Well, I've seen quite often that people are very interested in venturing out into the offline marketing world, but hit a speed bump when it comes to pricing. Setting your own prices can be somewhat intimidating when you think about the diverse budgets your different potential clients will be working with. Its nothing new to you guys that you wouldn't charge an ice cream shop the same price you would an apartment complex. Just how much the prices should differ and why is where people tend to hit a snag.
It seems like a common method is to check your competitors prices and simply just be cheaper than them. While it is key to know your competitors prices, your prices only need to be based on them in the loosest sense.
I'm going to break it down step-by-step on how I price my clients. Its not quick and easy, it requires effort and dedication, but your clients will also see that you priced your services to them objectively, and not subjectively.
1.) Know your personal limits and boundaries:
This is really a one time step, but I think it is an important one. First set your minimums, and your maximums. When conducting a sales pitch, it is always good to have your lowest and highest prices hammered into your brain. If the lowest you'll offer your work for is $400 per month, then have that mindset when discussing prices.
If your potential client tries to work you down to something lower, don't. If you're working for less than you think your work is worth, you aren't going to want to put as much effort into the client which can never lead to good things.
On the other hand, know your highest limits just as well. Figure out what you think your skill set and/or resources can justify. If your client feels that they're paying a pretty penny for sub-par work, problems will arise.
My personal boundaries are no lower than $450/month but no higher than $2000/ month
2.) Know your client, or perspective client:
Getting to know your client, and more importantly their business, is done in two ways. Both are great to do, but only one is completely necessary.
The first way is to actually get to know the person who you are working with. Clients will be more comfortable giving their money to someone they've spent some time with.
The other way is to do some research on their business that will give you hard numbers to figure out your pricing with. The first bit of research I do is to find keywords that I think potential customers of their business would find them by searching.
2a.) Finding the best keywords:
The tool I use for this is simply Google keyword tool. Its fast, and my clients know who Google is. Here I've included an image showing the two keywords I would use for my figures, and to present to the clients. I choose two to three that I find to be most relevant, and gets the highest traffic and cost per click.
2b.) Using the keyword information in the pricing formula:
Now I have two keywords selected that get a good amount of traffic and would be highly relevant to finding an apartment in evansville indiana. We see that the combined traffic of both keywords would equal 24700 searches per month. What I do with that is get the mean value of traffic of the selected keyword. The way to find the mean value is to simply take the sum of the traffic for the keywords, and then divide that by the number of keywords used.
In this case it would be (14,800 + 9,900) / 2
which results in a mean value of 12,350 searches per month. The key is to then take that number and and decide how much of that traffic would your services help to convert into sales.
3.) Key statistics to consider when formulating the price:
One is that many people search the same thing multiple times before making a decision about it. This means we can't go off assuming that just because we have this juicy number of 12,350 means that we're going to charge them as if 12,350 separate people searched that term in a month.
Another is that just over half the people who search on the internet look at reviews made by others or that over three quarters of them trust user reviews over 'expert' reviews and believe that online reviews are the most trusted form of advertisement.
Consumers are actually willing to pay higher prices for businesses that get good reviews. (7878)
4.) Using all these figures to generate our price:
Earlier I calculated the mean number of monthly searches for the keywords I selected. So now we have a base number to work with: 12,350. Let's now take this number and apply the statistics I mentioned earlier.
Since there is no solid figure that defines how many times people search for something before they make a decision, we will have to use our heads and a bit of logic during this step. What I would do in this situation, since we're talking possible places of living, is assume that those conducting the searches are going to thoroughly research their options. Taking that into consideration I would assume they are searching the keyword more than a few times. What I'm going to do is generate a number based on 10, 15, and 20 times.
12,350 / 10 = 1235 so close to 1200 people
12,350 / 15 = 823.33 so close to 800 people
12,350 / 20 = 617.5 so close to 600 people
The next step is to take this number and then apply that just over 50% of internet users look at reviews online.
1200 / 2 = 600
800 / 2 = 400
600 / 2 = 300
Then we take that figure and apply that over 75% of these people are using these reviews to make their decision.
600(.75) = 450
400(.75) = 300
300(.75) = 225
So now we've dwindled down those searches to a figure that seems much more appropriate and accurate than the original 12,350, so basically at this point you decide which one will be the most appropriate to go off of.
4.a) Using this information to select an appropriate price and pitch it to the prospect:
At this point in the game is where we do the real number crunching to come up with the price. What I like to do to pitch these figures to the prospect is thoroughly walk them through this process of applying the logic and statistics to get down to our final number (450, 300, or 225) and then explain to them at they are standing to lose this many potential customers in the current state of them getting poor reviews.
I like to keep my price around what I like to keep my adsense CTR at, under 2%
So you've now shown them what they have to gain with your services, now here's the logic behind the price.
At the apartment complex that is targeted in this scenario, the average monthly rent for their places is $425. So if they stand to gain 300 potential customers by using my services, they could potentially gain (in the best case scenario) $127,500 worth of business. Applying my 2% or less rule, I'll go with 1%. So, I would charge them $1,275 per month under the understanding that they stand to gain much more.
