Today’s post is short and sweet. Time and time again, I meet entrepreneurs struggling to figure out what price to charge for their products and services. And when entrepreneurs are engaged in direct selling and price is pretty much up to them…. it’s worse than ever.
Why? Because if you’re like many entrepreneurs, setting your price is the psychological equivalent of setting the value of YOU. Your life, your work, that thing you’ve poured your energy and soul into. What’s that worth?
After agonizing over what to charge, you reach a decision and start selling. Finally. It’s a relief. Until a prospect utters these words, which feel like an ice-pick to your heart:
“Gee… that’s expensive!”
When I began my therapy practice years ago, I charged $50 an hour. It was my first business, and people told me I was too expensive.
Wow. That really surprised me. Thankfully, I was equipped to deal with it – it’s one of the perks of being a therapist. I knew that psychology was at play and that there was something bizarre going on with these people saying I charged too much.
When someone says “that’s too expensive”, they’re verbally acknowledging an unconscious comparison. A comparison they don’t even realize they are making. They’re measuring your price against something else, and you don’t even know what that something else is.
Want to know how to stop this thought process in its tracks? When you hear, “That’s too expensive,” ask this:
“Compared to what?”
The first time I asked a potential client this question, I got an answer that sounded like this: The person paused for a while, almost in stunned silence, and then said “…. piano lessons!”
This person had been wanting to rid an addiction of anti-depressants and the only mental reference for price comparison was piano lessons for their child. This was the comparison their unconscious mind was making. This was the comparison that left them feeling the rate for therapy was too expensive.
Piano versus Peter.
But it doesn’t make sense to compare music lessons to therapy sessions that resolve addictions. They’re not the same, and there are no similarities that can be drawn.
The unconscious comparisons people make regarding price are largely BS, and they rarely hold up to closer scrutiny.
I raised my rates. I continued increasing them as my business became busier and my time more in demand. When I left the private therapy practice and moved into my current business psychology consultancy, my rates were $325 per hour.
And business has never been better.
Perceived value increases dramatically when you have higher rates (if your skills and experience justify them, of course). I used to joke that if you wanted to help someone quit smoking, just charge them $2500 for the consultation! They’d take it so damn seriously that they couldn’t help but quit!
This is just a joke, but it does demonstrate the principal that clients paying more are almost always more rewarding and responsive clients.
Here’s a list of the most important questions you’ll ever ask yourself about pricing. The answers may not all come to you today, but just start to think about them. That thought process is critical.
– What do your clients compare your price to?
– What are you comparing your price to?
– What would you like your clients to compare your price to? (They’ll always compare it to something!)
How do you feel about rate setting? Do you know the answers to these questions? Let me know in the comment section.