Grow With Soul: Ep. 46 How I Approach Pricing Services & Offerings With Kayte Ferris

 Sharing my thoughts on the question and struggle of every business owner - pricing.You get an idea, you think its pretty good, you wrestle with the content and the format, you fight away all the the self doubt about who am I do to this, and you get yourself to a place where you are excited to introduce a new thing to the world, and then you turn around and you walk straight into this brick wall, which is, what the hell do I charge?In this episode I am going to share my thoughts and my approach to pricing and how I price what I do.

Here's what we talk about in this episode

• Who is it for and what can they afford?

• What is the end result worth to the customer?

• Define a price range before making the product

• Defaulting to time when pricing products

• What feels right and fair

• Considering happiness and health when pricing products

• Raising your prices

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Read the episode transcript:

Hello, and welcome to episode 46 of Grow with Soul. Today it’s just me, and I’m going to be sharing my thoughts on the perennial question and struggle of every business owner: pricing. 

So, you get an idea, you think it’s pretty good. You wrestle with the content and the format, you fight away all the self doubt of ‘who am I to do this?’ and you get yourself to a place where you’re excited to introduce a new thing to the world. And then you turn around and you just walk straight into this brick wall, which is ‘what the hell do I charge?’ 

Pricing is sticky, particularly when you’re doing something that you love, and particularly when you tend to dance with self doubt which I think probably describes everybody here, because we’re running a business that is something that we love to do. We feel that our pricing says a lot about us, and what we think about ourselves and it’s a literal embodiment of what we think our output is worth. And when we operate in a society, as we do, that tends to give you your rate of worth in the form of a wage or a salary, you don’t get to choose it when you start a new job, it’s incredibly uncomfortable to do that for yourself. I think that’s why I have so many clients who ask me, like, ‘what should I be charging for this?’ Because we’re so used to this being a decision that we don’t control, it is given to us, and when we suddenly have to define it for ourselves, that’s something that none of us are mentally or energetically prepared for.

So, in this episode I’m going to share my thoughts and my approach to pricing, and how I price what I do. I’m sharing this because I think it’s important for more perspectives on pricing to come to the table so that people can find a way of pricing that they feel comfortable with, and I’d like to really stress that I don’t consider myself in any way an expert on setting prices ,and what I’m going to talk about is just what works for me. You may want to take elements of this and combine it with more scientific pricing approaches but this is what works for me. 

Also as I haven’t had any personal experience with selling or pricing physical products, I’m not going to be talking about that here, but you’re only ever a short Google search away from finding a formula for pricing physical products. It’s precisely because I think there aren’t the same clear cut materials and labour costs in a service or visual product that pricing them is so tricky. So, you know, caveats over, here’s how I price my services and offerings and my approach to figuring that out. 

WHO IS IT FOR AND WHAT CAN THEY AFFORD? 

A really important first step is being really clear on who your product or service is aimed at, and what they can realistically afford. So you should be thinking about who is the customer for this anyway in order to create something that that person is actually going to want to buy, but really use that with your pricing as well. This doesn’t have to be super specific, but just inform a ballpark area for you to run with. 

For example, if you’re creating something for students, their affordability is going to be very different for a service aimed at city workers. In my business, I knew that my basecamp course had to have a much lower price point as it was for people just starting out, who would be a little bit reticent to invest too much in one go. On the other side of the coin, my coaching packages and my mastermind are for people whose business is sustaining them, and they’re looking to reinvest, so the ballpark can be higher as they want a more specific premium service, and they’ve got more ability to invest in that. 

Start off being clear about what your customer can realistically afford, and if that’s not going to give you what you need financially, you may need to think about maybe shifting which audience you’re targeting, moving to a more volume based model, or adding in another customer type that you could talk to, and diversify your offering slightly. 

WHAT IS THE END RESULT WORTH TO THE CUSTOMER? 

Once you’ve got a ballpark price range that your customer can afford, you can zoom in and get more specific. With a service or digital product, somebody is buying an end result rather than the nuts and bolts of the thing itself. So what is that result worth to them? 

This is really where digital and physical products separate. Because when you’re buying  a physical product, you’re buying the thing and all the things it’s made out of, and the fact you’ll have something nice in your house or to wear. But much more so with digital products it doesn’t matter how technical or wonderful the thing is, you’re buying the result you want it to have for you so much more.

 I consider there to be 4 main things that people have in their minds and that have a bearing on their decision making, but one of these things will likely overrule the others. So again, the audience knowledge has to come in here to really ascertain which one of these 4 is going to be the main driver for your person.

Time – is your service saving them time? 
What is that time worth to them? If they’ve been trying to get something off the ground but need some direction and support, your coaching, for example, could save them six months of time, and six months of lost earnings in all that time that their product isn’t live – what might that be worth, that saving of that time? 

