Pricing your services is a nuanced art. Priced too high, your target customers won’t be able to afford you. Priced too low, you’ll leave money on the table with each new client or — even worse — run your business into the ground.
Many agencies struggle with pricing. Their biggest mistake? Providing only one option, which encourages clients to push back and negotiate. It doesn’t matter how accurate your rate is. If you offer only one price, your client will assume there must be a better deal.
The best pricing strategies include multiple tiers. Three is the ideal number and will give the biggest boost to your bottom line. With two tiers, clients will go for the cheaper option without considering the premium one. But when you include three options, the majority of clients will select the middle choice. The trick is to strategically price your middle tier to represent your ideal scenario.
A Simple Method for Designing a Smart Pricing Strategy
Building a three-tiered pricing strategy isn’t complicated. Start with the middle tier. This package should take into account a combination of what’s ideal for your business and your client. Charge exactly what you want to earn for providing the best blend of your services.
Essentially, the middle tier should reflect what you would charge if you were only offering one option. From there, you’ll be building two packages that exist for the purpose of directing your client to this middle option.
Next, create a stripped-down version of your middle tier. This will be option one. It should remove some of your deliverables and offer something basic but still valuable. Price this level between 20 and 25 percent lower than your middle option.
Finally, build your premium option by adding a few bells and whistles to your middle tier. These additional services aren’t essential, but they will help take your client above and beyond where he needs to be.
Price this tier 30 or 35 percent higher than your middle option. If your client buys it, great. If he doesn’t, that’s OK, too — your middle package is where you wanted to be in the first place.
The Sweet Spot
A three-tiered pricing strategy offers a number of benefits. First, while the majority of clients will select the middle option, it gives them a sense of control over their relationship with you.
It also helps you determine whether your services are priced accurately. If clients are looking at your packages and hesitating, it means that none of the tiers are where they need to be. If clients always go for your platinum option without batting an eye, you’re selling yourself short. If they’re consistently choosing your middle package, you’ve found the sweet spot.
By offering just one or two pricing tiers, you’re encouraging your clients to either negotiate you down or always go for the lowest price. But a three-tiered system sets you up to earn exactly what you intended to in the first place.
Stop leaving money on the table. Set three pricing options, and watch how they guide your clients right where you want them to go.