Pricing Strategy for Services Business
Many businesses often overlook it; pricing your services is an important part of your business. If you set the price too low, you’ll miss out on profits, and if it’s too high, you’ll likely not be a customer’s priority. Therefore, it’s essential to strike a balance between managing your expenses and growing your business. Need some practical tips? Here’s a complete guide on setting a pricing strategy for services business!
Effective Pricing Strategy for Services Business
Do you know that 20% of new businesses fail within the first two years, and 45% of new business startups don’t survive the fifth year? Well, yes. This small business failure mostly happens due to the improper management of various business aspects, including pricing.
So, to ensure you don’t make this mistake, here are some suggestions that help you develop an effective pricing strategy for services businesses:
Do Market Research
The first thing you should do to have a good pricing strategy for services business is to conduct in-depth market research. Analyze the pricing your competitors have set and compare it with your target audience.
Understand what your ideal customers will happily pay for and get an idea of your product’s perceived value. For instance, if they target the same customer base as yours, you should set the price accordingly.
On the other hand, if one of you caters to premium customers, then fine-tune the pricing strategy. Doing this ensures your products face no barriers to entry and you can capture the attention of the maximum number of customers.
Consider Overhead and Other Costs
You must also take into account your overhead and development costs to set a pricing strategy for services business. This includes rent, insurance, utilities, taxes, advertising expenses, permits, and licenses.
In addition, the direct development costs include labor, material, manufacturing, and fuel charges. If your business expenses are low, you can price your products in a low and competitive range, targeting price-sensitive customers.
Statistics show that up to 83 percent of respondents compared prices on a few sites before making an online purchase. However, if your costs are high, then your products will fall in the premium category.
Adopt a Value-Based Pricing Approach
You should consider adopting a value-based pricing approach. In this, you set the price of your products based on the customer’s perceived value. It shifts the focus from what your services cost to what they’re worth to them.
For example, if your service helps clients save time, reduce risk, or boost their revenue, you can set your pricing to reflect that. All in all, a value-based pricing approach allows you to differentiate your services and achieve high returns.
Perform Tests on Focus Groups
Know that there’s no one-size-fits-all solution when it comes to setting a pricing strategy for services business. Before finalising any strategy, you should do A/B testing.
Segment customers into two groups and experiment with different pricing models. Then, gauge customers’ response, willingness, and overall profitability, and opt for the model that promises positive outcomes.
Consult Industry Experts
You may also want to consider consulting industry experts, especially if you work in the fintech sector. Industry experts are more knowledgeable about market trends and help you set a price that promotes growth.
They can find small points in pricing where you can make changes to increase your sales volume and revenue.
But that’s not all; they are also more aware of customer behavior and can find the sweet spot where you achieve good profit margins while also satisfying end customers.
Conclusion
Selecting a pricing strategy for a service-based business can be quite overwhelming, especially if you are just starting your venture. However, with the above-mentioned tips, you can easily set the right price for your products that appeal to the maximum number of customers.
