Navigating the Evolution of Your Pricing with Confidence
March 18, 2024
Pricing in business can feel like a constant balancing act between what you think your creative work is worth and what the market is willing to pay.
Sometimes, you might accidentally set your financial ceiling by assuming people will only pay what you believe you’re worth. This is a classic case of self-sabotage, where you’re unknowingly putting a limit on your earning potential.
But here’s the thing: as your business grows, so should your confidence in your pricing strategy.
It’s common to start with safe, low prices.
We’ve all been there, thinking we need to keep prices down to attract more customers. But as you get more experience and your business expands, you’ll see that your initial pricing might not cut it anymore.
It’s time for a change, and that’s perfectly normal.
But it can feel impossible to figure out your next move when it comes to pricing!
Changing your prices isn’t just about throwing a new number out and hoping it sticks! It’s about understanding your unique business – whether you’re selling products or offering services – and aligning your prices with your personal values and goals.
It’s about finding what works for you.
In this week’s blog, I’ll guide you through this process. We’ll explore different pricing strategies and I’ll share tips on how to enhance your mindset, so you can confidently set prices that reflect the value of your work and help you achieve your business goals.
Changing your pricing might feel intimidating, but it’s an essential part of growing your business. I’m here to help you navigate this process, so you can find a pricing strategy that not only makes sense but also feels right for you and your creative business.
The Traditional Pricing Path
Feeling like you’re constantly trying to nail down the ‘right price’?
It’s tempting to look for the perfect price by comparing your rates to everyone else’s. And while doing some competitor market research can be helpful, it shouldn’t dictate your pricing decisions. Prices aren’t universal. They vary with each business and market.
The key is understanding your options and making them work for your business and values.
Becoming familiar with common pricing models and their pros and cons is a solid start. It builds the confidence you need to strategically and intentionally set your own prices.
So let’s toss out that old, dusty pricing playbook. It’s time to write your pricing strategy in a way that’s right for you while understanding where your current pricing may be falling short.
Hourly Pricing
The familiar starting line. Trading time for money. It’s where most of us start out when we land that first job as a teenager- be it at the local boutique, coffee shop, or even as a freelancer.
But here’s the problem.
While hourly pricing is something we are all very familiar with, this model often limits your revenue potential.
Why?
Because the faster, better, and more efficiently you work, the less you make.
I call it the hourly pricing penalty.
There’s a ceiling to what you can charge per hour and how many hours you can work (there’s only 24 in a day— and I don’t recommend you try working them all) and as your expertise grows, this model starts to pinch.
This is why I encourage my clients to move away from hourly pricing models as soon as possible!
Cost-Plus Pricing
The next step up is often to shift to a cost-plus pricing model. Here, you set a fixed fee based on your hourly rate and estimated time, including materials, expenses, and your desired profit.
It feels different but, in all honesty, it’s hourly pricing in disguise. Again, your earnings are limited to the time you put in.
If this is what you feel comfortable with right now, it can often be a solid stepping stone to increasing your revenue potential and charging your worth as a creative entrepreneur.
Value Pricing
This is where the game changes. With a value pricing strategy, you price based on the perceived or actual value of your product or service.
Suddenly, the ceiling on your revenue potential is either significantly higher or, in some cases, the limit does not exist (gotta love a Mean Girls reference).
Other times, you may price lower, focusing on volume (a good example of this is subscription models!). This approach opens the door to making more money and, crucially, more impact.
For example, think about the varied pricing of handbags.
→ At Target, you can easily find functional, stylish handbags for about $20, appealing to those looking for value and practicality.
→ Step up to Coach, and prices jump to the hundreds, targeting customers who value brand and quality.
→ At the pinnacle are luxury Birkin bags, costing thousands, catering to an exclusive market that prizes rarity and top-tier craftsmanship.
Each brand’s pricing – Target’s affordability, Coach’s mid-range quality, and Hermes’ luxury exclusivity – reflects its ideal customer’s needs and perceptions.
This kind of pricing variation doesn’t only happen in product-based businesses. It’s also very common in service-based businesses.
Think of your options when you look to get a massage.
There’s a range from affordable to high-end.
→ The cheaper options are often chain locations offering basic massages – great for a quick, no-frills experience. It gets the job done.
→ Moving up in price, you find massages at local salons and spas. These cost a bit more and usually provide a nicer experience with more personalized care.
→ At the top are the luxury massage services. These are the most expensive, offering a premium, indulgent experience often in exclusive spa settings.
Essentially, the more you pay, the more luxurious and tailored the service becomes.
In your business, you get to decide which tier you’d like to focus on so you can target the right audience, position and market your offers strategically, and price accordingly!
