Last week a potential client told me that raising prices has been the one sure way to get new clients. I bet you know some people who manage to charge 10 times the market price for their service and the clients just line up at their door. How do they do it, when everyone else is driven to undercut the next guy, competing on price and driving their own earnings into the ground?
Just ask Atsuko Tanaka. A New York hair stylist, she charges upwards of $450 to style a wig, when an average wig cut in New York is in the $40 price range. She also seems to enjoy a steady stream of clients. Oh, and she doesn’t advertise, since her clients come from word of mouth.
Your ability to raise prices and create the income you want starts, like everything else in life, in your head. If you are totally sure that your service is the best thing since sliced bread, your clients will believe it too. But if you are sitting there, agonizing about every word you say out of fear of being judged, forget it. Clients will not be interested.
Just yesterday, I had a conversation with Sarah* a wig stylist in my coaching group. For her, every client walking through the door is a new burden. Instead of being happy that someone trusts and believes in her enough to bring an expensive wig for a cut, she is eaten by self-doubt.
What if she doesn’t like how I cut? What if she isn’t satisfied? What if she never comes back? What if I am not professional enough?
Fortunately, we had a few other wig-wearers in the group, so we asked them what was REALLY important to them when styling their wigs. They mentioned things like courteousness and interest on the part of the stylist, short waiting time, and responsiveness to their requests. And yes, they want the wig to look good, but somehow that requirement didn’t make it onto the top three list.
Every single one of my clients is amazing at what she does and practically every one of them doubts her abilities, because there is probably someone else out there who is better or more experienced. So what? When people come to you for service it is because they found something in you that resonated. They didn’t go to the other guy. If you want to make good money doing what you are doing, stop obsessing about your ego! It’s not about you; it’s about your clients. Give them what they want (not what you think they want) and they’ll adore you and pay your prices (even after you raise them).
For a small service-based business competing on price doesn’t usually make sense, since there will always be someone out there just slightly cheaper than you. Feeling underappreciated and working for low pay will ultimately leave you burnt out and frustrated.
Below is a list of approaches that will help you raise your prices. Consider adding just 10% to your fees and notice what this does to your client list.
A common rule of thumb is to provide a service that benefits the client 20 times more than the price she has paid. What are the benefits of working with you (emotional, time-saving, health-related)? The more you believe in your service, the easier it will be to justify the price raise to yourself and then to your clients. In time, you should be able to position your business in the right price range.
How to Raise Prices And Get More CLients
- Give people what they want – if you want to get paid top dollar, you need to target premium buyers. A corner sandwich kiosk and a gourmet French restaurant both serve the same piece of chicken breast, but they command wildly different prices by appealing to different clienteles and addressing different needs (speed and price vs aesthetics and bragging rights). Premium buyers are willing to pay for convenience and prestige or simply believe in getting the best. This means that your service will not be right for most of the population. That’s OK. You can create scaled down packages with lower price tags to attract more budget-minded buyers (and market them separately).
- Differentiate – clients don’t know many of the things that go into a service/product. If your service is exactly like everyone else, if you are a generalist, the clients can only compare based on price and settle for the cheapest alternative. However, if you can show people that your service is unique in answering their needs, there will be a segment of the market that will be willing to pay higher prices. It is all about perception.
- Educate your clients – consider what the client is hoping to resolve or achieve with your service and show them how you do that. Also show them the possible obstacles and why they may not be able to achieve that result with lower-priced alternatives. Are the clients aware of all the possible things that can go wrong? Do they know that different materials are available? Write out a tip sheet on getting the best results in your industry and use it as a free offer to attract people interested in your service.
- Use trust building marketing strategies – many clients are afraid of making the wrong decision. Use trust-enhancing marketing strategies (joint ventures, orchestrated referrals, etc) to develop trust in your work. Often clients will be willing to pay for the peace of mind that comes from working with a trusted adviser. This approach would require you to devote some time to helping your clients’ decision-making by providing information and answering questions. Consider creating FAQ sheets to be posted on your site and invite prospects to contact you for information. Testimonials from happy previous clients also go a long way to reinforcing trust.
- Give value BEFORE you sell – if you give valuable advice and ideas BEFORE you sell, clients will be convinced that your paid service is 10 times more valuable. And they’ll believe in your work enough to pay good money for it.
What was the last time you raised prices? How did it affect your business? Tell us about it.