Justifying a higher price for your services

One of the biggest objections you'll likely receive in your business is the price. "This sounds great but it costs too much" or "Is there anything you can do on the price?" are common objections that you'll have to overcome at some point or another.

Competing on price is not a good strategy.

As soon as you choose price as a competitive advantage instead of value, you enter a race to the bottom. A race that can only result in slashed profit margins, problem customers and the inability to devote proper resources to your clients.

What's more, the customers that only care about price tend to be the customers that are never satisfied. They always want something more for their money. Because they value price over value, they will squeeze you for every penny. In reality, customers that refuse to recognise the value for the price they pay, are probably not the best-fit customers for your business.

But what about companies like Amazon, EasyJet and Aldi that compete on price? Well, when a company reaches a certain point (billions of dollars in revenue) and usually in fast-moving consumer industries, they can take advantage of huge economies of scale, buying in bulk and selling in bulk.

For service businesses focused on driving end value for clients, this simply isn't an option. You are not offering a commodity, you're offering premium value.

Leave price competition to your competitors in the endless race to the bottom. Focus on premium value and not only will you increase your profit margins, but you'll also maximise the resources that you can devote to your customers and ensure they receive the very best service possible.

A higher price indicates higher value

When you need to shop around for products and services like household items, cars, cosmetics, jewellery or coffee. Do you always buy the cheapest option? Probably not. Because the cheapest almost never means better quality.

In the same respect, you need to make it clear to your customers that your pricing is premium because your service is premium. When that price objection comes up, and it will... Instead of heavily discounting and entering the race to the bottom, focus on the value you provide instead that justifies the higher investment in your services.

Loopback to the reasons why your service costs more, such as:

• We devote extra resources to your account to make sure that we deliver on your expectations.
• We put extra investment into higher quality people to serve you and your business.
• We have a proven track record in delivering results for hundreds of clients just like you with case studies to back it up.
• We invest more into research and development to produce a better product or service for you compared to the competition.
• There are no hidden costs such as time or extra investment to fix mistakes that cheaper services providers might make as a result of not devoting enough resources to you.
• We are not the cheapest solution, because we focus on driving as much value as possible for you, the client. And that means investing in you to achieve that.

There are many reasons why your premium service is justified. Sell the value and you justify your higher price point, and even though the investment is greater, the value far outweighs that of the competition.

Should you ever negotiate on price? Maybe. Here are some tips if you do.

Negotiating on price is a personal decision and depends on a variety of factors like your profit margins and the scope of work you provide. Sometimes you can come to a win/win with clients, and sometimes they just want a small discount. It goes without saying that you need to make sure there is enough profit in it to make it viable, otherwise you're better off just saying no and focusing on a client that will pay you properly.

But if you do get into a little price negotiation...

One way to negotiate on price is to clearly explain that a reduction in price, means that you will need to reduce some of the services that you provide to the client. Thus maintaining the balance of fair exchange. Maybe this will be ok with the client, or maybe they will decide they want your full-service offering.

One thing to avoid when negotiating on price is offering blanket discounts such as 10% or 20%. Instead offer 3.5% or 6.2%. This shows your prospect that a) There is really not much wiggle room in the price and b) You will not engage in major price reductions just to compete.

You may also be able to work out payment plans or referral incentives to sweeten the deal for your customers without sacrificing your profit margins.

Remember, that if you believe in what you're selling. If you know the quality is there, then resist the urge to compete on price. Focus on the value you create that justifies that price.