May 15, 2015

Stop Selling Yourself Short

I used to think people would choose who to buy from based on price alone, and so if I was a little less than everyone else, they would pick me.

Years ago when I started my first side-business, I thought that how you set pricing for your product or service was simply to shoot for just below the competition. I thought people would choose who to buy from based on price alone, and so if I was a little less than everyone else, they would pick me.

This is a terrible idea.

Simon Sinek notes in his book, Start With Why, “Selling based on price is like heroin. The short-term gain is fantastic, but the more you do it, the harder it becomes to kick the habit.”

For one, once you train your customers to look for and expect cheap prices from you, it becomes insanely difficult to ever raise those prices and teach them differently. Additionally, it communicates how much you value the product. You’re teaching them the worth of what you’ve created by setting the bar so low. You will also have a hard time fighting for margin and profit if you are always trying to be cheaper than someone else. And lastly, you miss part of the market that wants to pay more because they want a high-quality product.

Related: Extra Time Means Extra Cost

For example, I usually shop at Publix over Kroger and Target over Walmart. For me, it’s worth it to pay more and avoid the lines, chaos and overall experience I have when I go to my Kroger or Walmart. Sure, some people would think that’s snobby. That’s okay.

But when you think about your business, that may be just the type of person you want to price for and sell to.

Let’s say you sell handmade dresses for children. The type of person who wants to buy a unique, high-quality dress but does not have the time or desire to sew it herself is the customer you should price for. Your small home-based business can’t and shouldn’t try to compete with the Walmarts and Amazons of the world.

So don’t just try to undercut the competition. Instead, price your products based on what they are worth and who you are selling to. Then you will attract the right customer that’s happy to pay your price.

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  • Paula B says:

    I have ALWAYS underpriced my services as a General Contractor for many years. Oh, the money I could have made had I known what I know now! I did okay and made my clients very happy, but I was far more valuable than I priced myself to be. My clients appreciated my expertise and would have paid more had I simply presented the higher price from the beginning. I always did a lot of things free that other contractors charged for and I found that people did not put value to it because I didn’t assign value to it. Hindsight is 20/20, isn’t it? I have heard you say to raise prices and I plan to in my encore career. Thanks for all you are doing for us. Hoping you’ll have an BB event nearer NC soon.

  • Brittney says:

    I am looking for solid language for price increase. I am gaining a new employee, I am under priced for the market, and I have almost 10 years of experience in specialty service.

  • Mary Nelson says:

    I have been doing the same thing, charging less than what the product is worth and I don’t even put my labor cost in it. I know the economy is not good right now but I know I need to adapt a different mindset. I thank God for allowing me to read this. I work full time, have to side jobs and it’s still almost paycheck to paycheck. I need to really learn how to budget well.