How much to charge for anything is one of the greatest challenges many businesses, bloggers and consultants face.
Many think there is a “correct” price and do not realize that few things in life are more relative than money.
What really matters is VALUE – not price.
This is true whether you are buying or selling. If you are wondering how to price your products or services, read on – these examples are HIGHLY RELEVANT to what you need to know.
Why Value is More Important Than Price:
The true cost is cost over time – not immediate outlay. To make this clear, here are some specific examples:
SHOES: You can pay a little or a lot for shoes, but the TRUE COST is how long they last divided by what you paid. If you own hundreds of pairs this may not be obvious, so let’s use my boots for our example:
- If I buy cheap boots they cost about $30 and last three months. The cheap boots cost $120 per year to wear.
- If I buy high quality Tony Lama boots they last at least a year, then I can have them resoled and reheeled and wear them another year. These boots cost about $150 so they cost $150 the first year, but only $40 (the cost of refurbishing them) the second year, for a total cost of $190 or $90 per year. So $150 boots cost less than $30 boots over time – and they’re much better for your feet, too!
APPLIANCES:
Our throw-away economy is not only creating overflowing landfills – it is costing us money, too.
- You can buy a window air conditioner for $100 and up, but they only last one season. Or you can save up and buy quality, have it serviced once a year, and use it for years.
- Did you know you can still sometimes find working chest freezers and stoves built in the 1950s? How long did the last refrigerator, stove, washing machine or dryer you bought last? If you want to save money on energy costs and appliances, find a good repair shop that sells refurbished appliances – and have them pick you out a high quality machine. You’ll only pay a small amount more for the best appliance when buying used, but it will last a lot longer. Oh – and be aware that “energy star ratings” are often NOT accurate.
LAWN MOWERS:
You can buy disposable lawn mowers at Wal-Mart, Lowes or Home Depot or you can buy a high quality Snapper lawn mower and with a little maintenance it will run year after year. If you are in the market for a lawn mower I encourage you to read more about how very different Snapper is from cheap brands in The Man Who Said No to Wal-Mart.
COOKING UTENSILS:
I suspect one of the reasons many people don’t enjoy cooking is that they’ve never had decent pots, pans and especially utensils. Many stores sell cheap junk utensils that are little more than toys. They are often too small to be effective, rust almost immediately, or made from cheap components. Invest in quality and good utensils can last almost a lifetime. See Greening Your Kitchen Cooking Utensils for photos of quality utensils and what materials to choose. You can even buy ergonomic kitchen utensils for those with limited dexterity or arthritis.
These are just a few examples of why value is more important than price. When you are marketing what you do, make or sell, emphasize VALUE and QUALITY. As the old saying goes, buyers are not going to remember what they paid when they’re still getting use from what you sold them months, years and possibly even decades later.
I encourage you to read Values, Value and Valuation – the Money is All Relative. The pendulum has swung as far toward cheap as it can get. It MUST swing back because focusing on cheap is simply not sustainable. The first thing many ecommerce store owners think to do when sales drop is lower prices.
BAD IDEA! If traffic and sales are down and
QUANTITY OF SALES are down,
lowering prices = less profit per sale
right when you have fewer sales!!!
Whether you are selling products or services, NEVER, EVER, COMPETE ON PRICE! Emphasize value. Illustrate as visually and entertainingly as possible what you have to offer. Focus on clients and customers willing to pay a reasonable price for quality and willingly sacrifice any who only focus on price – and here is why:
Customers who focus on cheap will be unhappy
even if you PAY THEM to take it.
They will suck up more of your time and cause you more grief and stress than they’re worth. Let them be someone else’s headache!
Gail Gardner
I always try to quality over cheaper products, however, as many have pointed out, it really does come down to your individual situation. It may not be financially possible for you to go with the higher quality product, and that’s absolutely fine. But, not all higher priced products are rip-offs.