Money – you might be able to help them save money.
Perhaps they can buy your step by step guide instead of hiring a freelancer to set up a new process in their business. What price point is it worthwhile for them to opt for your guide as opposed to the freelancer? 

Expertise – do they actually want the knowledge and the expertise to do something for themselves? 
Rather than hire someone to help, do they want to do it for themselves so they can understand and fix it going forward? Is it something only they can do in their business but they lack the confidence around how to do it best? What will the knowledge and expertise that you can give be worth to them over time in their business? 

Experience – For some, the experience of your service will be important too.
Maybe they’re really relishing the prospect of digging deep into their brand through their design process for the first time, or they want to make room to slow down with your printable journal? So perhaps the experience of working with a coach or a mentor is a really big draw, so what’s that experience worth? 

Think about which one of these 4 fits best with your offering and your customer, and what they need, and what is the price range that will make that result worthwhile to them? That should give you a more zoomed in ballpark figure. And remember, this is something you can survey your audience about if you’re creating something new. You can ask, and see what kind of price ranges people come up with. 

CREATE THE THING TO HIT A PRICE

So I find it much easier to define a price range before I start making a new product. I find that it gives me some structure and boundaries around the creativity, actually. When you’re creating a course or a digital product, there’s always more and more and more that you can add and it very very quickly gets out of hand and you end up with something that really you feel is worth £400 or even more, it’s got everything that you know in it, but maybe your customer can only afford £40, and then you’re stuck. 

When I have an idea for something new, I start with thinking about who its for, what they can afford, what the result will be, and what that’s worth for them. That gives me a price range to work to, and then when I’ve completed the work, I’ll pin that price range down and the exact price based on how I feel about the finished product. I’ll get somebody to test read it and by that time, by the time I’ve done the work, I know what I want to charge for it. 

So, in practice, this looks like, for example, my Purpose Kit. When I started off, I knew it was going to be somewhere between £30-£50, and then over the course of creating it I narrowed it into the middle of that price range at £37. In practice, the way that I negotiate that is that I might add in something like a video or a Q&A element if I want to increase the value of the product to hit that price point, or I might decide not to offer a Facebook group or extra support if I’ve got a lower price range to hit and I don’t want to compromise on the content; I’ll compromise on the extras. 

I will say that if you have already created a product, and you’re there thinking ‘oh crap, this thing is way more than my customer can afford’ then don’t panic or start again; the key thing is that you’ve realised. So my suggestion would be to break the behemoth of this thing that you’ve made into smaller offerings. 

Perhaps one module could be a stand alone eBook, maybe three sections fit well together as a course on their own; just break it into smaller chunks that will be more in the price range of your customer, or you know you can take part of that and start building an audience that are going to be more able to afford that – that’s just going to obviously take a lot longer. 

What is my time worth to me? When we’re pricing services, we generally default to time, although I never like to think about it as a straight swap as time for money. You’ll always lose out, because there’s time unaccounted for, whether you’re preparing for a call or in the hours that you’re providing feedback. I also think that when we’re only charging for our time, we’re not making a profit. If we think about the physical pricing model, if you only charge for the materials and the labour, you’re not making any money on that physical product, you’re just covering your bases, and the same is true if you’re only charging for your time; you’re just covering your costs, you’re not actually making any profit that you can then reinvest in your business or you know, just have, because we’re allowed to want to have money. So that’s why I feel a little bit reticent about charging for just our time. 

As we discussed at the beginning, ultimately it’s not your time people are buying, it’s that end result, and that end result might be worth more than you think your time is worth. 

Though I don’t base my pricing strictly on my time, I do think about what my time is worth to me, to make sure that my pricing still feels fair and that I’m not charging too little. So I’m afraid this isn’t particularly scientific, and it changes as I grow and my life changes and my priorities change. 

I remember many years ago seeing an article that recommended that you work out your preferred hourly rate by thinking about what you’d want to receive to stand in line for an hour to make that hour worth it. So, if somebody has a stall in the market square and they’re giving away free money, but you have to wait there for an hour, how much would you have to get at the end to make that worthwhile? I kind of use that as a framework; I mean, if I was just getting free money it would be less than if I had to work for it. 

Sometimes I think about if I had to do something I really didn’t want to do, how much would I have to get for that in order for it to be worth me not doing something I’d prefer to do? Or how much would I have to be compensated for an hour that I couldn’t be working on my business, whether that’s creating content or new products? 

Maybe for you it’s how much would I have to be compensated for not spending time with my kids or not be doing my hobby, or whatever it is. 

To get an idea of what your time is worth to you is really important to make sure that you are pricing in a way that you end up not resenting the work that you’re doing. Because we’ve all kind of been there, and when we start out, we get a bit like that, where we’ll undercharge, then we’ll be doing the work or project and we just hate every minute because we know we’re not getting paid our worth and what we value and that we’re missing out on stuff that we could be doing but we’re being underpaid for this other thing. So I think that’s an important thing to bring in, more as a check and balance to make sure that what you’re charging, what that end result is worth for other people is worth it for you too. 

