Women in Business: Common Challenges: No1 - Pricing!
Over the last ten years, I've worked with hundreds of women helping them to start their own lifestyle businesses. These ranged from gardening to law, event planning to fundraising, dance schools to mobile nail bars, parenting classes to bespoke jewellery and botox/fillers to personal stylists!
Setting up on your own is exhilarating! You are your own boss and the successes and challenges are both yours to own. You learn as you go, trying things out, discovering what works. In my experience, there are three key barriers that I come across again and again. In this article and the next two, I want to share these with you and give you a way through, if any of them sound familiar to you.
The three baddies are:
1. How to cost your product
2. Managing customer expectations and
3. Confidence in selling or pitching your services
Let's take a look at them in turn.
1. Costing your product
We all know that the purpose of a business is to create and keep a customer, right? So, in order for someone to be a customer, they need to pay for our product or time. I find that women often feel uncomfortable talking about money. So much so that they can become quite unclear about what their work costs. One client of mine designs wonderful natural beauty products. They are made from the finest organic oils and shea butter and do wonders for your skin. What do they cost? "Oh, just give me whatever you think", she told me! No, no, no!
You determine the value of your product by:
a.) Researching the market. What are others charging? How does their product compare to yours? You need to do some competitor analysis for anyone who might also be trying to reach your target market. So, one of my clients makes blinds and curtains. We took a look at John Lewis' prices as well as more local competitors. We also discovered that she offers blinds with less seams and a faster turnaround than this major brand - these are both excellent selling points for her.
b.) Knowing your audience and geography - are you pitching to high-end retailers or are you selling at your local farmers market? Again, you need to know as much about your ideal customer and their buying preferences as you can. A young family will likely be more cost conscious than a single person in their late fifties. Do your clients want innovation? Good value? Luxury? Quality? And are there any geographical constraints?
I was recently in Hebden Bridge in Yorkshire. I enjoyed mooching around the lovely antique shops. Many of the bits and bobs sold there could have been sold in London for ten times the price. But there is a local ceiling to what the market will tolerate - lesson - context matters. This also applies to your 'channel' for distributing your product or service - if you have a shop, you will have a lot more expenses to cover than someone else who trades only online. The online provider can pass on some of their saving to the customer.
c.) Here's a nice simple way to work out how much of your product you need to sell, at what price, to make your business viable. First, uncover what the costs are for you to produce the item and then add your running costs and salary to these. Then divide this by the number or units or hours you are offering.
So, say, I am making my face creams and to make fifty costs me £300. Plus my travel, web hosting and insurance - say this is £200 per month. Then I need to earn £2000 before tax. Total: £2500.This then gets divided by the price your product commands in the market. Let's say £50 a pot. So each month, to make the sums add up, you need to sell 50 pots. If we reduced the price to £25 we would need to sell 100.
These simple sums make it easy for you to know how many units you need to sell to make a living. This, combined with research on the current market and the buying habits of your customer, can enable you to be clear and confident about your pricing.
Next week, I'll be looking at how to manage customer expectations - being clear, transparent, boundaried and delighting your clients and customers!
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