If you are providing value, you can charge as much as 10 times your competitor, and still be reasonable, because, in the end, the client knows he is getting his money’s worth
I completely agree, though many people struggle with price vs value. As a business, we focus on value not price. Occasionally people mention a competitor is cheaper than us but the question is are they offering the same level of service and infact, are they better value?
We’ve kept to giving high quality service not cheap pricing, and I think that it’s this that has been part of our success to date.
This is probably a question with no right answer. There are just too many things to factor in, and i for one don’t have the energy to do it. I usually throw in some prices i consider right, and it’s great if i get the job, but i don’t cry over it if i don’t. I assume the responsibility.
I love the examples that you use to demonstrate why value is more important than price. Your shoe example, in particular, really struck a chord with me. About three and a half years ago, I bought a pair of beautiful boots for about €200, so probably around that time nearly $300. I was so embarrassed to tell anyone how much I had spent on them, as I figured they would think I was insane. But now, going on almost four years later, they’re still in really great condition. I’ve had one of the zippers replaced, but other than that, there have been no major repairs. Just goes to show you that, if you’re willing to make a larger original investment, you’ll, more likely than not, see a bigger pay-off long-term.
Hi Petra,
We have all been conditioned to believe we are “supposed” to do certain things especially when it comes to shopping – and ironically it is not always the same “something”.
I knew someone in college who would actually wait until something was NOT on sale to buy it because she would never lower herself to be someone who EVER bought ANYTHING on sale!
Many of us have been conditioned to buy cheap. Thank you for sharing that buying quality does work for many people. Because the quality of so many products and most clothing has declined terribly since I was young we would all do well to buy a few quality pieces instead of JUNK or even shop at resale shops for high quality at low prices.
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This is such a critical issue for any new business Gail, and one I’ve been contemplating a lot recently as I prepare to role out my own services list.
The words that sum it up for me (in relation to the kind of services i will offer) are the ones you added in response to an earlier comment – “you should charge what someone is worth TO THE PERSON BUYING THAT SERVICE”
The challenge of course is to find a good way to apply that scaling to whatever you do. Valuing yourself is important and all too often a challenge.
Still contemplating how best to price my services…
Thanks, much food for thought (again)
Jym
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Hi Jym,
It is great to have you here commenting. When you decide to add your services list let me know by commenting here or tweeting @GrowMap and I’ll add you to this post. (I don’t stay on top of DMs but search for standard tweets regularly.)
I collaborate with a lot of others and may have some insights into the value of particular services. I am always happy to bounce ideas around and make suggestions.
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Thanks Gail, Happy to be here and I appreciate the offer.
I’ll let you know when it’s up.
Exactly. Unfortunately I am more or less forced to pay the bare minimum, of course for products that will not last long. It’s hard to tell whether you’ll get more out of spending tons more for a higher quality product, but that is what I would do if I had the money. It also doesn’t help though that the quality of products has greatly decreased over the years.
Nice posting, often we suffer this type of situation where the client has no interest in our service and wastes our valuable time.
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I often have this problem. Client asks me how much i charge. Placed in that situation i can’t but wonder how much he believes my services cost. Then i try to figure out how much money he has. Then i think of how many hours i would need to work.
Then i open a wine bottle, take a sip and give him a random middle price. I really have to get used to starting with the wine from now on, it would make my life easier.
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ha-ha! using wine for making great decisions 🙂 you’re funny))
this is really such a hard thing to decide… what if i charge a very high price and lose the client? or what if i charge too low and just waste my time?.. for making a decision i usually ask my clients about what they know about the subject, and if they don’t know anything at all i usually charge them well 🙂
I struggled with pricing as a consultant. When contracted with larger companies, it was a much easier time for me when I would fax them the invoice. With smaller mom-pop shops, there was a lot more pushback and calls for justification. I’ve never dealt with hardgoods, but in my opinion, they would be easier to justify.
