CFC #003 - 3 Pillars of Strategic Pricing - Part 3 of 3May 20, 2023
If you’re puzzled by pitiful profits in your services business, your gut reaction may be to push for more sales.
Sometimes this helps.
But, sometimes the potential profits slip through your fingers.
There are lots of reasons why more sales might not equal more profits in your pocket.
Top of the list is your pricing.
Over the past 2 weeks, I shared the first 2 pillars of my 3 Pillar Pricing Pframework to help you price strategically and maximize your financial success while minimizing your stress. (If you missed them, you can check out the first part here and the second part here.)
Today, I’m sharing the final pillar. Let’s go!
Pricing pillar #3: Market Matters
Why should you care?
Have you ever gotten dressed without giving much thought to the weather that day?
Ever regretted that after stepping outside?
Setting your pricing without considering broader market factors, such as economic outlook and competitor positioning and pricing, can lead to similar regrets.
But, with much worse consequences for your business (e.g. missed sales and thus tighter cash flow).
And your life (more work, more stress, and less time for fun).
And yet, while many founders may be generally aware of how their market is faring and where their pricing stands relative to their competitors, they use this information passively as opposed to strategically.
By passive, I mean that the founder will say to themselves “okay, competitor A is setting their price at $X and competitor B is setting their price at $Z, so I’ll set my price at $Y.”
The founder in this example is focused on fitting in with the current competitive structure.
As a result, they miss an opportunity to price strategically and stand out from their competitors.
Or, the founder may see that the industry has fallen on hard times and decide out of fear to lower their prices or offer steep discounts.
Adjusting pricing lower to show sensitivity to economic challenges may be the right move.
But it should be done as a result of asking “how does this action position us in our market?”
While it’s true that some customers seek to cut costs across the board in times of trouble, other customers are merely more selective in what they spend their money on.
For these customers, raising your prices or holding them firm in times of trouble could be a signal of confidence in the value of your service.
Rather than price your offering out of the market, it may encourage certain prospects to explore what you offer.
As I noted in last week’s newsletter, we use benchmarking analysis to assist our clients in pricing strategically relative to their peers.
We also help guide our clients through strategic questions like the ones I described above.
What could taking a more strategic approach to pricing by incorporating benchmarking analyses unlock for your business?
Pricing that considers market factors is an important step in producing profitable sales that set you and your business up for sustained financial success.
This, combined with a value-based approach and a cost-based approach will give you a holistic process for strategically pricing your services.
I hope you enjoyed this discussion of my 3 Pillar Pricing Pframework (last time with the alliteration…for now🙂)
I’ll share more ideas, advice, and actionable strategies to help you make more money and lower your stress in upcoming issues of this newsletter.
In the meantime, if you’re looking for more, there’s a couple ways I can help you:
1. Watch my free training on the 5 steps you'll need to take to get the financial results you want from your service business and feel less overwhelmed. Free training here.
2. I can help you get clear on where your business is today and create the strategic financial roadmap you'll need to discover your desired tomorrow. Book a free strategy session here.