How to decide on a price for your services

23 October 2015

How to make sure your trade business doesn’t compete on price

Running a successful business isn’t always about matching your competitor’s price. Being the cheapest can work, just look at Ryanair, but then British Airways is still one of the biggest companies in the world. In every market place there are room for budget and high end competitors.

A successful business is as much about branding, good customer service and reputation as it is about price. Psychological studies consistently show that people link higher prices to better quality, which is as big a draw as affordability. That’s how luxury jewellers like Cartier sell so many watches.

Why expensive beer should be your role model

Back in the 1990s, Stella Artois entered a crowded market place with an advertising campaign that emphasised how expensive it was – against all the thinking at the time. Various French farm labourers would do whatever they could to stump up the cash for a glass of beer. In doing so, they attached a premium tag to their label that set it apart from all the other beers competing on a purely value basis. The result? Stella quickly became the biggest selling beer in the UK and the marketing rulebook was thrown out the window.

How to calculate your worth

So, before automatically matching your competitors on price, think about your true price. Calculate your hourly rate based on what you want to earn and stick to it. You can also establish this by asking your customers what they think is a fair price and analysing the competition.

In order to increase your true price, you need to think about ways of enhancing your service and standing out so that being cheap isn’t your USP. Here are some ways to achieve this:

Avoid the downward pricing spiral

Competing on price works for some. People pick up work by doing it for less but it’s rarely a long-term solution. Competing on price can often be a slippery slope, with companies desperate to undercut each other and eventually working at a loss. Standards are then forced down by a lack of time to complete jobs and the work dries up as word of mouth works against you.

Value your work and don’t do it for less. In the end, if you’re good enough to deserve the money, customers will soon work it out. And after all, they’re always right.



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