launch27 27 weeks coaching

to Building a BUSINESS Once and for All

Week 3 - Monday - Pricing

Rohan Gilkes’ 27 Days to Building a Business Once and For All: Pricing

rohanJune 14, 2016 by rohan

Rohan Gilkes’ 27WeekBuild: Day 11 – Pricing

Take a sec to watch the video above as Dara lays out her pricing strategy for her maid service company.

Cool beans, let get moving.

We can sum this entire post up in this way: Never let your competition set your prices for you!

So this is a question I get a lot:

“How am I going to compete with <insert large company doing the same thing> when they price at only $10 per hour?

Answer: You don’t!

You glance at what they do, go “Oh, that’s cute!” and then you go about creating your own value proposition and brand and price at whatever you like!

For us, we aim to price in the upper 25% of the market, i.e closer to a sustainable $30 per hour than the $10 per hour you’ll see with large VC funded companies that are just trying to grab up marketshare.

And in a lot of ways this works out better for us because…

Price denotes quality

Screenshot 2016-06-14 08.42.39

In the mind of the client, the price you charge suggests the quality of service they will get. Fewer clients are attracted to super cheap prices than you would imagine.

If they’re paying to have you come to their home, many would rather pay a premium price for the peace of mind that comes with doing business with a reputable company with well-trained and professional employees.

The goal for me is to pay my teams well. In order to do so, while still making it worthwhile for me, I have to charge a nice premium on top of this and this is much easier to do with premium pricing and messaging.

So we just set our prices like this:

1) Find out how much I need to make per cleaning (x)
2) Find out how much the teams need to make to be happy (y)
3) Create value that in the client’s mind justifies a price of (x+y).
4) Make sure the number we determine is at about the top 25% or so in the market.

That’s it.

At the end of the day be ready to try different price points, and don’t be afraid to raise prices (I did it twice in 7 days) if you think the market can support it.

Layering on value

Screenshot 2016-06-14 08.39.36

So in order to price how we do, we have to find and communicate as many value added components as possible to justify our prices

1) Money Back Guarantees
2) On time Service
3) Convenience -Online Booking and payments, etc.
4) A gift with each service (Mints or chocolates)
5) Premium branding
6) The peace of mind that clients will get dealing with us…

and on and on and on.

The more of these value adds you provide and the better you communicate them, the higher your “whatever the hell you like” price can be.

Pricing is within YOUR CONTROL

Screenshot 2016-06-14 08.53.41

At the end of the day, pricing is within your control.

If we take the risk, and put the energy into creating value, we then have the complete and total discretion at setting prices as long as our branding is right to communicate that value.

All we need to do is set prices at a point where the value we provide exceeds the price the person is willing to pay and let the market sort it out. So no we won’t be selling $10 per hour cleaning services, or $45 WordPress themes, or $6 per month shaving experiences.

Not anytime soon 🙂

Never let your competition set your prices for you when the real price-setting mechanism is completely within your control: Branding and customer experience!

In summary

TL/DR If you position your offering as a premium service with enough value-added components for the client, you can charge damn near what you please. Just be ready to adjust to what’s happening and don’t try to hang on to a price that isn’t working.

At the end of the day the pricing decisions are in your hands and if you position yourself well, those pricing decisions are largely independent of what the competition is doing.

Here is a video you might enjoy to nail this home…


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rohan
About the Author

Startup entrepreneur , writer, and local brand builder. I’ve launched and grown several companies, generated millions in revenue, and along the way allowed thousands of people to peek over my shoulder to see what works. What follows is the 80/20 approach to building a successful business.