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Wow, this really puts things into perspective. The example of shoes, well I’ve just pleaded this case to my hubby (I love shoes) and it worked. Thanks for sharing 🙂
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It all comes to thinking logically and doing the right math. For me, i always ask the question of “what i’m going to get from this product i’m buying”, if the product is of a great value and have a high ROI, then i’ll pick it up no matter what the price is (within my budget of course).
For the services that someone would provide, i think it comes to:
1- how much the employer is willing to pay you to not learn the skills that you’re using. If it’s a hard annoying thing, then mostly you can charge a lot.
2- The previous work you’ve done + the success rate with it. If you have a great portfolio, then you could be charging even more then you deserve 🙂
Thanks for sharing.
I am going to keep it simple.
Charge/Pay is directly proportional to popularity.
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This is an excellent post. You are so right – if a client doesn’t see the value of your service, they won’t be happy if you paid them for it.
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Hi Gail,
A big thumbs up to your excellent explanation of valuing your own services. The points you make about being selective in choosing clients directly correlates with how much they value the service they contract for.
A case in point: I was once offering a specific type of training service to a small business, a local non-profit, and a municipal government body.
The small business paid a premium rate as the training was good for its employees.
The government department paid twice as much because their next round of budget allocations was dependent upon acquiring the training.
The non-profit quibbled and wheedled and wanted to steal the techniques.
the person buying has a lot to do with it, been blunt, some people are just too cheap, dont see actual value and would like money for old rope if the shoes was on the other foot.
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I completely agree with you. There just one question, what to do if there is no money to buy shoes for 150$
I agree. You don’t want to emphasize price, because that always attracts the worst possible customers – people who just want your product for free, and will complain about the little things. The people who will pay a premium will actually care about using your product the right way
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Hi Henway,
I totally agree with you. The people who complain about what you charge can make your life miserable. They always want more than you agreed to give them for what they paid (often claiming they “didn’t understand”), take many times more hours than most clients and will STILL complain.
Those people are crazy like snakes; master manipulators who want more than they deserve. Best to make them someone else’s nightmare.
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The importance of value is not only for material things. But i definitely agree value is what really matters when buying personal stuff…. great reminders here!
When you buy a things online the prices vary for the same really ,I feel sometimes confused how to sell,what price to give
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It gets even worse when selling something intangible like life insurance or digital products! I agree with the value adding statement above and that it is uber important to do so.
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Hi Trudy,
Insurance should be focusing on sharing what they do for us if we have a claim (although many companies would have a hard time because they do as little as possible!).
Pricing for digital products is variable. I don’t know how effective it is, but there is a product called Make My Price Sell for how to determine best price that could be useful.
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Hello there! I didn’t know that you can refurbish boots! It’s the first time I hear it. It’s totally worth the price the way you describe it! Thanks for sharing,
John
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Hi John,
High quality boots and shoes can be re-heeled or re-soled or both. Heels are very inexpensive and can double or triple the life of your shoes – especially if you tend to wear them on one side. If you heels wear on one site have your shoe repair person put protectors on that side.
As long as the upper part of a pair of shoes or boots is in good condition they can usually be resoled. Refurbishing your favorite shoes that are already broken in beats buying new ones.
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For me, I always think the opposite of where I stand. If I am the consumer trying to purchase something, I think of why the manufacturer priced it that way. If I am the seller, I think about what will the consumers think of my product if I priced it that way.
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Hi Dian,
That is very good advice. Many businesses fail to put themselves in their customer’s shoes and miss out on many opportunities because of it. As consumers we need to be willing to pay a fair price and support Fair Trade efforts.
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It’s always difficult to set a charge on services. You must take into consideration how much time is involved as well as the work you’re actually doing. In addition, while I value my services, others may not value them as much. Too many people want something for nothing and that’s not right either. That seems to be where the balance problem is. Thanks for the thought provoking post!
