-notch work, with no room for improvement – or you’ve been severely underpaying yourself up until now, you absolutely must add value when you increase rates.

When we restructured Aeolidia, my web design studio, to have a full time employee managing projects and payments, we had to raise rates extravagantly (at least that’s how it felt to me!) from what we had been charging. In addition to hiring an employee, I no longer had the time to be doing work where I was paid directly by our clients, so the loss of my hourly income also meant we needed to adjust somehow. When we raised rates, we started offering much more value, and we continue to add value and efficiency as we do our day to day work, making regular rate increases tied into an increase in what our clients receive from us.

When talking pricing with potential customers, be very clear on what people are getting. If rates go up, but customers perceive that you’re offering the same old thing as before, that’s not going to help your case. You need to have solid, defensible pricing that makes sense to you and to your customer. My previous article, A Practical Change With an Unexpected Result, is a perfect example of how clarity in pricing removes customer objections.

People are very conscious of the possibility of being ripped off, especially online. If you are vague about your pricing and/or what the customer will receive, they will feel mistrustful, so make sure it is easily understandable.

Be confident about your pricing. You are not trying to trick your customer, and if you’ve set your pricing thoughtfully, using real data about hours, costs, and value, it will be easy to show that, and you should have no reason to feel anxious or guilty. Never negotiate on your price. Let potential customers know that your work is an investment, not an expense. If you would like to work with a customer who can’t afford you, adjust pricing for them by limiting features, not by arbitrarily lowering price. You may have good results just offering a payment plan. When pricing is tied to value, customers will often happily agree to pay the full price rather than lose features. If you lower pricing without changing what the customer gets, they will feel like you were purposefully overcharging them at the outset. You’re not a used car dealership!

Focus all your information on your customer, not how great you are. Your website copy should not be about how you won this or that award or list out your achievements or skills. Instead it should let your customer know why they would want to hire you, and what you will do for them that will improve their business or life. You want your customer to be mentally reaching for their wallet as they learn more about you and your company.

Know who your target customer base is – and if it’s shifted with your rate shift, make adjustments for that. Maybe you are too expensive for your previous customer base now. This was one of the most painful things to me about our big rate shift. I hated to let our old client base down, and I mucked up what should have been a smooth transition to a new level of work by trying to offer a super cheap option to budget clients, or agreeing to work with past clients again at a huge discount. It took a while, but we eventually dropped these low-cost options for all the reasons found in Part 1 of this series.

You may get less customers after raising your rates, at least at first – though maybe you won’t! Consider that you’ll need less customers at your new rates, and then work on new ways to attract customers if you don’t see an increase in earnings (work on new ways to attract customers all the time, regardless).

If you find yourself needing to search out a new customer base, or expand on your existing one, work to be a specialist in your field. It seems counter-intuitive, but if you narrow your focus and narrow your customer base, you often will see a dramatic increase in work. For instance, if you’re a photographer, and your favorite thing to photograph is weddings, drop all family sessions, portrait sessions, etc. from your portfolio and your services, and work to position yourself as a wedding photographer. Almost anyone looking for photos for their wedding is going to be more enthusiastic and interested in a website targeted to wedding photos than to one with a general appeal that doesn’t speak to them.

Be awesome. Really, that’s what this whole series boils down to. If you do incredibly wonderful work that provides value to your customers (for instance, our web design clients should expect to make back the money they spent on us and more), new customers will have already heard of you, they will be dying to work with you, they will be pleased as punch during the process, and then they’ll go tell all their friends about it. You’ll be able to charge what you’re worth, which will enable you to be even more awesome. I love it! Are you with me?

Let’s look at those worries again:

• I might get less customers. Maaaybe. But you’ll need less customers.
• I will feel guilty stating my prices to customers. No way! You’re not taking advantage of them, and you know you’re worth it.
• People will push back when hearing my pricing. Good! That shows you that you’re on target – you need at least some push back to know that you’re not underpricing. Have fun with these conversations, letting the customer know what you’ll do for them, and how excited you are to work on their project. “Winning” a customer is actually really fun, no matter how much you dislike “sales” in general.
• Our perfect customers won’t be able to afford us anymore. Aiiieee, I feel your pain on this one! But once you’ve decided to raise your rates, then they aren’t your perfect customers anymore, I’m sorry to say. Don’t worry; you’re going to love your new customers.
• I wouldn’t pay this much myself for my services. Ha ha, no you wouldn’t! That’s because you’re an expert, and it’s easy for you. Your customers have another job they want to work on, and they feel very happy to outsource this to you, the expert.
• I don’t deserve this much money; I’m not that good at what I do. Really? Really? I’m betting that if you’re passionate about your business, you have put a lot of time and effort into learning all you can, and improving every step of the way. If you truly believe you aren’t worth the amount you need to be paid, it’s either time to improve your skills or to consider another calling. If you do love what you’re doing, but feel you have a lot to learn, you must at least make sure that your pricing is competitive, then do all you can to get yourself to a point where you can make a wage that lets you live the way you’d like to.

What do you think? Did I miss any worries? I’d love to debunk them for you in the comments, so spill it! Why aren’t you raising your pricing? I’d also love to hear from anyone who is now ready to go out there and make what they’re worth!

Read the original (very lively!) comments for this article on Oh My!