Pricing Your Products and Services

Some people wildly overprice their products. The more common mistake though by those just starting out in businesses is to be too cheap. As a freelance copywriter and web marketing guy who’s been around a few years, I’ve seen the effects of this both in my own business dealings and in those of clients.

My Early Mistakes

My first venture into selling web marketing services was selling cheap and cheerful search engine optimisation plans to local businesses. Years of experience writing and promoting web content on my own websites meant I knew the work backwards, but that didn’t mean I was totally new to dealing with clients.

Looking at what the big agencies with their cold calling telemarketers and their “digital consultants” on commission might charge for SEO, I thought it was amazing that people were spending thousands on things I could do with a bit of loose change and some elbow grease. Half a decade on, I still think some of these guys are jawdropping with their fees given the kind of work that gets done. I figured there was plenty of scope to outperform them for far less, which led me to wonder how cheaply could I offer a service and still be able to deliver the project. That more or less became how I set the price. I guess I had the same train of thought that a lot of people have when they’re new to business: if I offer the lowest prices that I can then I’ll attract heaps of customers.

One reason why I was happy to charge extremely low prices was because the money I made from each job still compared well to what I’d been used to earning on an hourly wage. If you’re selling your services, it’s a huge mistake to base your prices solely on what you’d make doing the same work on salary. Quite a bit of work and maybe some expense goes into generating leads, and then there’s the work of turning those enquiries into sales. There are admin activities, PR and marketing efforts, ongoing education and professional development and a myriad other tasks in your business that you can’t include as line items on your invoice yet are crucial to running a business. Most businesses also go through quiet periods here and there too, and you need to make enough money when you’re busy to offset these. These are all things you don’t need to worry about when you’re on salary.

When I set these low fixed-rate prices I didn’t realise how much I was setting myself up to feel badly toward my customers. My prices made some sense if all I had to do was deliver the project, but of course customers had questions about how the campaign was going and what I was doing on their behalf. Most of what they were asking me was actually perfectly reasonable but it still ate into my time. It got to the point where I would resent any correspondence at all. There I was, spending all this time on emails and I just wasn’t making the money to justify it. Of course, this was not the customer’s fault at all.. I’d brought it upon myself by not properly anticipating how much time this communication would take. Most of them were nice and reasonable people, and I would have had no reason to feel aggravated if I’d only set up the right relationship in the first place.

Willingness, affordability, competition

What your prices mean to you is only half the story. What they mean to your customer comes down to three things: how much they can afford, how much it’s worth to them, and how much it would cost them to get a similar thing anywhere else.

Affordability can be about payment terms as much as about total dollar amounts. I once wrote a sales letter for a web designer selling $1200 websites. His main customers were long term unemployed people starting their own businesses on the government’s NEIS scheme. How many Centrelink payees have a lazy grand lying around? Not a lot, but they can do $12 a week, so that was his offer. It made a lot of sense really, not least because it meant his clients could start getting customers a lot faster with a website up and running ASAP instead of having it on hold until they’d scratched some change together. It was such a smart offer that I was a bit jealous I didn’t come up with it first.

Definitely pay attention to your competitor’s prices – your customers certainly will. But don’t think you need the lowest price to make sales. People will pay extra for something if they think it’s better or just to avoid a pain the neck. Most of us are well aware that we could get fresher fruit and vegetables for a lot less by going to a market or green grocer, but most of us have to go to the supermarket anyway and while we’re there the tomatoes and capsicum we want is right in front of us.

What do Your Prices say About you?

People often treat price as a shorthand for quality. Why? Because it’s easy. It’s especially so when we lack the knowledge to make a more informed judgement. If we’re honest with ourselves we can all admit we do this, usually without being fully aware that it’s what we’re doing. I know I do it. I enjoy  balsamic vinegar. Sometimes I buy the supermarket brand; other times I splurge on something nicer.

You might really know your stuff with vinegar then and have a proper idea of what makes one product better than another. Not me! When I browse the shelves the only real way I have of knowing that the nicer one is nicer is that it costs more, and the same goes for nearly everyone paying more than double what they might for black tangy fluid.

Even when we do know a bit about what we’re looking at, price levels still influence perceptions of quality. You can criticise this sort of thinking as irrational and you wouldn’t be entirely wrong, but nobody has time or the inclination to become expert in everything so we need these kind of mental shortcuts to get through the day.

Now I’m not saying everyone will love you if you put high prices on rubbish. Instead, just have regard for what message your prices send to customers. Conventional economics describes customers as moist emotionless robots who will desire a thing more strongly as it becomes cheaper; as businesspeople we need to be more in touch with how humans actually make decisions. If you tell people you’re inexpensive, they might think you’re.. well.. cheap.

Whether we acknowledge it or not, things like ego and social status play such a huge role in so many purchases that we’ll often avoid the cheaper option even when it makes a great deal of sense for us.  Being too cheap can drive as many customers away as it interests.

In many ways, this can be as much about how and when you present price as it is about the dollar figure – you might decide after a full consideration of all facts that it makes immense sense to sell something at a lower price than your competitors. Even so, think long and hard about whether you want to scream from your headlines how cheap you are, or whether you’d rather build desire and perceived value first and then let the price be a pleasant surprise once they’ve already decided they want your stuff.

In Conclusion

No one pricing strategy is right for every business. A big part of what makes business so interesting is that different people will find radically different ways to succeed, much of the time getting best results when they spot an underserved part of the market. Your prices should be set both with regard to your whole cost of doing business, and with regard to what your customers can afford and are prepared to pay.

James Mawson is a freelance copywriter and web marketing consultant based in Melbourne.  Visit his website at to read more articles or get in contact with