The minefield of pricing decisions - part three

Pricing for beginners. That’s not for beginners as in ‘I’m still trying to work out what service to offer’ kind of beginner. It’s about the very beginning of your journey into entrepreneurship. The doors have just opened and you are ready to roll. 

How does one approach the idea of pricing when starting off a business. This is a hotly debated topic. Do you offer a whole range of discounted options to entice a bunch of people to try out your widget or give your service a try-out? Or do you set out your fees in full without budging into discount-land.

Either option is actually going to work. Offering to work for nothing or next to nothing will provide you with a list of customers who might or might not refer you. You will work long hours for no return. 

However, if you offer your service at the full rate, you might end up having little to no work for some time. Either way you starve and it takes time to build up a customer base. And that is the nature of the beast. 

Is there another way? Oh yes. You can spend a lot of money on advertising and it will definitely speed up the process. Most people don’t have that luxury. So what to do if there is no budget for advertising. 

The trick is to really decide for one or the other.  I have always believed that discounting rates too much can be dangerous. It sets a precedent. The better idea is to offer your service for nothing. Give it away. Establish a reputation. Yes, there will be times when you will have some really dud clients who are in it for the free ride.

However, giving a full service to a customer, even if it is free will give you a string of brownie points which will eventually lead to paying clients. If you start discounting your rate, you end up never getting out of that discounting groove. Your referrals will insist on receiving the same discounted rate. It becomes a treadmill off which you can but fall.

So discount rates are out then? Not entirely. One of the best areas to offer discounts is as an incentive for repeat business. You want your clients to stay with you for a very long time. In fact one of the better ways of growing your business is to ensure that there are add-ons to your product or service that you can offer either straight away as part of a bigger package, or ones for future development.

The cost of getting your clients in the first place, in this instance working for free, can then be spread over several selling opportunities. It could even be that your initial free clients end up paying for that add-on service.  A one-off sale means constant customer sourcing.  By extending your product range you are able to sell yourself to an existing customer base with whom you have already built a relationship.

Having said all of the above, there are many instances where discounted fees have really worked very well. So do take this particular bit of advice cautiously and evaluate your own personal position to see what would work the best for you. 

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