Many entrepreneurs and businesses, especially startups, often fear one thing: Losing opportunities to sell and profit. This fear also often cripples them and prevents them from moving forward with their business, and they end up missing out on opportunities that they could have profited more from online business.
One such instance when this fear is most evident is raising prices.
Most business owners would often associate a price increase to losing customers. After all, it doesn’t take a genius to understand that people are more likely to let go or move on to something better when they feel like they’re at a disadvantage. Wouldn’t raising prices to have the same effect? We will find out later on.
As a review, if you have seen Annette Fergs TV Episode 36 up on my YouTube Channel, I’ve discussed some steps you can follow to determine a good price point for your services. As I’ve mentioned in that video, there is no magic formula to pricing services. The value of each service is determined differently as most of the resources involved, like time and expertise, are intangible materials. However, you can come up with the best estimate by doing the following:
- Defining Your Target Market (Niche)
- Determining Your Position In That Market
- Deciding How Many People You Can Service & What Price Point You Are Comfortable With Charging Them
- Testing Your Price Points Out
If you haven’t watched this video explaining how these four steps work yet, I am encouraging you to do so after or before you continue with this article since this is a continuation of what I have talked about previously.
Anyway, once you have your target market, you also know where to place or position your business in that market, and you have decided on a price point that is comfortable to you and the number of people you plan to service, then all that’s left to do is to test.
Can You Increase Your Prices While You Test?
The short answer is YES. In fact, testing is there to help you arrive at a price point in which the amount you charge for your service is commensurate of the value you provide to clients. When you decide on your initial price point, you are determining that value of your service based on a revenue goal that is relevant or fair to you. However, this does not mean that this price point is all your service can go for.
If your service is deemed of higher value by clients who have actually experienced it, the initial price point you have decided on maybe “too low” or “too cheap” for the service’s client perceived value. If this is the case, not increasing your prices could have the opposite effect – it may fail to attract clients who might be more advantageous to work with for the long-term.
Increasing your price point, little by little, as you go along is something we strongly suggest. Not only does it boost your business’s profitability; it also puts your business on a different level. As you increase your price point, you’ll attract more A and B-grade clients. If that is one of your business’s end goals – to improve your reputation and to cater to high-level clients – then increasing your price points will work to your advantage in the long run.
When Is “Enough,” Enough?
If you are wondering when you could stop raising your prices, the answer is indefinitely. If your service is continually improving, if it keeps on increasing its value, then your prices can also keep increasing – forever, if applicable. You only stop raising prices when the value of the service is already on par with the amount you charge for it. Continuing to raise your prices beyond clients’ perceived value of your service is not something you would want to do as that will eventually lead your business to ruin.
What you can do to make “increasing prices” feel more natural is to take in clients by batches. For instance, if your target number of clients for your initial price point is five, then you try selling to those five clients before moving on to a different – potentially higher – price point. Then, you take a different set of 5 clients at a higher price point. You can keep doing this up until the scales are balanced and the amount you charge for the service is equal to the value the service provides.
As to how much these price increases should be, there is also no recommended or set percentage. It can be anywhere from 10 per cent to double the initial price point. Since you are basically running a lot of tests at different price points, you could be charging way less than you should, and that prompts you to drastically increase your prices by 50 or 60 per cent on the succeeding batch of clients. If you think that your initial price point is off by just a teeny bit, then you can also just increase your prices slightly for the next batch of clients.
Again, it all depends on how balanced the value of the service is to the price point you decided on initially. You can increase or decrease it as you see fit.
Also, as you go forward with your business, your services may gain new value add-ons which can prompt you to increase your price points again. Just remember that as long as you don’t go beyond the service’s perceived market value, you can increase your prices indefinitely. Increasing your prices whenever necessary is actually something we at Annette & Co. would recommend to protect your business’s profits.
If you want to know more about how this works, or if you want to hear me discuss this in greater detail, be sure to hop on Annette Fergs TV, particularly Episode 37, which is my official YouTube channel. You can also follow Annette & Co. in any of our social media channels.
For more expert tips on how you can scale your business profits, follow Annette & Co. on social media. We’re on Facebook, Twitter, YouTube, Instagram – and even TikTok! We also air Podcast episodes LIVE so be sure to hop on when you have the time!