COO Tip: I dive into each of these pricing models in more depth in my previous blog post, ‘Pricing For Profit.’ You can check it out here!
Mindset Shift: The Heart of Your Pricing Evolution
While it can be helpful to understand the different pricing models available to you as a business owner, the information is often useless if you don’t have the right mindset and confidence to claim your pricing and mean it!
Each step in this pricing evolution demands a corresponding leap in your mindset and personal development. You have to believe in yourself, your business, your product or service, and the value you are delivering to effectively sell at higher and higher price points or to serve a larger audience.
That kind of strong conviction and confidence are KEY to selling at each level. If you’re not confident in your worth, your audience won’t buy into it either— I swear, people can sense it!
Building Your Confidence
As a professional, your confidence is a key ingredient for success, especially when it comes to the often overwhelming task of pricing your services.
But how do you build this unshakeable confidence?
The answer is often found in two essential areas: client feedback and continuous professional development.
Connect with your clients
Start by talking to your current and past clients. Ask them how your work has made a difference in their lives, whether it’s boosting their income, making things run smoother, or just bringing them happiness. These stories are incredibly valuable.
Then, gather these positive experiences into testimonials and reviews. They’re not just nice compliments (although hearing good feedback always feels good). More importantly, they’re solid evidence of the value you bring. You can also consider creating detailed case studies from your most successful projects.
Showcasing these successes not only boosts your confidence but also acts as a powerful tool to attract new clients and help build trust in your offers and pricing.
COO Tip: If you aren’t asking for feedback and testimonials regularly, start now! It’s as simple as setting up a quick Google Form or sending an email. I always say– don’t wait until the end of a project to request a positive review. Instead, ask any time you and your client experience a win, no matter how big or small!
Invest in your professional development
Every course you take, every workshop you attend, and every certification you complete is like adding a shiny, new tool to your already impressive toolbox. But this isn’t just about collecting accolades to flash at your next networking event or on your LinkedIn profile.
The true value of professional development lies deeper.
These experiences serve as tangible, external validation of your ongoing skill development. This commitment to growth not only bolsters your expertise but also signals to others that you are a dedicated, evolving professional in your field.
People will more confidently invest in your offers when they can see evidence that you are, in fact, an expert. And you’ll have the confidence to name your prices and stand behind them without self-doubt or imposter syndrome!
When setting your prices, whether by setting your hourly rate or adopting the value pricing model, focus on the value you deliver. With a clear understanding of your impact and a commitment to developing your skills, you can feel validated in your pricing.
This way, you’re not just throwing out a number. You’re saying loud and clear, “I know what I bring to the table,” with the cool confidence of someone who knows the value of their work and isn’t afraid to claim it.
Selling and Positioning
As your pricing evolves, so should your sales and marketing strategy. With each shift in your pricing model, the way you sell and position your product or service must adapt.
This is especially true as you go from trading time for money to placing value on your expertise and impact.
For example, if you move from a cost-plus model to a value-based model, you’re no longer just the affordable option. Instead, you’re establishing your services or products as a more luxury experience.
This shift in positioning means you’ll likely need to re-evaluate your Ideal Customer Avatar (ICA). Your target market may now be those who value expertise and quality over just price or bargain-hunting.
Your Business Plan
As you can see, pricing changes will influence every aspect of your business.
For this reason, I urge you to revisit your business plan so you understand how these changes fit into the big picture of your business.
As your pricing evolves, so must your business plan. Think of your business strategy as a dynamic blueprint that adapts and evolves. It’s not a plan you just set and forget.
You need to keep it “alive” – much like nurturing your favorite houseplant – minus the watering can and sunlight.
COO Tip: Don’t have a business plan yet? Now is the perfect time to start! Plus– it doesn’t have to be complicated. I walk you through the process in this blog. Who knows–you may even gain more clarity around your pricing and offers in the process!
Strategic Pricing in Action
Shifting from hourly to cost-plus to value-based pricing involves more than just slapping a new price tag on your offers. Strategic pricing demands a significant boost in confidence, experience, and mindset, along with decisions that align with your personal values, capacity, and financial goals.
So, what does this look like in actual businesses?
To bring this concept to life, I’ll share two real-life examples from my work as a business coach for creatives.
These stories are about clients I’ve helped with their pricing. In each case, we found a pricing strategy that fit their unique business and personal goals. This custom approach led to success that was not only significant but also lasting.
Let’s dive into these stories to see how mindset and pricing strategies unfold in two very different creative businesses.
Product-Based Business: Pricing Products As a Maker
I worked with a client who ran a product-based business. She was a talented maker who sold her creations online through her website and Etsy, and at local artisan markets.
