Lessons from my first experience pricing, well, anything.
I already had a hunch that I was devaluing my own labor and allowing people to tell me what my time was worth, but the pricing study proved I wasn’t being fair to myself. Ironically, it was my own flexibility with pricing that was devaluing my labor, and setting unreasonably low prices may have even unintentionally communicated a lower quality. As you probably already guessed, I decided to raise my TaskRabbit rates, but here are three lessons anyone can take away from this experience:
1. Communicate your value and don’t be afraid to implement profitable prices.
If you believe in your skills and services, then it’s crucial to become your strongest advocate and learn to communicate your value with a fair price. Although it can be tempting to lower prices to gain market share, you risk unintentionally communicating lower quality by pricing you services well below market value. Neither the buyer nor the seller wins, and the market enters a downward spiral, with buyers paying and receiving less and sellers earning and giving less.
2. Using price as a competitive weapon won’t necessarily get you more business.
Undercutting your competitors on price may program customers to focus only on your price and disregard the value you bring to them. Whether it comes to skilled services or software, the additional value of assets like time, labor, and customer service are true profit drivers, and a more creative pricing strategy is called for. There is no silver bullet or perfect price, but approaching the pricing process with an agile, multi-priced mindset driven by data and value is a great start. This brings me to my last point.
3. Different strokes for different folks
My introduction to the optimal price band showed me different customers will pay different prices for the exact same product or service, and some may be willing to pay more based on their perceived valuations. While that may seem obvious, it’s critical to understand each type of potential buyer if you want to capitalize on different valuations with your pricing strategy. The more you know about your customers’ preferences, interests, and quirks, the easier it will be to align each of them with the right service at a price that works for both of you, whether you offer a software product or you’re cleaning out someone’s garage.
To learn more, check out our Pricing Strategy ebook, or learn more about our price optimization software and solutions. We're here to help!