Pricing and Perceived Value

Have you ever undercharged for your services? Or maybe you’ve done work for free because you lacked confidence. You can tell the truth…I won’t rat you out. Honestly, I have given away more services than I care to count. Not because I could afford to do it, but because I lacked understanding of how pricing works in the minds of my clients. 

In July, I gave away a training program worth $2250 for a mere $400. And my wife teamed up with our good friend to run an intervention (i.e. we discussed what an idiot I was.) What I realized was that I know how pricing works…in theory. But what I did not understand is how my customers view the price I place on my services. It all boils down to perception. Let’s watch and learn.

A few nights ago, my cousin Natasha brought my sister Teah a pair of like-new size 9 designer boots to try on. As Teah opened the box, she was trying to decide whether she wanted to accept the boots or not. She remained pretty indifferent toward the boots until Natasha said, “girl, these are 300 dollar boots”. My sister’s response: “I LOVE THEM!” LOL!

I was in stiches. Why? Because I have priced myself out of the market so many times, refusing to charge what I was worth. And that night I realized that my price would have simply changed my prospect’s perspective on the value of my services. Let’s look at the fashion example again (…and I do have my sister’s permission to share this…I’m not throwing her under the bus.)

My sister dresses very nicely. The value she places on being fashionable is high. So, free boots do not appeal to her fashion sense. Natasha immediately picked up on that and ascribed a value to the boots. It’s called perceived value. As consumers, we buy products based on how much we think they are worth – how much we think we are worth. We purchase goods and services according to the value we place on certain areas of our lives such as clothing, food or education. However, as a small business owner it’s important to think of pricing in reverse.

How much are you worth?