Updated: Aug 23, 2019
Running two businesses, one selling product (Selene Cosmetics) and one selling a service (Social AF) I have been able to experience first-hand the similarities and differences when it comes to price point. A lot of people fear the money talk when it comes to business, either because they aren’t confident in the price they are charging or because they fear they may lose a client at the first mention of price rates...
I’m going to break down a few need-to-knows which have personally helped me overcome both of these issues:
First, how to actual know what to charge...
When it came to selling a product, it was easier for me to figure out the statistics on how much to price everything. Some of the main things taken into consideration when pricing product is:
The physical cost of that product to get to you from the manufacturer, including all shipping and tax costs
The time it takes you to package orders
Any material, packaging or processing costs should also go into the postage rates. Don’t forget that your materials cost money. The bags you post your product in, your business stationery such as stickers, thank you cards, labels.. these are hidden costs people usually write off as non-important – but you will soon realise that even though you are making sales, you barely see any profit remain.
Hot Tip: consumers are more likely to get deterred from a product due to the cost of shipping, so hide these fee's in the product cost instead.
If you are a one man (or woman) band, doing the job of a small army of 12, consider if you had overhead costs, such as admin, packing staff, content creators etc. This will give you the option and opportunity to expand in the future if necessary.
In summary, if you buy a product as cost for $7 and think selling it at $14 gives you an easy profit of $7 – you’ll find yourself sorely mistaken...
When it came to selling a service, I suddenly found myself really lost and confused. I had only ever worked at a 9 - 5 Graphic Design job where I was on a set wage, regardless of the work I was doing. If I ‘freelanced’ it was usually for friends and family – so I had NO idea where to even start with pricing. So, I would send my family and friends out into the cyber world to DM and email a handful of people and companies who had similar offerings to me and ask them for price lists. I figured as long as I put my prices on par or even cheaper than what was out there, I would be sweet. It took me about a year in to realise I had been mistaken, and there was more to planning your pricing.
What I’ve learnt through experience, education and research...
When it comes to selling a service you should consider the following factors:
Any outlay costs for product materials plus profit
The money you invest in your machinery and programs that make your service possible
The costs to outsource anyone else to complete the job. E.g. I am a graphic designer, I don’t have an inhouse printer, but I can outsource this for clients. If I do this, I will always add a very small % on top of the printers quote, this is to cover my time, set up fees, liaising and organising for the client and making it easier on them overall. Usually you can spark a deal with these people to give you a ‘reseller’ discount, say of 10%, then you can pass this 10% to the client. Meaning they will pay the same amount going to that person directly anyway!
The time you will dedicate to work on a project from start to finish
Your experience and credentials
The value of your offering – think about how far your product or service will go and the value it holds to the client. It is not necessarily measured by the time it takes to do. Is what you're selling a necessity for your target client or an optional purchase? People are more also likely to spend more money on longevity products/services (e.g. a logo would be something people would not only need but will use for a long time to come, ideally the life of their business – and a website is also a high priority for businesses and therefore of high value to my target audience). Consumers will also likely spend money on sentimental offerings. The more important something is to your target market the more they would be subconsciously willing to spend e.g. they would be inclined to spend more money on a wedding cake than a 5th birthday cake.
And most important... YOUR DEMAND = YOUR WORTH = YOUR MONEY BAG!!!!!!!!!
Back when Cardi B was Insta-famous, but not yet “Bodak Yellow” famous, she hosted parties at clubs for a fee. It became clear that the rappers and other guys she co-hosted with were making more money than she was for the same job. “I said, ‘I’m going to stop taking bookings until y’all pay me more,’” she said. And “that bag doubled.” - NYTIMES
Time actually IS money...
The main difference between selling a product and selling a service is time.
Realistically speaking, you can push more product than you can a service. You can get your manufacturing company to make you 1000’s of a product and you can sit back and watch the sales come in and product go out! When it comes to a service, most times you are selling YOURSELF and YOUR TIME. With only 24 hours a day, and 52 weekends a year, you realistically do have a MAXIMUM amount of clients you can take on each week, each month and each year.
