Proper pricing of your goods or services is a big decision when you’re trying to grow your company. One of the major factors to consider as you’re setting your pricing is what is more important to your clients: price or value?
Focusing too much on price can be a slippery slope. If the only reason your clients come to you is because of your low cost, they’re likely to leave you if a competitor undercuts your price.
That doesn’t mean you should ignore pricing your products and services too low can send an unwanted message that what you have to offer isn’t worth much. But setting a high price doesn’t guarantee success, either. You have to deliver value.
Companies often take the “low price” tactic in a market space where what’s being sold is more or less a commodity. In other words, there’s no difference between you and your competitor. The only differentiator is price. If that’s where you find yourself on a regular basis, you probably need to take a hard look at your business plan and pay particular attention to your unique value proposition. Figure out a way to make yourself stand out from your competition. It could be speed. It could be experience or reliability. Or it could be industry intelligence or insight that nobody else offers.
Here’s why a focus on value (and on customers who want value) is so important.
Clients that focus exclusively on price are notoriously fickle. If they can find it cheaper, they will leave you in a heartbeat, as I mentioned above. Oddly enough, price-based customers also tend to be more demanding. They will nickel-and-dime you to frustration—and then still leave you if someone offers a lower price.
Customers that are only focused on price don’t have a promising future. Instead of paying a reasonable price to generate value in their own companies, they are trying to do things on the cheap. Companies like that don’t tend to stick around. If they don’t leave you because of price, they may simply go out of business and you end up having to replace them.
Customers who understand value are better long-term clients. They are probably interested in building a valuable business themselves. They are much more likely to stick with you as long as your price is commensurate with the value you deliver. And frankly, clients like that are more fun to work with.
Does pricing matter? Of course it does. You have to be able to justify the price you’re asking. But your pricing should be based on what kind of value you’re delivering—and what that’s worth to your clients.