Do you know what your product/service is worth? Are you charging the right amount? Most small business owners, me included, struggle with this question. Why? Because we often confuse the cost of producing the product with the value it brings to the customer.
Establishing a price for your goods or services has nothing to do with the production cost and everything to do with the value. A great example of this in action is software.
A few years ago I bought a copy of the Adobe Creative Suite. I opened an attractive box which contained a CD and a small manual. There was less than $10 worth of material in the box, and yet I happily have paid $1,000 for the software. Why? I paid a premium, well above production cost, because the software fulfilled a need.
A few months ago I upgraded the software, through an online download. I didn’t even get the CD or manual, but I was extremely satisfied with the benefits I purchased.
Calculate Your Value
The same is true for your product or service. Your value is based on how much you help clients save, increase, reduce or improve. If you can quantify these benefits, then you have a foundation for establishing an appropriate price for your goods or services
- Use these questions to build your value:
- How much can my product save my customer? Savings may be in time, money or effort.
- How much can my product earn for my customer? Can you help them increase their income; directly or indirectly? Does it create a foundation for future opportunities or establish valuable personal relationships?
- What intangible benefits might customers realize, and is it possible to quantify these benefits? Will your product improve their abilities, confidence, appearance or peace of mind?
Focus on the Benefits
Remember, your customers buy benefits and solutions to their problems. If you can associate a dollar value with specific benefits, you have a powerful message to include in your marketing material and a solid foundation to charge a premium price for your product!