Using rates as a marketing tool
When it comes to marketing and self promotion, you’ll often hear about the four Ps - Product, Price, Place (Distribution) and Promotion. The one that’s often forgotten when in comes to marketing is price.
Price can be used as a positioning tool because of perceived value. Consider cars. You can buy a low end Chevy or drop a tens of thousands (or more) on decked out Mercedes. Both will get you where you’re going. But, the latter will get you there in a lot more style. Folks drop that kind of dough because of the perceived value associated with the Mercedes brand.
It’s similar for service businesses, even though services are intangible. For instance, a designer can price themselves on the low end and focus on volume or go for the high end and target fewer or higher profile clients. Granted, being good at what you do is important, too, along with the value and experience you bring to the table.
Many people associate higher price with higher quality. Conversely, if you’re offering the sun, moon and stars for a buck and a quarter, people tend to be a little suspicious as to whether you can deliver the goods.
Before you develop your pricing strategy, it’s a good idea to figure out your base rate. That’s the number you can’t go below. If you’re charging a fee that’s too low, each hour you work digs the hole a little deeper. On the flip side, go too high and you risk pricing yourself out of the market.
To figure out your base rate, you’ll need to account for three things:
Salaries – the money you pay yourself, staff if have one, along with costs associated with salaries like insurances and taxes.
Overhead – All the stuff you need to pay for to keep your boat afloat.
Profit – The money that enables your business to grow or pay for unexpected things, like when your computer takes a nose dive.
As luck would have it, I wrote and article on figuring your rate a while back. Here's a link. This will give you the nitty gritty on how to do it. At the end of the article is a link to a calculator I developed (Excel) that will figure things for you. The calculator is a paltry $2.50 US that helps to cover my bandwidth costs.
Once you know your real numbers, you can begin to make sensible decisions about the direction you want to take.
Price can be used as a positioning tool because of perceived value. Consider cars. You can buy a low end Chevy or drop a tens of thousands (or more) on decked out Mercedes. Both will get you where you’re going. But, the latter will get you there in a lot more style. Folks drop that kind of dough because of the perceived value associated with the Mercedes brand.
It’s similar for service businesses, even though services are intangible. For instance, a designer can price themselves on the low end and focus on volume or go for the high end and target fewer or higher profile clients. Granted, being good at what you do is important, too, along with the value and experience you bring to the table.
Many people associate higher price with higher quality. Conversely, if you’re offering the sun, moon and stars for a buck and a quarter, people tend to be a little suspicious as to whether you can deliver the goods.
Before you develop your pricing strategy, it’s a good idea to figure out your base rate. That’s the number you can’t go below. If you’re charging a fee that’s too low, each hour you work digs the hole a little deeper. On the flip side, go too high and you risk pricing yourself out of the market.
To figure out your base rate, you’ll need to account for three things:
Salaries – the money you pay yourself, staff if have one, along with costs associated with salaries like insurances and taxes.
Overhead – All the stuff you need to pay for to keep your boat afloat.
Profit – The money that enables your business to grow or pay for unexpected things, like when your computer takes a nose dive.
As luck would have it, I wrote and article on figuring your rate a while back. Here's a link. This will give you the nitty gritty on how to do it. At the end of the article is a link to a calculator I developed (Excel) that will figure things for you. The calculator is a paltry $2.50 US that helps to cover my bandwidth costs.
Once you know your real numbers, you can begin to make sensible decisions about the direction you want to take.
