how to price a service,service pricing,pricing strategy,entrepreneur tips

The art of pricing a service

how to price a service

When I was a fresh college graduate, I had lots of free time. Whenever I had to get anything done back then, it was much faster than it is today, because now I have a full-time job and a child to look after.

I recall that I needed to prepare certain documents for my first job, and I had the luxury of time to do it. One of them featured a personal tax identification number.

With zero expertise, I went on a mission to get a piece of card containing a 10-digit number. I got up at the crack of dawn to get to the tax office early, only to be told that I didn’t meet a district requirement. I then returned the next day just to discover that another criterion was missing. My ordeal had just begun…

I had no access to the internet back then and the tax office’s red tape did not help at all.

Within 7 days of back and forth, I finally got my card.

But the story didn’t end there.

3 years into the workforce, I looked for another job. My new employer requested that my tax identification number be transferred to another regional tax office.

Now with less time on my hands, I went to fix the paperwork. I didn’t have anyone to do it for me.

It took me 14 days, 56 hours, $28 worth of printouts and a notarial service, and $70 worth of public transportation fares just to have my tax identification number transferred.

But wait, there’s more!

sad cartoon paperwork

After 7 years I had to change the status of my tax number. I found out that not only my papers have not been properly processed, but I also had $400 worth of penalties.

Thanks to the internet, I found a service that helped me fix the issue.

You see, because I’ve been through the process, I know it can be an easy fix for someone who understands the ins and outs of tax processing.

To avoid the trauma, the possible mistakes, and wasted time, I am willing to pay my whole month’s salary to an expert who can do it correctly the first time.

If only I had someone like that to begin with, I wouldn’t have had this problem.

The price had gone up, all the expenses piled up, but I still preferred to spend more just to get it out of my way.

This is the art of service pricing.

cartoon planning strategy

What is service pricing?

Service pricing is a strategy that ensures that the price you set for your services is both fair to the client and profitable to you. Pricing a service is tricky because there is no “one size fits all” solution in the service industry.

Each service has a different value for each customer under different circumstances.

Take a birthday cake for example. Its regular price is around $10.

The cake shop is about to close and the last piece of birthday cake is standing on the shelf. An office worker bangs on the door, pleading for the shop owner to let him buy a cake for his son. The cake is a peace offering because he missed his son’s birthday, yet again.

The father is willing to pay double just to get that cake.

In another block, a baker will celebrate his birthday tomorrow and he will throw a party. He knows how to bake a cake and would want it highly personalized.

Therefore, even though it would be a lot easier to buy a cake from the same shop, he would just bake his own cake because he has the time, he has expertise, and cheaper supplies.

The (true) cost of a service is determined by whoever’s paying for it.

How do you price a service?

There are many ways to go about it, but since we’re an on-demand design service – not pricing experts, allow me to send you to a business expert’s website and read more about it.

You may have scoured the internet for price recommendations, but it is difficult to synthesise all of the information and make a decision. Let me save your time by dropping the truth bomb:

Service pricing is difficult because you want to make everyone happy.

The goal should not be to please every conceivable consumer at the lowest possible price, but rather to solve each of your target customers’ problems at the best possible cost, which benefits both the client and the service provider.

discovery call deer designer thiago

Focus on finding the right clients

“Everyone” is not your potential client, no. I know you’d think it is but it’s not, trust me.

Just as an example, Deer Designer doesn’t just accept anyone that signs up. We try and target people that can get the real value out of the service.

You need to find out who’s the best fit for your service.

Clients that are a good fit for Deer Designer often have the following characteristics:

  • They have ongoing design needs (not just one-off projects)
  • They know how to delegate (have experience working with freelancers/employees)
  • They know how to write a brief
  • They have an established business, no matter how small

If you are also providing services, you should aim to have an initial call with potential clients to know more about their business and if whatever you’re offering fits their needs.

In these calls, you’ll be able to spot red flags, which will prompt you to be cautious of closing a deal with anyone who’s not a fit.

Common client mismatch red flags (for on-demand design services)

  • Doubts about a long-term commitments (even if we don’t)
  • Inquiries about cancelling the service and the money-back guarantee
  • Asking where the team is located (it shouldn’t matter at all – talent is talent, no matter where they’re from)
  • Focusing on requesting urgent tasks all the time

How to sell value?

To price a service effectively, it must be based on the value it can provide to a specific client in each unique circumstance. Agree?

Now the question is: how do you sell value?

Surprisingly, if you find a client-match, they’ll do the pitch for you.

As they share their pain points, they’ll find out why they looked for you in the first place and decided you’re the best solution for their problem.

Here are some examples for Deer Designer:

Pain-point 1:
They’ve worked with freelancers and were burnt with a lack of reliability, lack of consistency, and surprise charges. More often than not even paying more for less output.

Solution 1:
With Deer Designer, clients pay a low monthly fee (the same every month) and get a reliable and always available design team to do all their design tasks for them

Pain-point 2:
Working with freelancers, they are limited to one designer only that usually can’t do all kinds of design tasks

Solution 2:
With Deer Designer, they get a design team that sits within multi-skilled squads and can tackle all kinds of requests

Pain-point 3:
If they have an in-house designer or work with agencies, it’s hard to “turn it off” during lean seasons

Solution 3:
With Deer Designer, clients can always pause their accounts and reactivate it whenever needed

Pain-point 4:
Fear of meeting deadlines as they grow and scale

Solution 4:
With Deer Designer, they can add/remove designers to their team as needed

Can you imagine all of those issues discussed by a potential client in a client-fit call? It’s a match made in design heaven!

The art of pricing starts with the heart

we love deer designer

Look, we only have 24 hours in our day. Whether you’re a business owner or a social media manager, your hour is definitely worth more than $12, right?

This is more than people pay for Deer Designer to handle all your design requests.

What do I mean by it?

When your goal is get more done in an efficient and economical way, there’s always an alternative.

If you try to understand and empathize with potential client’s needs before waving a price tag, you’ll bring profit to your company and generate not just consumers, but raving fans.