Example time: Hypothetically you were in the event industry, you had a reputation as an elite and luxury service and are in high demand. You could set your price point to cater to more people - but it would do you more damage than it would r good; and here’s why. If you want to brand yourself as a luxury service in your field, this means that not everyone should be able to afford you. If everyone COULD afford your service, you would be working more to make the same income or even less of an income. To break it down you would realistically only be able to do 2 events a week? That’s EVERY weekend working, no time off – a total maximum of 104 clients. Or, if you had the DEMAND, you could triple the price, make your target audience smaller, spread yourself less, and concentrate on 1/3 of those clients and get paid the same pay cheque. Which would you rather?
Know your worth and don’t be afraid to ask for what you want...
Once you have set your prices, stick to it for a while and don’t get disheartened if you get some no’s!
Don’t give discounts on your pricing. Tip: Psychologically speaking, you can offer clients a complimentary product or service that is ‘free’ to you or doesn’t cost much to drive sales and secure jobs.
If you see a large trend of people dropping interest or you’re not getting bookings or sales refer to the following checklist:
Is your pricing the thing that is wrong or is it the way you have branded yourself?
Are you marketing your product to the correct audience?
Does your price reflect your target audience correctly? Think about who they are, what their spending habits are like etc. It is always wise to create a consumer profile to better understand your ideal client.
Do you need to start slightly lower in price to increase your experience, portfolio, demand and then be able to slowly increase your pricing to what you aim to be charging.
I constantly change my price list based on market changes, the cost of product, the cost of equipment, the cost of design programs and subscriptions, and the changes in my demand. I make sure my price lists always state PRICE LIST AS OF **** (date/month/year). And I include a small statement that *price lists are subject to change at any time. When quoting, be sure to set an expiration date on all quotes, this is typically anywhere from 14 days – 30 days.
Tip: Get the money conversation done upfront. I noticed a lot of people would chat with me from start to finish, back and forth for multiple emails and messages and calls, just to get to the final topic of pricing and this would happen…
Now, I get the prices out there A.S.A.P!! Resulting in spending as little time as possible on conversations that don’t lead anywhere. Your time is valuable. And so is the time of the person you’re talking to. Even when I get the brief inquires such as “hi, how much are business cards” and really what I want to say is… BUSINESS CARDS? What about them? Do you want 20, do you want 20,000. Are they on standard paper, do you want foil finish, do you want 3D talking cards?! I need more information!! But what I really respond is “Hello, could you please give me more information about the kind of cards you are after, maybe even a photo of what you want? And the quantity you are after as well so I can better quote you. But for your reference, business card designs start from $****”
This will give them a sense of your pricing and the chance for you both to know if they are still interested! Don't forget, not everything is for everybody.
If you don't understand the price of something, its probably not meant for you.
Tip: Be sure to always take a deposit upfront before starting any work. 30% - 50% deposit upfront is reasonable. Be sure to cover any costs of materials you will need before starting a job to cover yourself.
A lot of what you can charge comes down to branding and marketing yourself correctly. I believe you can charge ANYTHING you want and there WILL be people who purchase what you’re selling, as long as you have branded yourself correctly, and placed yourself in front of the right people to see you (but that’s for another blog topic). Think about it, you can purchase a plain white cotton shirt for $5 or a branded plain white cotton shirt for $500. The difference?
Hot Tip: Do not have constant sales/offers.
If you are constantly having sales your customers will intentionally wait for these windows to make a purchase - or worse still, have no sense of urgency to take advantage of committing to a product or sale you are offering because they know it will just come around again soon enough.
If you are having trouble branding yourself correctly, both online and off, and are unaware of your marketing strategy, you would benefit from coming to our first branding and visual identity workshop! Click here to learn more and get one on one business support on the evening... and if you've made it to the end of this blog post, here's a hidden $10 off code for this workshop: SHMONEY