Episode 131 on the Business Bites Podcast
Product pricing. A scary, but necessary part of owning a business. How do you make sure you’re pricing your product or service right? In this episode, Mike McDermott, founder of FreshBooks, lays out two ways you should be thinking about your product so you aren’t undervaluing yourself.
Value of a product or service is determined by the customer, and is what will drive the price. An easy way to think about this is to frame value as time saved. And this is often higher than what you think. Why? Because you know the ins and outs of your product/service. The time it saves you will not be the same as the time it saves them. For example: they won’t need to spend hours searching the internet for an answer.
People will pay for price certainty. They will pay for the peace of mind of knowing the exact cost of something. So, stop charging hourly. This puts you and the customer against each other, rather than on the same team. It also doesn’t cause the customer to have to guess how much money they will end up spending on your service.
Remember: these are your products and services. They are specific to your company. Do not price them based on the prices of other companies. That may undercut the value, and lead you to undersell yourself.