Having a good pricing strategy is at the heart of giving added value to your customers and making your business profitable. Without the right price point, you're less likely to attract the right type of customers; you're less likely to bring in sales and more likely to limit your potential income.
But as we explained in part 1 of this blog series, going for the cheapest price is not a sensible move for most businesses.
If you're delivering a core service and high-level expertise to your customers, it makes a lot more sense to base your pricing around the value you deliver, and the perceived value your customers see from working with you.
So how does this work? How do you make higher prices work for you?
But as we explained in part 1 of this blog series, going for the cheapest price is not a sensible move for most businesses.
If you're delivering a core service and high-level expertise to your customers, it makes a lot more sense to base your pricing around the value you deliver, and the perceived value your customers see from working with you.
So how does this work? How do you make higher prices work for you?
Raising your price in line with value
If you're going to increase your profit margin, you've got to raise your price. And this is where a value-pricing approach really does boost your overall profitability.
Raising prices can ring alarm bells, though. So many of my clients find it really difficult to even talk about raising prices. What I hear is, "I can't do that because..." or "It won't work because…". But, guess what, raising your price point could be an amazing move – and here's why.
If you raise prices and lose a few customers, you could still be making more profit overall, and increasing the viability of your business. And that's because the customers that truly value you will pay that higher price.
Think about it. Many businesses that come to us as clients are actually swamped with work and have an overflowing pipeline of sales – but they're still not making money. The most logical thing to do at this point is raise your prices.
Increasing your price will:
Raising prices can ring alarm bells, though. So many of my clients find it really difficult to even talk about raising prices. What I hear is, "I can't do that because..." or "It won't work because…". But, guess what, raising your price point could be an amazing move – and here's why.
If you raise prices and lose a few customers, you could still be making more profit overall, and increasing the viability of your business. And that's because the customers that truly value you will pay that higher price.
Think about it. Many businesses that come to us as clients are actually swamped with work and have an overflowing pipeline of sales – but they're still not making money. The most logical thing to do at this point is raise your prices.
Increasing your price will:
- Increase your profit margin and bring in bigger revenues.
- Discourage low-value customers that only care about price, not the value they receive.
- Streamline and filter your customer base so you're left with less overall customers, more high-value clients, more income, and more time to service these customers too!
A better view of your financials
To craft a price point that works, you need to understand the financial needs of your business. That means having a clear budget, tracking your financial performance and keeping a close eye on your key numbers.
At Nimbus Integration, we're cloud accounting specialists, so we can help you get on board with the latest accounting tech, look at your numbers in fine detail and see the impact of pricing and margins on the bottom line.
With an online accounting system in place, such as QuickBooks Online, I can use one of the new breed of cloud reporting and forecasting apps to help you visualize the impact of your pricing. Forecasting is such a powerful tool to have and lets us project your financials forward in time to 'scenario plan' different pricing options and the impact on your profits.
So what strategies can you try? Here are a few ideas to kick off with:
Upselling strategy – 'The power of three' is a very powerful psychological pricing strategy to try. If you give the average customer a choice between a small, medium and large price point, they'll mostly choose the middle option. People make decisions better when they have a comparison point, and will far more readily pay the more expensive medium price when they can see there's a) a cheaper option and b) a more expensive option.
Value pricing – Charge your customers by the value you deliver, not by the hour. Recording time and charging for every minute isn't a profitable approach. Instead, find the right clients (those that place real value on your service), at the right price to produce the right profit so you can grow.
Fixed price – If you're delivering a monthly service to customers, package this service up as bundles and put a fixed price on each different bundle. There's no messing around recording time and charging it out. Instead you have a regular and predictable pipeline of income coming into the business, based around the value that you're providing.
There are several pricing strategies to try out, and working with us to scenario-plan your options will take a lot of the 'What if…?' worry out of the process of raising your prices and bringing in better profits.
At Nimbus Integration, we're cloud accounting specialists, so we can help you get on board with the latest accounting tech, look at your numbers in fine detail and see the impact of pricing and margins on the bottom line.
With an online accounting system in place, such as QuickBooks Online, I can use one of the new breed of cloud reporting and forecasting apps to help you visualize the impact of your pricing. Forecasting is such a powerful tool to have and lets us project your financials forward in time to 'scenario plan' different pricing options and the impact on your profits.
So what strategies can you try? Here are a few ideas to kick off with:
Upselling strategy – 'The power of three' is a very powerful psychological pricing strategy to try. If you give the average customer a choice between a small, medium and large price point, they'll mostly choose the middle option. People make decisions better when they have a comparison point, and will far more readily pay the more expensive medium price when they can see there's a) a cheaper option and b) a more expensive option.
Value pricing – Charge your customers by the value you deliver, not by the hour. Recording time and charging for every minute isn't a profitable approach. Instead, find the right clients (those that place real value on your service), at the right price to produce the right profit so you can grow.
Fixed price – If you're delivering a monthly service to customers, package this service up as bundles and put a fixed price on each different bundle. There's no messing around recording time and charging it out. Instead you have a regular and predictable pipeline of income coming into the business, based around the value that you're providing.
There are several pricing strategies to try out, and working with us to scenario-plan your options will take a lot of the 'What if…?' worry out of the process of raising your prices and bringing in better profits.
Talk to us about your pricing strategy
If you're drowning with work, bringing in a great pipeline of customers and still aren't seeing the positive impact on your bottom line, come and talk to us.
We'll help you get the view you need of your financials, the forecasting tools to test out your pricing ideas and a whole heap of confidence in the viability of raising your price point to help grow your business.
Find out more about how cloud tech helps you get in control of your key numbers.
If you'd like to have a chat about your pricing model, please do get in touch with us.
We'll help you get the view you need of your financials, the forecasting tools to test out your pricing ideas and a whole heap of confidence in the viability of raising your price point to help grow your business.
Find out more about how cloud tech helps you get in control of your key numbers.
If you'd like to have a chat about your pricing model, please do get in touch with us.