Home
>
Small Business
>
Setting Prices - Pricing Your Consulting Services

Setting Prices - Pricing Your Consulting Services

THE PSYCHOLOGY OF PRICING

In case you hadn't noticed, people can react very differently when faced with the same price for a product or service. In fact in most cases, we'll never actually know what is in their minds when they consider a price and then decide to respond to it in certain way. So what does that mean for those of us pricing and selling our services out there in the market?

Typically, people who sell services go for an hourly rate. They use a process called "reverse competition" to determine what their rate should be. This is where you take a look at what your geographical competitors are charging, and you decide where in the range you want to fit on the spectrum of hourly rates. Inevitably, we choose a rate somewhere in the middle, so we can say that we're not the most expensive, but neither are we the cheapest!

What kind of message are we sending out to our clients with this approach?

We're showing absolutely no differentiation from any other company ? just sticking ourselves straight down the line. In other words, we compete with everyone! Not a very prudent marketing decision.

So pricing simply using an hourly rate that sits in the middle of the spectrum is, in my view, a wasted opportunity to create a point of difference with your offering. Let's think more broadly for a minute about what we are actually offering to your clients: Regardless of what our specific offering is, we all offer some combination of:

Quality, Price and Service

QUALITY

Quality has become an expectation - the minimum you need to be in the game. It is similar to a high school degree - no one cares if you have one, but watch out if you do not. Quality is no longer an effective differentiator. So if you are going on about the exceptional quality of your service in your promotional material and sales pitch, just realize that in your customers eyes, you are not differentiating yourself in any way.

After all, no sane company is going to advertise the fact that the work they do is of average or low quality. It's all high, isn't it?

PRICE

There is absolutely nothing positive about competing on price, unless you specifically position yourself as a low-cost provider. Certainly, there is a market for the discount provider, but I believe this only works if you have a very high volume of transactions. As a service provider, the only sensible route is to obtain premium prices for your services.

No matter what you charge, there is always someone, somewhere, willing to perform the work you do for less money. Customers are value conscious, not price conscious. They look to do business with people they feel give them more than they are paying for. So the goal for the service provider is to make sure the customer perceives the full value of the service, not simply the price component.

Its accepted fact that many customers will equate high price with high value - especially when there is very little else to judge your value on.

Wise consultants know that if they price their services at the low end of the market, customers do not take their advice seriously. On the other hand, if you charge rates on the upper end of the spectrum, the customer will hang on every word you say and has a higher probability of implementing your suggestions. This of course has a proviso that you are offering a great service, rather than a mediocre one.

Sometimes the biggest hurdle to get over when considering charging premium pricing is our own attitude. Do any of these sound familiar?

'I can't charge those prices ? my customers will all walk away!' 'My service isn't worth that much'

As long as you stay in that mindset, you'll never make the transition to high end pricing. You must truly believe the value of what you offer - after all if you don't, why should your customers? More on this below in a discussion about articulating the value of what you do.

If you are selling good advice, and your customers listen carefully and implement it - they will be more successful and thus will value you that much more. It is a cycle that spirals upward: The more you charge, the more people follow your suggestions, the more profitable they become, the more valuable you are to them. This is a vicious circle that you definitely want to be part of.

SERVICE

The third component of your offering is service. In today's world, service is the ultimate differentiator and separates successful companies from mediocre companies. People will pay a premium for excellent service, and want to do business with companies who provide it. They want to build up personal relationships, know that their needs are understood, and do business with people who demonstrate integrity and value long term associations.

Successful businesses are in the relationship building game, and everything they do is aimed at strengthening connections and affiliations with potential and existing clients. This is where each of us can be different. No one can imitate our personal style and success at building and maintaining relationships.

In the long run, excellent service providers will prevail over mediocre "competitors."

Getting Away from the Hourly Rate Mentality

Before you do business with a new customer, you hold all the leverage in the relationship. After the services have been performed, the customer possesses the leverage. The lesson is that you want to set all of your prices when you possess the leverage - that is, before the engagement begins. This requires quoting fixed prices and removing yourself from the Almighty Hour mentality.

The minute you quote an hourly rate, you put a fixed limit on your earning potential. It's hard to increase an hourly rate once it has been set. The most successful service providers charge for the job as a whole, and don't reveal how many hours it will take to complete the job.

One of my clients - a management consultant ? bemoaned the fact that he always underestimated the hours required to complete a job, even when he added in extra time. When all the extra hours were added in, his hourly rate worked out to less than $50 per hour. At my suggestion, he began quoting prices by the job. After three months he conceded that on average, he was able to charge more for the whole job than when he quoted by the hour. His customers ? it seems ? perceived greater value when he outlined what the job consisted of, than when he simply quoted an hourly rate for his time.

