Guest Blog by Jenny Busch

Hands wring, feet go cold, and voices drop in volume just a bit when we state what we charge for our products or services. It is a moment that brings up preconceived notions, second-guessing, and self-doubt. Will I seem overconfident and self-promoting if my price is too high? Insecure and mousey if my price is too low? What if I can’t deliver—what if I can?

Sound familiar? You’re not alone. Price and value conversations can be challenging, particularly for new entrepreneurs and independent contractors.

You can reduce this insecurity and confusion by learning and applying a few business basics, understanding what drives entrepreneurs to underprice their skills or goods, and by recognizing the true role of revenue in business.

First, the basic, but rarely executed, task of analyzing your market. Know your market size, market saturation, your competition, and your industry standard rates. Do more than a quick online search to gain full answers in each of these areas.

Also, study different pricing models. Harvard Business School Online’s Business Insights Blog, A Beginner’s Guide to Value-Based Strategy, explains that goods and services are priced according to the target audience’s perceived value of those goods or services. Visually, the model is a line with four marks upon it: 

• Willingness to Pay

• Price

• Cost

• Willingness to Sell

Between these marks are three zones: 

• Customer Delight

• Firm Margin

• Supplier Surplus

The two marks (Cost, Willingness to Sell) and the two zones (Firm Margin, Supplier Surplus) contain hard expenses that unequivocally dictate the minimum price of your good or service. This assessment, and the results of your market analysis, give your pricing hard numbers.

The muddle sets in at the top two marks, Price and Willingness to Pay, and the top zone, Customer Delight. Customer Delight is the customer’s knowledge that they have paid less (Price) than their absolute threshold (Willingness to Pay) to gain the value of the product or service, and this knowledge generates goodwill, brand enthusiasm, and loyalty. Business owners tend to ignore, minimize or guess at these emotional and relational components, thus misunderstanding their impact on pricing strategy.

Lack of precision about what you do and why you do it creates uncertainty that can lead to underpricing. Clearly and deeply understanding your value proposition can help clear this confusion. Like analyzing your market, this is a basic but rarely executed task of diving deep into your unique selling position. This value is not too vague or subjective to articulate clearly. The best answers come from interviews with your existing and potential customers, employees, and suppliers. 

Second, address other ambivalence that may be undermining your clarity and confidence with pricing. Destinee Berman, in her podcast Embrace Value Pricing and Your Relationship to Money, suggests you think about and journal on two points: What were the circumstances surrounding you and money as you grew up? What comes to mind when you think of having a lucrative business and earning a lot of money?

Examine any contradictory feelings regarding success and greed, risk-taking and security, comfort, and financial gain or loss. Note if these contradictions prevent you from setting business revenue goals because you fear you will be disappointed if you do not reach them or embarrassed if you do. Likewise, Berman recommends you journal on your ambition stories. What arises when you think about ambition? Is ambition a part of your self-identity? Are you comfortable being known for, and public about, your ambition? Perhaps you have inherited stories that say you cannot own your power, claim your ambition, or self-promote.

Still have the uneasy feeling that you cannot deliver on your promises? Revisit your unique selling position and state it in your messaging. Do not bury this information hoping people will notice. Place it in front-end communications to make it crystal clear what the experience of buying or working with you is like. Make this experience steadfastly consistent from client to client.

You will deliver because there is a fit. Your precise offering is matched with your ideal customer. Customer delight is high, and you can price confidently, knowing you have generated goodwill, brand enthusiasm, and loyalty.

Third and finally, you are not greedy. You are asking for money. Money is the lifeblood of all business. Proper pricing strategy matches the specific value of your skills or goods with your ideal customer at a precise rate. Nothing more, nothing less.

Work to remove the emotion around pricing and asking for money, so the task becomes more comfortable. This confidence will help you raise rates or prices if inflation, demand, or increased expertise require it. Also, become accustomed to and intimately aware of customer delight. These seeming intangibles, goodwill, enthusiasm, and loyalty, are the underpinnings of your brand. Brand and brand awareness have a huge impact on value pricing.

“Pricing…based on value you deliver is drastically different from your intrinsic value…from your worthiness that is innate and exists.”

Desiree Berman

Let your voice be clear, your feet warm, and your hands outstretched in a handshake as you quote your prices. Stand strong in your pricing structure, knowing you have done the work…and you will deliver.

Jenny Busch

Copywriterjenn

copywriterjenn@gmail.com