I can still recall four or so years ago, when putting together my first company and trying to set prices. I read over a lot of information and talked in depth with my husband, who has an economics degree and a business mind (and who once owned his own company before we met), and other business owners who were doing the same thing I was doing. I set my prices accordingly, and always tried to remain in the mid-price range.
Everything I read and everyone I spoke to said the same thing: Don’t set your prices too low. In doing this, you are telling the customer you are not worth their money. If Company X charges $50 for the same service, you should charge $50, not $30. By bringing the cost down you are not only cutting into potential profit but you are not competing with the other people in your field.
Think about it: If you are choosing between a few contractors who charge $30 per hour and one who charges $10, you might wonder why the lowball price is so low – too good to be true? Most likely you will go with one of the contractors who charges about what the others charge.
As I’m setting up this new business I’m wondering if, in today’s economy, this still stands true.
Let’s say that services that are similar to what I will be doing cost $60 an hour. Yet this is a service that is not a necessity. So, I’m not selling food that you need to eat or clothes that you need to buy to stay warm. Instead, I am selling a service that some people would like to have.
But as we know, the first thing that goes when times are tough are the toys and extras.
So with that in mind, if I am entering the business market when times are tough and only a select few will spend money on this service if I keep the price competitive with what others are charging, would I get more clients by lowering the price because it would attract people who could not afford the higher price? Or would I not attract them anyway, and then cut myself out of the group of people who would pay $60 per hour for a service?
Just a thought for today. How do you see yourself shopping now, or spending any extra money that you might have (if you are lucky enough to have any at all!) I see myself shopping for bargains again. Buying clothes for the kids that are second hand, purchasing foods that are either generic or on the sale rack, and skipping over things that we don’t need, like books (I can get these for free at the library) and fun stuff.
As I set up this next business I want to make sure of a few things. First, I want to make sure that the services are accessible to the people who need or want them without costing an arm and a leg. Second, I want to make sure that I am being fair to myself as well.