Many of us go into business because we really like delivering a service or building a product. As a result, pricing often becomes sort of an afterthought for people as they start their business. This is especially true in the beginning where businesses constantly struggle in that tension of becoming profitable while trying to find work with their ‘ideal’ clients.
And it’s a good thing that people are passionate about what they provide, but there are few things that can lead to business burnout more quickly than not getting your pricing strategy right.
As an aside, that’s probably why we’ve written so much about pricing…
- The Super Simple Guide to Pricing for Photographers
- Getting to Yes: Crafting Prices People Will Pay
- How to Send Pricing Using Your Website
- Should I Show My Pricing on My Website?
We should start by saying that we know that many of these are pricing mistakes because we’ve made each of them at one point or another during our last decade in business. So, please know that we share each of these from a place of humility.
Don’t Make These Pricing Mistakes
- Discounting Your “Get Out of Bed” Collection
Inevitably someone will point to your lowest collection and ask for a discount. It might go something like, “I don’t need 8 hours of coverage. Could we do 6 hours—would that change the price?”
Don’t do it.*
You’ve (hopefully) intentionally decided that your lowest collection includes what it does for a reason. Maybe you need a minimum of 8 hours to deliver the quality that people see in your portfolio. Maybe anything less than that makes it hard for you to cover your costs or be profitable.
Additionally you’re tying up your time with someone who is paying you less than you could otherwise make.
And lastly, will you be just as excited to serve that client knowing you’re cutting them a deal? And will that client value your services as much if they’ve received a discount? We’ve found that clients who try to haggle often turn out to be difficult clients in other aspects, too.
*Discounting makes sense if someone is booking you in the off-season or during off-peak hours that you usually would not otherwise work. For instance, my gym offers a discounted membership for people if they’re willing to only work out between 11 and 3, which are typically their slower hours.
Note: This was written (and the corresponding episode recorded) before the COVID-19 pandemic.
- Not including “core services” in each collection
Is there something that you usually include as an “add-on” or a la carte service, that you end up doing regardless of whether someone pays for it? Add that to your collections and adjust the price accordingly.
I once worked with brand photographers who offered styling and design help as an upsell. They thought it made sense since some of their clients had stylists available or offered to take care of the styling so they could “just shoot.”
But they noticed that the images didn’t turn out as well when they didn’t contribute to styling. Since they knew those images could potentially be portfolio images they could use to book more clients, they would step in and style even when the client hadn’t paid for it.
Eventually they built ‘styling and design’ into their collections because 1) they were doing it anyways, 2) they’re really good at it and it sets them apart, and 3) it increased the perceived value of the service.
Styling and design was then able to become a big selling point, and reason in itself to book them over some other brand photographer where a separate stylist might need to be hired.
- You haven’t identified your most profitable customers (or you’re spending too much time on your least profitable customers).
Spend time looking over your customer list. What you’ll likely find is that 20% of your customers make up the majority of your profit. On the other end of the spectrum, you’ll likely find a group of customers that felt like they took up 80% of your time but weren’t nearly as profitable.
Identifying the characteristics of your most profitable customers will allow you to start refining how you target those customers. What is it about those customers that make them more profitable? Do they share similar characteristics? Do they tend to value the same sorts of things?
At Till Agency (an advertising agency that I co-founded), we noticed that a certain subset of clients required a lot of work (often in the way of unnecessary communication), but also had the lowest retainer value. Typically, they had lower budgets, had never invested in paid advertising, or didn’t have a system to effectively nurture or handle leads. What was worse, these clients took attention away from clients with larger retainer values.
This observation led to some policy changes regarding what clients we would take on, and led to new initiatives to educate clients with lower retainers so they better understood paid advertising and our approach, with the hope that would make them less likely to require so much attention.
- Too Few or Too Many Price Points (and not incorporating any psychology)
Intentionality around pricing can go a long way. While it can be easy to get overwhelmed with all the pricing tips and tricks out there, there are many that have been well-researched.
For instance, too many choices can overwhelm the customer or client and cause decision overwhelm. But if there’s only one option, the customer or client doesn’t have anything to compare it against, which can result in lower perceived value.
In one study of grocery store samples…
Here are some of my favorite tips:
- Drop the $ sign and comma for high end price points (e.g. 5000 instead of $5,000).
- End prices with a 7 or 9 when it makes sense.
- Have no less than 2 collections and no more than 5 collections.
What’s most important, of course, is that pricing is presented clearly. Next time you go to make a purchase, think about how pricing was presented and what about it helped you make a decision.
- Not optimizing customer value
It’s typically easier and less expensive to sell to existing customers than it is to acquire new customers. This, of course, makes sense because you’ve already done the hard work of building trust with existing customers.
Look at your existing customers or client list. Are there ways that you can continue to move them up the value ladder? Are there other complementary services that you can offer?
On the Brands that Book podcast, Kat Schmoyer shared how she started offering floral services for clients who booked her wedding planning services. Makayla Harris shared about how she was able to increase customer value through selling prints and products to her photography clients.
Optimizing customer value is important in building a profitable and sustainable business. Many people would probably find that they can work fewer hours or events and make just as much (or more) money than they’re making now by optimizing customer value.
How to Avoid Pricing Mistakes
You don’t need to be a data scientist to start identifying pricing mistakes. Some reflection can go a long way in improving how you price your services.
Try this quick exercise. Take a look at all of last year’s clients, and answer the following questions…
- Who were your favorite clients to work with? Why?
- What projects took the most amount of time (and mental energy)? Were they also the most profitable projects? If not, why?
- After a client books a service, what are some ways you can increase customer value through upsells and complementary services?
- What projects were the most profitable? Do these projects share any similar characteristics? Are there ways you can position your business to reach more of these types of clients?
Just answering those simple questions will hopefully help you generate ideas for improving your pricing structure.