Discounting Your Price Decreases Your Value

I know, I know…when you’re just starting out as a mompreneur, it seems hard to put a big price tag on something you offer and feel good about it. You worry if you’ll get any buyers/clients, and that you can’t compete with “the big dogs” who’ve been out there doing something similar to what you do for longer than you have, and you think the best way to get more sales and make more money must be to lower your price.

Don’t get me wrong–sometimes, you offer a low-priced item for the right reasons and it can be just the thing to get a new client to hop on board. But other times, and especially when you wind up dropping your fees lower and lower to the point that you know you can’t be profitable, it’s the wrong strategy entirely.

I follow Dave Navarro, The Launch Coach, and get a lot of great insight and ideas from his blog. His most recent post caught my eye since he addresses this exact topic. In fact, he goes so far as to say that “Low-priced products tell your audience to devalue the information within.” I’ve said this before many times, but there is a psychology associated with pricing your offerings and how valuable they (and the people who buy them) feel they are.

You can read Dave’s full blog post here.

Think about it: What message are you sending your audience about how valuable you and your services are? And what are you subtly telling them about their own worth when it comes to your fees? Are you content with being the “bargain coach” or the “lowest priced virtual assistant”? Do you want to continue to attract clients who can barely afford to invest in themselves?

Rather than trying to compete on price alone with others who serve your target audience, look for ways to offer more value and better service than your competitors do. And make your rates relative to the VALUE you offer!

Are you struggling with setting your fees (and keeping them where you want them to be)? Do you find it hard to know the value of what you offer? Leave your comments below and we’ll discuss it.

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11 comments

  1. I am having a hard time with pricing things for sure! I don’t sell BIG PRICE items and do sell things on Etsy…how can I compete on Etsy when everyone else making the same things is much cheaper? I thought getting a real ecommerce website would help and I could mark up my items more there to compare to boutique things. Would love some insight!

  2. Hi Melissa–

    I think you have a good point that you’re selling in a forum where others with similar products are competing for clients. So perhaps it’s a good idea to change the forum/vehicle that you use for sales. I agree that your own ecommerce website could help. Here are some other ideas:

    – Collaborate: Find some friends/colleagues you can partner with that give you an exclusive “in” to some potential clients you wouldn’t reach otherwise. Do you know a friend who has a resale/clothing/baby store? Ask her to feature your items there and give her a percentage.
    – Go Local: People often like to support local artists/business owners. Are you presenting at crafts/arts fairs, baby conferences, etc.?
    – Pick a target market and a niche: While I like all of the stuff on your website, you are offering everything from coffee mugs to baby lovies to notepads to very sassy, cool belts… While it’s clear you have a lot of talent and are showcasing your capabilities, you might benefit from choosing to focus on a narrower niche (the WHAT you offer, like hip, easy accessories) or on a narrower target market (the WHO you sell to, like cool moms).

    Hope this helps!

  3. Pricing is such a hot topic. If you do it wrong you’re trapped in a price war. But you always wonder if that person not calling you back is not calling because they don’t like your pricing model. This article was fantastic!

    A great example is crossfit (www.crossfit.com) The average gym in Atlanta charges $125 a month. Compared to an LA Fitness or Golds or Anytime fitness they are WAY out of line. But crossfit gyms sometimes have group discounts and student discounts, but they’re not that much. The rationale for this kind of price comes from the high end trainers and facilities that most crossfit gyms offer. I’d hate to see them lower their prices to compete with traditional gyms, because all would suffer.

  4. Hi Jason–

    I’m from Atlanta but haven’t lived there in over 10 years, so I hadn’t heard of Crossfit before. What you described sounds like the same sort of philosophy behind Starbuck’s pricing. I heard a story on NPR years ago where they did a blind taste test between Starbucks coffee and Dunkin’ Donuts coffee. Dunkin’ one the blind taste test, so they did some more research to find out why Starbucks’ expensive, not-as-tasty-coffee was beating the pants off of Dunkin’ in business growth. Turns out that Starbuck’s success had to do with how it appealed to the way customers wanted to feel about themselves. People who buy their coffee at Starbucks want to walk in and have an experience that includes fancy coffee mugs, hip music, intriguing gifts, and being served by a barista. People who buy their coffee from Dunkin’ want to walk in, be quickly served some delicious coffee for a low price, and walk out. So it sounds like what you’re saying is that Crossfit is playing into the value that its clients perceive in themselves. By charging a higher fee than most, they are able to attract a clientele who feels good about highly valuing themselves by going there.

    I appreciate you providing such a relevant example of perceived value and the psychology behind pricing! And next time I’m back home, I’ll have to check out Crossfit. 🙂

  5. Hi Lara,
    Great article and great discussion here (as usual!)

    Yes, pricing is such a sticky topic for us all!

    You have to decide which space you are going to play in and stick to it. Are you going to compete on price and try to be lowest cost provider? Then discount away! This is what I call a “Lag” strategy. Your price ‘lags’ the market. Walmart has a Lag strategy..they compete on price and it works.

    Are you going to compete on something else, like quality, uniqueness, value? Then you MUST at a minimum adopt a “Matching” price strategy or a “Lead” price strategy. When you Match you are trying to hit the middle of the market. When you Lead you are trying to do a premium price.

    As you say, your price communicates a message. There is a psychology to it..both within you, the business owner, and within your buyers minds. Pick your place and stick to it and you’ll be golden!
    .-= Shawn Driscoll´s last blog ..free teleclass: How to turn a Flood of Ideas into a Steady Stream of Income =-.

  6. Some say that a higher makes you more desirable because you are “more exclusive.” Luxury goods are hurting in this economy, yet, Walmart is posting positive.

    What about using a lower price point to then spring board them to other offers. For example, I do a group coaching that is cheaper than my one-on-one, yet, when there are 5 people enrolled, it’s the same rate per hour as one-on-one.

    One group coach member recently move to one-on-one. Can’t multple price points exist?

    You say ask, “Do you want to continue to attract clients who can barely afford to invest in themselves?” Perhaps, I’m a lost puppy kind of helper but I love helping people find their value, too.

    Great article and I will take what you say into consideration – been thinking about my value, too.

    Question, a friend wants me to coach her. I feel wierd charging her? Any suggestions? Should I do it?

    Thanks, Lorin Mask

  7. Lorin,

    You make some great points about having multiple price points. I call that a Product Funnel and think all of us coaches benefit when we have one of these in place to move our clients from one offering to another. Kudos to you for having that in place.

    Regarding coaching your friend, that’s a tricky one. The answer totally depends on you and your boundaries and your personal goals. If a friend is asking you to perform a service that you make your living by doing, then by all means, it makes sense to charge for it. After all, she could hire a different coach to support her, and she would have to pay that coach, so why wouldn’t she want to pay her friend for her valuable service?

    When I first started coaching, I turned down the opportunity to coach many family and friends who wanted my help, simply because I was too attached to who I needed them to be. It had a lot to do with how I felt about myself and my confidence as a coach. In the last few years, however, I have coached several friends and colleagues, and I’ve had no trouble with the boundaries around coaching them to win the game they’re playing (rather than anything I’ve needed them to do since they are a part of my life), and I’ve accepted money or trades for doing so.

    Does that help?

    Best of luck to you!

  8. Shawn,

    I love your words of wisdom here. I’m so grateful to have your insight and support. You have helped me create pricing strategies for many of my offerings, and I have to say–sometimes it’s just easier to hear what to charge from someone else. That’s one of the reasons I so value you as my coach–you have definitely helped me determine my value.

    Thanks so much!