Avoid These Pricing Red Flags with John Ray
Oct 01, 2024In the latest episode of "Keep What You Earn," Shannon sat down with pricing expert John Ray to discuss common pricing pitfalls and how to effectively articulate and set value-based pricing for service professionals.
Pricing is more than just slapping a number on your services. It's about understanding your value and how to communicate that value to your clients. Many entrepreneurs, especially those in service-based industries, struggle with pricing. They often fall into the trap of billing by the hour, which can severely undervalue their offerings. According to John, "The hour, if you're billing by the hour, that's an input that has nothing to do with the value that the client realizes and internalizes."
Shannon emphasized that her own struggles with pricing were rooted in a misalignment between the effort expended and the value provided: "Pricing profitably is just one dimension of it. But I think that we always tend to price based on our effort and price based on how long it takes us."
John pointed out some common red flags that indicate you might have a pricing problem: too much work for too little money, having too many clients for the revenue, and marketing that focuses on you, not the client. When your marketing highlights what you do rather than the value and transformation you provide, you attract price-sensitive clients who are likely to haggle over rates. Shannon discussed how these issues resonate with many service professionals, "We all are. I think this is something. I'm really looking forward to this conversation."
One of the most significant mistakes service providers make is equating time spent with value delivered. John likened this to building a deck: "It's like pricing that deck based on the lumber. I mean, that has nothing to do with the value that I'm now realizing from that deck setting out on it." Instead, entrepreneurs should shift their focus to the outcomes and transformations their services provide. For instance, Shannon shared an example from her practice: "I am not $1,000 an hour person. I'm a $2,000 for a path to a million dollars." Framing the pricing in terms of the value or outcome helps clients see the broader picture and understand what they are genuinely paying for.
Service professionals often undervalue themselves because they don't recognize the worth of their expertise. John suggests having deeper conversations with clients to understand their real needs and the hidden, intangible values they derive from the service. "Your clients tend to value you more than you value yourself," he noted, encouraging entrepreneurs to lean into these value-based discussions. Shannon echoed this sentiment, recounting how reframing her service descriptions led to better alignment with clients' perceptions of value. "Their one question that your client has to answer, is it worth the outcome for the price?"
Practical tips for better pricing include talking to clients to understand their needs and the value they place on your services, focusing on the outcome instead of time spent, curating marketing to highlight transformative value, and leveraging client testimonials to showcase real-world impact. John summed it up perfectly: "Our impatience to get to the consultation... is what stands in the way of better understanding of value and the ability to effectively price that value."
By taking the time to understand both tangible and intangible values you bring to your clients, and framing your pricing within this context, you can overcome common pricing pitfalls and set yourself up for sustainable success.
Stay tuned for more insightful episodes of "Keep What You Earn," and don’t forget to check back for part two of this engaging conversation with John Ray. Until next time, remember that understanding and articulating your value is key to keeping what you earn.
John Ray is a consultant and business coach who advises consultants, coaches, attorneys, and other services professionals on what are often their two biggest problems: pricing and business development. John's #1 national best-selling book, The Generosity Mindset: A Journey to Business Success by Raising Your Confidence, Value, and Prices, covers topics like value and adopting a mindset of value, pricing your services more effectively, proposals, and essential elements of growing your business. John is also a Studio Owner, Producer, and Show Host with Business RadioX®, and works with business owners who want to do their own podcast. John is the host of North Fulton Business Radio and The Price and Value Journey, and he has hosted and/or produced over 2,200 podcast episodes.
Go to thegenerositymindset.com to learn more about John’s book and to buy it.
Website: www.johnray.co
What you'll hear in this episode:
03:28 Lacked business resources; passionate about helping others.
08:59 Start by discussing client needs, not selling.
10:14 Service-based businesses struggle with setting initial pricing.
15:14 Intangible value often boosts business owners' ego.
17:03 Judgment-free zone emphasizes clear communication and value.
21:22 Power sessions now results-based, not time-based.
If you like this episode, check out:
Lowering Your Price to Sell More?
Product or Experience - What is More Important?
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