Well everyone, there is an example of how I would approach pricing for a customer that is based on some real figures and not just "what sounds good". If you want to come in here and say that this is a bad method or that nobody should pay attention, thats fine.. but just remember to read the title and realize that I'm not boasting this as some groundbreaking method.. just a look at how I do things.
It seems like a common method is to check your competitors prices and simply just be cheaper than them. While it is key to know your competitors prices, your prices only need to be based on them in the loosest sense.
I'm going to break it down step-by-step on how I price my clients. Its not quick and easy, it requires effort and dedication, but your clients will also see that you priced your services to them objectively, and not subjectively.
1.) Know your personal limits and boundaries:
This is really a one time step, but I think it is an important one. First set your minimums, and your maximums. When conducting a sales pitch, it is always good to have your lowest and highest prices hammered into your brain. If the lowest you'll offer your work for is $400 per month, then have that mindset when discussing prices.
If your potential client tries to work you down to something lower, don't. If you're working for less than you think your work is worth, you aren't going to want to put as much effort into the client which can never lead to good things.
On the other hand, know your highest limits just as well. Figure out what you think your skill set and/or resources can justify. If your client feels that they're paying a pretty penny for sub-par work, problems will arise.
My personal boundaries are no lower than $450/month but no higher than $2000/ month
2.) Know your client, or perspective client:
Getting to know your client, and more importantly their business, is done in two ways. Both are great to do, but only one is completely necessary.
The first way is to actually get to know the person who you are working with. Clients will be more comfortable giving their money to someone they've spent some time with.
The other way is to do some research on their business that will give you hard numbers to figure out your pricing with. The first bit of research I do is to find keywords that I think potential customers of their business would find them by searching.
2a.) Finding the best keywords:
The tool I use for this is simply Google keyword tool. Its fast, and my clients know who Google is. Here I've included an image showing the two keywords I would use for my figures, and to present to the clients. I choose two to three that I find to be most relevant, and gets the highest traffic and cost per click.
2b.) Using the keyword information in the pricing formula:
Now I have two keywords selected that get a good amount of traffic and would be highly relevant to finding an apartment in evansville indiana. We see that the combined traffic of both keywords would equal 24700 searches per month. What I do with that is get the mean value of traffic of the selected keyword. The way to find the mean value is to simply take the sum of the traffic for the keywords, and then divide that by the number of keywords used.
In this case it would be (14,800 + 9,900) / 2
which results in a mean value of 12,350 searches per month. The key is to then take that number and and decide how much of that traffic would your services help to convert into sales.
3.) Key statistics to consider when formulating the price:
One is that many people search the same thing multiple times before making a decision about it. This means we can't go off assuming that just because we have this juicy number of 12,350 means that we're going to charge them as if 12,350 separate people searched that term in a month.
Another is that just over half the people who search on the internet look at reviews made by others or that over three quarters of them trust user reviews over 'expert' reviews and believe that online reviews are the most trusted form of advertisement.
Consumers are actually willing to pay higher prices for businesses that get good reviews. (7878)
4.) Using all these figures to generate our price:
Earlier I calculated the mean number of monthly searches for the keywords I selected. So now we have a base number to work with: 12,350. Let's now take this number and apply the statistics I mentioned earlier.
Since there is no solid figure that defines how many times people search for something before they make a decision, we will have to use our heads and a bit of logic during this step. What I would do in this situation, since we're talking possible places of living, is assume that those conducting the searches are going to thoroughly research their options. Taking that into consideration I would assume they are searching the keyword more than a few times. What I'm going to do is generate a number based on 10, 15, and 20 times.
12,350 / 10 = 1235 so close to 1200 people
12,350 / 15 = 823.33 so close to 800 people
12,350 / 20 = 617.5 so close to 600 people
The next step is to take this number and then apply that just over 50% of internet users look at reviews online.
1200 / 2 = 600
800 / 2 = 400
600 / 2 = 300
Then we take that figure and apply that over 75% of these people are using these reviews to make their decision.
600(.75) = 450
400(.75) = 300
300(.75) = 225
So now we've dwindled down those searches to a figure that seems much more appropriate and accurate than the original 12,350, so basically at this point you decide which one will be the most appropriate to go off of.
4.a) Using this information to select an appropriate price and pitch it to the prospect:
At this point in the game is where we do the real number crunching to come up with the price. What I like to do to pitch these figures to the prospect is thoroughly walk them through this process of applying the logic and statistics to get down to our final number (450, 300, or 225) and then explain to them at they are standing to lose this many potential customers in the current state of them getting poor reviews.
I like to keep my price around what I like to keep my adsense CTR at, under 2%
So you've now shown them what they have to gain with your services, now here's the logic behind the price.At the apartment complex that is targeted in this scenario, the average monthly rent for their places is $425. So if they stand to gain 300 potential customers by using my services, they could potentially gain (in the best case scenario) $127,500 worth of business. Applying my 2% or less rule, I'll go with 1%. So, I would charge them $1,275 per month under the understanding that they stand to gain much more.
Well everyone, there is an example of how I would approach pricing for a customer that is based on some real figures and not just "what sounds good". If you want to come in here and say that this is a bad method or that nobody should pay attention, thats fine.. but just remember to read the title and realize that I'm not boasting this as some groundbreaking method.. just a look at how I do things.
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