WHAT FEELS RIGHT AND FAIR

As you can probably tell I’ve got quite an unscientific approach to pricing for myself. I find that the variables are so intangible, so rather than having those material costs, it’s things like my happiness, and my health, and those kind of things that come into effect when I’m considering the volume of work to take on, and therefore what that work should be priced at, and that intangibility makes it impossible to put a meaningful financial value on those factors. 

So whenever I set or raise prices, I focus on what feels right and fair. I use the ballpark figures of what the result is worth to the customer, and what my time is worth to me, and I find a compromise within those two ranges that makes me feel good, and that I know I’ll be able to provide good value for the client or the customer of the product too. 

So I also think that if you’re somebody that is worried about pricing and pricing too high or pricing right, you don’t need to worry about going too high. You’re almost always going to go in a little bit low, because it’s awkward and uncomfortable, and you feel bad ,and you worry you’re not worth it. So you’re gonna go in lower than you probably could. My advice is just to not overthink it but to ask yourself if the number you’re thinking of feels right and fair to you and to your customer. 

Whenever I talk about pricing with clients, I get them to just say out loud the number that feels right without overthinking it; just tell me a number. And every time that number is the one they end up going with because it’s the one that just intuitively felt the most right. 

And ultimately your price feeling right is the most important measure; if it’s too low, like I said, you’ll resent the work you’re doing, and if it’s too high, you’ll feel too embarrassed to really talk about it and push it, and again you’re not going to enjoy the work because you’ll be feeling like ‘oh my god, I’m not providing the value here’. So focus on what feels right, right now. Because really, that’s all you can work with. 

And, of course, you can always raise your prices later, although that is another can of worms, so I’m going to just finish off by talking about raising prices. 

When you’re setting your prices, it’s easier to go up in the future than go down in the future. Both for you, psychologically how that feels, but for your customer. Like, if you sell one or two and then put your prices down, then they’re going to be like ‘what the hell?’ and then other people will be like ‘why is this suddenly cheaper?’ So generally, if you’re worried, leave room to go up in the future. 

Again because we’re so used to being told when we can have a pay rise and when we’re worth having more money I think a lot of us, myself included, leave it much longer than we could to raise our prices. It feels a bit selfish and it feels risky – what if no one hires me anymore? – all those feelings come in. 

First of all you know when the time is right to raise your prices when you feel like you need to. When you start to feel a little tug of resentment, or even you just wish that you were getting a little bit more for what you do, that’s a sign that the value of your time and your work has increased for you inside. Externally, if you’re turning people away due to workload it’s likely that you’re quite cheap, and you could make more money doing less work. The more that you do your work, naturally the better you’re going to get at it, so you need to make sure that you’re taking it into account and not staying at the same level for months and years. 

I tend to raise my prices once or twice a year, so one might be a very small increase that gives me the guts to go for the one I actually one a few months later. For me this tends to first show up when I’m thinking forward or I’m planning, I’ll be thinking ‘oh I wish I could get X figure for doing this, really, that would feel more worthwhile for it for me’, and when I’ll go through the process that I’ve described here, like thinking about who I want to be coaching with, and what their affordability is and what the end result is for them. 

For courses I tend to start low, and then if the participants are getting loads more out of it than I anticipated (and I also ask at the end ‘do you think this was too high, too low, just right?) I might raise the price slightly for the 2nd intake. But for digital products I keep it the same, because I don’t have much into that. All the work was done at the front, so everything from then on is profit. 

The worry with putting prices up is always, you know, after you’ve thought ‘am I worth it’ and you’ve come round to the idea that yes you are, is always ‘what if people can’t afford me now?’ and that’s definitely something to consider, but make sure you’ve got your facts right before you make drastic changes.

As you’ve been growing your business, so too have your audience, so what’s affordable to them might have changed in the last 18 months. Make sure you’re really in touch with your core audience, and have a realistic view of what they can actually afford, and if you still find that your planned increase is going to price people out, then start to shift towards attracting customers who can afford you. That doesn’t mean that you ditch the existing ones completely; maybe you create a digital product or a course for them that’s a more affordable option, but you target your service at this new audience that you’re starting to build. I hope that doesn’t sound harsh. Because the alternative is that you just curry on doing work too cheaply, denying what you feel that you’re worth but I promise that all that will happen is that you’ll start to resent your clients, and that you start to resent your business, and doesn’t that really just defeat the object of having this business in the first place? 

So although I don’t think that all of our worth is tied up in our pricing, it is a signal to us of what we think we’re worth, so follow the internal directions you’re being given of what you feel your time is worth and what your work is worth, and listen to that. And, you know, we’re all good people here, we’re not going to be taking the mickey out of others, we’re not taking advantage of them, we’re just asking for what our value is, and that’s totally okay.