Many businesses set their prices with at least one eye on what the competitor is charging. The reasoning is typically "why would someone pay more money to work with me when they can get the service cheaper somewhere else?"
Today, we're going to try and help to break you out of that mindset today, so you can start getting paid what you’re worth.
At the end of the post is a short exercise I recommend, too.
What your competitor charges is irrelevant
Let’s pretend you charge £50 an hour to repair computers.
And Tony down the road charges £40 an hour to repair computers.
No question, some people will challenge your price and say “Why would I give you £50 when Tony charges £40?”
This is a penny-wise, pound-foolish outlook. What if you’re actually much more competent than Tony, and will do the job in one hour, whereas he will take two or three hours? Your “more expensive” hourly rate works out to be £30-£50 cheaper!
Your competitors might not be who you think they are...
In business we often think that our competitors are anyone offering a similar product or service - web designers feeling like they're competing with other web designers, for instance.
But that’s wrong.
Lamborghini and Toyota both make cars.
Rolex and Casio both make watches.
McDonald’s and Gordon Ramsey both make food.
Ryan Air and Emirates both fly you to a different country. (You can pay multiples of a price on the same plane.)
No one would argue that those businesses are in competition with each other. Lamborghini is actually in competition with Ferrari; Rolex with Omega and Patek; McDonald’s with Burger King, and Ryan Air with EasyJet.
There is always space for different pricing levels within an industry. People who buy their food at Harrod's are well aware they can get it cheaper in Aldi. All you need to do is decide what value you provide in exchange for the price.
The same is true across the board. Mechanics working on those Lamborghinis will not be charging the same as the mechanics in your local garage.
So I urge you to work out who your competitors really are.
And you do that by deciding what you really offer.
Most of the time we take the face value of what we do, and let it define us.
“I do SEO.”
“I’m a marketing consultant.”
“I’m a fitness coach."
“I’m a mechanic.”
Sure, they’re all true. But they don’t convey any value.
Compare the above with the below statement. They're the same work, but the framing is entirely different and they separate you instantly from everyone else:
“I increase organic traffic to websites so businesses can increase revenue without relying on adverts.”
“I help businesses to stand out from their competitors and earn more money.”
“I keep customers’ prized cars safe and reliable so they can drive without worry or discomfort.”
“I help busy dads get in shape even if they have demanding jobs.”
The key is to find the value, which you do by identifying what it means to the customer.
If you’re an artist, the value is the buyer feeling happy each time they walk into a room and see that magnificent piece of art on the wall. Priceless!
If you make guitar straps, the value isn’t the material. It’s the fact it keeps them comfortable during a 2 or 3 hour show, and will protect their £1,000 guitar by preventing it from falling off a cheaper strap. Pitch it that way and you can exponentially increase your prices.
If you're a therapist, the value is that you literally change people's lives.
Once you know what you’re offering, you'll be able to explain your prices if anyone ever asks why you’re not matching Tony down the road. (Anyway, what if Tony lowers his hourly rate from £40 to £30? Do you keep lowering, too? What if he lives alone in a small apartment, and you have a family to provide for? What if you’ve got years of experience and testimonials and he doesn’t?)
A short - but valuable - exercise
A lot of this is about mindset. And if you’re reading this, I’d wager you have a strong mind - you have to be, to be in business for yourself.
So set aside 30 minutes and think about this question: How do I want to earn my money?
I did this and my answer was “to genuinely help people to improve their lives.”
In my capacity as a marketing consultant, that ultimately means helping business owners to have less stress, earn what they want or need, and enjoy what they do. It means helping to offer a new perspective, to clear roadblocks.
What is the answer for you? When you go to bed at night, what would have been a productive and fulfilling day for you?
The answer to that will unlock how you provide value to your clients, which will help you decide what you should really be charging.
Regardless of what Tony is up to.
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