Initially, she thrived on selling small, low-cost items. But as her business grew, so did her ambition. She became passionate about creating more complex and labor-intensive products.
But, she was stuck in the mindset of low-ticket pricing – it was all she knew.
As a result, she priced these new offerings with minimal markup (yes, the prices were higher, but not much), barely covering the costs, let alone valuing her time and effort.
When these higher-value items didn’t sell well, she was stumped.
So, we took a step back.
It was clear that her current pricing strategy wasn’t sustainable. We embraced a ‘let’s see what happens’ approach and decided to significantly raise the prices of her new products.
This wasn’t a decision made lightly. We increased the prices by about 50% (the minimum in my opinion), bringing them closer to their true value. While this felt way outside of my client’s comfort zone, she was willing to give it a try.
And low and behold – sales improved dramatically.
Why?
Because the new pricing reflected the value and quality of her products.
Previously, the low prices had actually backfired! Her audience hesitated to buy because they doubted their authenticity and quality.
This often led them to wonder…
“How could something this valuable be so cheap?!”
“What’s the catch?”
By aligning the prices with the perceived value, we gained customer trust and eventually turned these items into a core offering for her business.
Ultimately, we didn’t just improve her sales, we also boosted her confidence in the worth of her creations.
Service-Based Business: Shifting from Hourly to Value-Based Pricing
Another client, a designer by trade, transitioned from freelancing to running her own service-based business before we started working together.
Initially, she stuck to an hourly model, but within a project fee structure that was more like a cost-plus pricing model.
This approach, though profitable in terms of sales, led her to overwork without meeting her ‘enough point’ – the amount of money she wanted to earn to cover her living expenses and comfortably live the lifestyle she desired.
While she was making the money, the lifestyle goals were falling flat. She had no time for herself, her personal passion projects, or life outside of work!
She was essentially selling more hours than there were in a day, leading to burnout.
Our coaching collaboration began with a simple proposition: I recommended she raise her rates by $250 per package so she could work less for the same, if not more, income.
She was skeptical at first, especially about our target increase of $250. She genuinely felt uncomfortable raising her prices so much.
So we compromised (at first).
To ease her into it, we started really small, increasing her pricing incrementally. We began with a modest $25 increase per project, which clients hardly noticed given the scale and scope of her services.
Over the next nine months, we gradually raised her package rates for her new clients in steps (I never like to encourage my clients to raise prices too often)– $50, then another $100, and so on, aiming for the $250 goal.
With each increase, her confidence grew as she realized these price increases didn’t negatively impact her ability to sell as she had feared.
Eventually, we surpassed the initial target, settling at an additional $275 per project!
This strategy not only achieved her financial goals but also allowed her to work less, reinvest extra funds back into her business, and select only the clients and projects that really lit her up!
Make Your Pricing Strategy Work for You
Effective pricing isn’t one-size-fits-all. It’s about finding what aligns with your goals, capacity, and the value you provide.
And if you’re feeling a bit tangled in numbers and strategies, don’t stress it.
I’ve crafted a range of resources, from free guides to premium tools, designed to demystify pricing for creative businesses.
A fantastic starting point? My 7-day time audit tool. It’ll help you see where your time goes and how to work smarter, not harder. This is the first step in taking your time back, and stepping out of the business overwhelm once and for all.
I also have several blog posts dedicated to the topic of pricing in creative businesses!
- Pricing for Profit
- Why Pricing Your Offers in a Vacuum is Dangerous and What You Can Do About It
- Does Your Creative Business Add Up?
- The Creative Entrepreneur’s Guide to Setting & Meeting Your Money Goals
For more tailored solutions, I’ve developed indispensable digital tools for both service-based and product-based creatives. Check out my Service Pricing Calculator and Product Pricing Calculator. These tools remove the guesswork from pricing by helping you factor in your time, hourly rates, expenses, and desired buffers so you can confidently stand behind your prices.
Want to really wrangle your numbers and zoom in on pricing? This mini-course offers a full suite of all the pricing tools I use in my business and with my 1:1 clients to plan for a profitable business. It’s an excerpt from my larger course with content that really packs a punch!
Ready for a deep dive? My comprehensive digital course, Business Building for Creatives, is more than a course – it’s a full-spectrum guide to everything art school didn’t teach you about making a living doing the creative work you love. From pricing to business planning, this course can help you successfully run the dream business you’ve built.
Your pricing strategy is dynamic, reflecting your market position and personal and professional growth. Embrace this evolution, and you’ll have the right mindset to not just meet but surpass your goals. With these tools in hand, you’re well-equipped for the journey ahead.
Remember, your confidence in your pricing resonates with your clients. When you believe in your value, they will too!