Price Resistance

If you are in business, at some stage you will encounter resistance to the price you are charging. Your best option here is to help the customer understand the full value of your service, and the value or benefit they will get by implementing it. If you cannot conquer price resistance through educating the customer, then I would seriously suggest you not take the engagement.

Never decrease your price to get business from a customer suffering from price resistance. That cheats your best customers - those who value what you provide - and subsidizes your worst customers - those drawn to you by price considerations alone. Those will be the first customers to defect once they find - and they will - a service provider willing to do the work for less. You do not want to work for people who do not understand, or refuse to pay for, the value you provide.

Stay true and stick to your guns.

In today's world it is no longer relevant to talk in terms of hourly rates when positioning the price of your services. It's all about value you provide, and the perception of value in your customers'

Megan Tough - published writer, coach, facilitator and speaker - works with leaders and business people to create outstandingly satisfying and truly successful professional lives. Better leadership, improved personal effectiveness, and business plans that hum! To learn more and to sign up for more FREE tips and articles like these, visit http://www.megantough.com

affordable house cleaning Wilmette ..

In The News:

Archer Aviation has acquired Hawthorne Airport for $126M to launch an LA air taxi network ahead of the 2028 Olympics, featuring AI-powered eVTOL operations and next-gen aviation tech.

Stay up to date on the latest AI technology advancements and learn about the challenges and opportunities AI presents now and for the future.

Fake AI apps disguised as "ChatGPT" and "DALL·E" are flooding app stores with dangerous malware that steals data and monitors users without detection.

Fake buyers demand specific vehicle reports from unknown sites to steal credit card information from car sellers, but warning signs can help identify these scams before paying.

Android users can now manage apps across multiple devices more easily with Google Play Store's updated remote uninstall button in the latest update.

NASA's Perseverance rover discovers shiny metallic rock on Mars that could be a meteorite from an ancient asteroid, containing high levels of iron and nickel.

Holiday scams spike during Black Friday and Cyber Monday as criminals exploit your leaked personal data. Learn how to protect yourself from fake stores and phishing.

Commerce Department proposes TP-Link router ban over Chinese security risks. Learn how this potential prohibition could affect your home network and devices.

Hyundai AutoEver America suffered a data breach affecting 2,000 current and former employees, exposing names, Social Security numbers and driver's license information.

Washington court rules automated license plate reader images are public records, even when stored by vendors like Flock Safety, setting precedent for transparency.

Fake airline texts claiming flight cancellations are targeting travelers with convincing scams. Learn how cybercriminals steal personal data and credit card info.

Discover how iOS 26's new Adaptive Power feature automatically extends iPhone battery life by learning your usage patterns and adjusting performance intelligently.

New TikTok malware campaign tricks users into running PowerShell commands that download Aura Stealer, which steals credentials and authentication tokens.

Gaia Family offers fixed upfront pricing for IVF cycles with unlimited embryo transfers and financial protection, partnering with over 100 U.S. fertility clinics.

The Jetsons Act aims to position Pennsylvania as a leader in advanced air mobility by establishing regulations for hybrid ground-air vehicles.

Fake Geek Squad invoice emails are targeting users with convincing charges and urgent phone numbers to steal personal information and money.

Fox News Digital's artificial intelligence newsletter digs into a robot in Russia that faceplanted, George Clooney's alarm and OpenAI's rivalry with the New York Times.

Major data breach at Conduent exposes personal information of 10+ million people. Government contractor hit by cyberattack affecting Medicaid, child support systems.

Texas startup Janta Power raises $5.5M for innovative vertical solar towers that generate 50% more energy than traditional panels while using just one-third the land.

NASA's twin ESCAPADE spacecraft launched aboard Blue Origin's New Glenn rocket Thursday afternoon from Cape Canaveral, beginning their journey to Mars with arrival expected in 2027.

Learn how to set email reminders on iPhone and Android so you never forget to reply again. Simple built-in features help you stay organized and on top of messages.

Discover how Apple's passkeys revolutionize Mac security by replacing vulnerable passwords with biometric authentication and encryption for ultimate protection.

New survey reveals 78% of parents fear AI scams targeting their kids, yet nearly half haven't discussed these threats. Learn why this dangerous gap exists.

Chrome now autofills passport and driver's license info automatically. Google's latest browser update adds official document support with encryption and user control.

Scammers impersonate Department of Veterans Affairs employees claiming veterans owe money, but real VA communications only direct to VA.gov or official channels.

Setting Prices - Pricing Your Consulting Services

Small Business