Hi Maria,
A mistake many people offering services make is to only charge for the time it takes to provide them. There is MUCH MORE value in many services to the person buying them. See my reply in the comment immediately below this one.
There will always be people who want something for nothing. Ignore them and live a peaceful life. Anyone who is not willing to pay your rates does not deserve to have you benefit their business.
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Concrete goods are easier to price than services. It is hard to tell how much time and effort your service is saving your client because it is easy for you. That is what I have trouble gauging.
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Hi Stephanie,
I meant to touch on services in this post. Have you ever asked yourself this question?:
Answer: Often very little because many people under-estimate their value and under-price their services.
When I was managing AdWords accounts I charged $100/hour cash in advance via PayPal. The company owned by someone whose skills were equal to mine charged $325 an hour. That difference would be caused by:
1) Who their clients were. (That is why many agencies focus on Fortune 1000 corporations – because they have deep pockets.)
2) Their connections. The more established you are and the more people who recommend you the more in demand you become and the higher your rates can be.
Were their clients getting 3 1/4 more value than I was giving? Not likely, especially when employees were managing their accounts rather than the owner who had all the experience.
I wrote about why you should charge what someone is worth TO THE PERSON BUYING THAT SERVICE and not base that rate on how long it takes you in my post on How to Get More Freelancing Work.
The value of your service is how long it would take me to learn how to do it myself + how long it takes to complete +uplifted for enhanced results because of experience.
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I will complete your ideas with something:
Jewelry: You can pay a little or a lot for jewelry, but the TRUE COST is how long you can wear it and fit it in your every day wardrobe, and still love it . For example, a cheap handmade is a choice that often can’t last very long… so you will change it and get another cheap piece to change later.
A rare handmade, like Murano Millefiori jewelry (bijuterii Murano) , designed by a jewelry designer, costs a lot especially if it is in sterling silver 925, BUT you can wear it for years and leave it for children as a little family treasure so… you have an investment in quality.
Hi Crina,
Valuing classics instead of jumping on every passing fad is definitely a good idea.
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Determining the price of a product is not easy. Especially if your products do not have competitors. Many things must be considered. For example in terms of raw materials, work processes, investment value, and profitability. What matters should be considered in a comprehensive manner so that it can become a leader in the market. Thank you.
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Hi Minka,
Businesses must be willing to charge enough that they can afford marketing costs and make a profit. They can NOT set prices based on what other businesses do or attempt to price quality to compete with cheap junk.
Having no competitors is an advantage, but whether you have competitors or not it is up to us to make the value of what we are offering obvious and easily understood.
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If you are buying online the price of the same product can vary a lot. There are definitely products that will outlast others. Sometimes you just get lucky or unlucky though. Some every day household goods I use sure don’t last like they used to. I don’t know if I just have bad luck the past few years or they are just not made that well anymore. I wouldn’t mind a few things from the 1950’s or 1960’s.
Hi Ray,
Many products are commodities so you can research prices on shopping comparison sites and shopping buying guide sites.
You are not having bad luck. This emphasis on low prices has pushed manufacturers to build cheap – and we get what we pay for. In some cases there is intentional planned obsolescence and in others they must be doing something to the products that they didn’t do back when.
I have clothes I made around 1973 that are still wearable, but materials today fall apart in a few years. Why is that? They must be doing something to the cloth that causes that.
This post is another of my small contributions to raising awareness that our choices affect the choices we will have in the future. Speaking of futures, the concept of retirement doesn’t work, especially when the value of currency buys less with each passing year.
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It had to be shoes didn’t it, figures. I’m a 16-length, and a 4-E width…not cheap, no they don’t last long. lol
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Hi Dennis,
Well, it could be worse. You could wear ridiculous women’s high heels. Talk about not lasting long. Too bad SAS Shoes doesn’t make men’s shoes too. They are the longest-lasting, most comfortable shoes ever. My IBM job was REALLY hard on shoes but those lasted literally 20+ years even though I abused them both at work and on the ranch.
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