Pricing Methods Part 3: Creative ways to price your work

Before you decide on a fee for your service it’s important to know the following:

• what your time is worth to you (and how much you want and need to earn a year)
• what other people charge for similar services
• the perceived value of your work

Two weeks ago I discussed the problem of undervaluing your work and last week I showed you how to determine what an hour of your time is worth to you. This is the first step in creating sustainable self-employment that works for you and your clients. When your financial goals are clear it’s easier to create services and fees that are in alignment with your goal.

The second step in pricing your work is to know what other people charge for similar services.

Remember when gas prices skyrocketed? In the town where I live prices reached an average of $5.00 a gallon.

Fortunately for my pocket book the high cost didn’t last. But as gas prices declined an interesting event occurred, perfectly illustrating how not to price your services.

Here’s the True Story of Gas Station A and Gas Station B

Once upon a time, two gas stations sat across the street from one another, easily accessible by the same flow of traffic.

When gas prices started to decline, station A immediately lowered their prices to $3.60 a gallon. They always had a lot full of cars waiting for fuel.

Across the street, however, prices remained at $5.00 a gallon. Their lot was completely empty, everyday. Eventually station B went out of business and closed.

What happened?

Gas is a commodity. “A commodity is a good for which there is demand, but which is supplied without qualitative differentiation across a market.” Wikipedia

The perceived value for gas station A was identical to the perceived value of gas station B. Essentially, gas is gas. There was no justification for a price difference of 39% and people knew this, so they went where the gas was cheapest.

Similarly, when you offer a service like “coaching” or “massage” or “spiritual direction,” you need to be cognizant of how much other people charge. If the perceived value of your service is identical to other coaches and massage therapists, you need to charge similar rates. You have little flexibility in pricing your work.

Charge too little and people may become suspicious or assume you’re not worth the money. Charge too much and they’re likely to go elsewhere.

So let’s say you’re working one-on-one with clients, maybe as a coach, massage therapist, counselor or any type of practitioner, and that your financial situation is such that you can’t survive on a $50 an hour, or even a $100 an hour system. What do you do?

Step three is to position your work as a specialized service instead of a commodity.

If you can differentiate yourself from others in your field, and offer a higher perceived value for your service, you have more flexibility in pricing your offer.

To do this you must define your uniqueness and demonstrate the value of your work.
Remember the commodity example above? Gas is gas. Massage is massage. Charge too much for a commodity and you’re likely to go bankrupt.

But, if gas station B sold a revolutionary fuel that had no toxic emissions and got 100 miles to the gallon regardless of the car, then the perceived value would be higher compared to the gas of station A.

Station B could then charge more than $3.60 a gallon, perhaps $5 a gallon, because most people would realize that the difference would pay for itself. They’d be supporting the health of the planet, cutting down on fossil fuel usage, and getting better gas mileage for their hard earned dollar. That’s value. (They could not, however, charge $10 a gallon. At that rate, the perceived value would diminish because the higher costing fuel would not pay for itself.)

The same is true for you and your service. You can offer something that resembles a commodity, like “spiritual direction”, “massage” or even “acupuncture.” If you do this, massage is massage, acupuncture is acupuncture. There is little to differentiate you from the other people who do similar work. In this scenario, you probably need to charge a fee that is relatively similar to everyone else.
But, if you develop a unique specialty in an area where people are looking for a specialist, you’ll have more flexibility in how you can price your services.

For example, image you’re an acupuncturist. You might be a generalist and help anyone who needs acupuncture. Maybe your clients have allergies, or shoulder pain or trouble sleeping.

Or, you might create a specialty, offering fertility treatments for couples who are having a difficult time conceiving a child.You can design your entire brand and business around fertility and families, and even have a valuable ezine with fun and useful information. You can write about inspiring stories, give people hope, or help them cope if things aren’t going as easily as the desired. You can even offer delicious recipes that prepare the body for pregnancy or reduce stress after birth.

When clients send you pictures of their new babies you can post them on your website (with their permission, of course!). You can collect testimonials from satisfied and happy patients and add them to your site, too.

Then, when a couple seeking fertility treatment visits your website they’ll see all of the babies and joyful testimonials, and they’ll seriously consider becoming your patient. They may even call you on the spot.

Essentially, they’ll compare your specialty in fertility treatment to the generalist who works down the street. They’ll see ten testimonials on your site from happy women who had babies, and they’ll compare those to the ten testimonials on the generalist’s site that range in scope from shoulder pain to allergies, and they’ll immediately recognize the value of your service.

And do you think they’d be willing to pay a bit more (or a lot more) to have excellent care from a practitioner who has a high rate of helping women have babies? Do you think they’d pay more to have the family of their dreams? Absolutely.

Of course, that doesn’t mean you have to charge more. But it does mean you can if you choose to.
Also, if you charge more, you can reinvest the extra money into education so you can perfect your art. You can take classes, read books, and study with experts who can teach you new ways to help your clients. The better you are at what you do, the higher your value as a practitioner.
Another way to increase your income is to offer “packages” that cost more than a typical hour of your time.
For instance, imagine you are a life coach and you feel that an hour of your time is worth $120. You could create a package in which you offer 2 one-hour coaching sessions, an MP3 recording of each call, endless email communication between calls, homework tailored to each client’s needs, etc.Then, in your promotional materials you can clearly state the benefits of your package, like

• clarity and action steps to help them realize their goals
• a recording of the call so they can more easily assimilate the material,
• email communication to help them get unstuck and stay on track.

For some clients, the endless email help is priceless. For others, the action steps are exactly what they need.

As long as you can communicate the added value of your package and what your clients will get in the long-run, you can charge more than your typical hourly rate. Instead of charging $120 an hour for this package, or $240 total, you might change $300. Or $450. Or even $1000. It all depends on the perceived value of what you offer.
Actually, the key to all of this lies in your ability to communicate the value of your service. The words you use, the way you focus your website content, the testimonials you have, the results your clients get, everything helps you communicate the value of your work.

There are many ways you can add value to your service by specializing in quality care that gets results. I’ve touched on just a few in this article. I suggest brainstorming ideas, getting together with colleagues and asking them how you might focus your work. Be creative.

Summary: When you offer a specialty instead of a commodity two things happen:

1) you can more easily create services that help you grow your small business or practice, and

2) you can quickly communicate the value of what you have to offer, which gives you more flexibility in how you price your work.

So what do you offer? A commodity or a specialty?

How can you stand out from the crowd and offer a needed service that specializes in something unique?

How can you package your work so you can earn more than an hourly rate?