Over at Scoutie Girl, I write a lot about mindful spending. In other words, encouraging others to think about where their money goes and what kind of goods or services they get in return. And today, thinking about my own issues with pricing and then reading a fantastic article by Dave Navarro (no, not that Dave Navarro) on pricing to build a success identity, it hit me:
mindful earning is just as important as mindful spending.
Here’s an example of how price will affect the mindful consumers checking out your business:
An independent sandwich shop that my husband and I used to frequent quite regularly recently put up a gigantic sign advertising that all of their sandwiches were now $5.
Really?! The reason we used to frequent this shop is because they offered good food at a reasonable price ($7-9 for a sandwich). The sandwiches were creative, contained good ingredients, and were always prepared fresh. My gut – quite literally – tells me that those things can’t all be true if the sandwiches are now $5.
Something’s gotta give.
So, instead of that sign inducing a visit for delicious sandwiches, I’ve avoided it – and probably won’t go back.
The first problem here is that I am that joint’s target customer. I like good creative food, made out of good ingredients, and if it’s prepared fairly quickly all the better. They lost their target customer by dropping their price. I wouldn’t be surprised if traffic has suffered because of the price – and because the price is lower, they don’t have as much margin to accommodate for a dip in traffic. Will they be able to sustain their business if they are missing out on their target customer? Doubtful.
The second problem is that by lowering their prices they are almost certainly unable to pay or maintain their staff adequately and unable to purchase quality ingredients. That affects others livelihoods & businesses. They are hurting their supply chain because they’ve devalued their product.
By pricing their product to the lowest common denominator, the sandwich shop has moved away from sustainability. And it’s probably hurt others in doing so.
setting prices with a conscience.
Pricing is a cornerstone of creating a sustainable business model. It is also one of the least understood (by me included!) and most terrifying parts of building a business – especially one that thinks big.
But pricing is an amazing tool for communicating who you are & what you do to the right people. Pricing is a tool for creating a business that sustains you, your family, your business partners, and the wider economy. Setting a fair price – to you & to your customers – is the key to have a successful, sustainable business.
Rule #1. Price your services or products at what your ideal customer expects to pay for them.
Your ideal customer is not you. You won’t pay much for your service because you can do it yourself. Your service has no value to you. If, in your mind, your ideal customer is yourself, reevaluate your ideal customer right now.
Your ideal customer is someone who puts a great value on the service or product you offer. You are saving them countless hours of their valuable time. It’s your job, though, to mindfully consider what your service is worth to them. Set your price at this value and not a penny lower.
When you set your prices lower than what your idea customer expects, many will question your product or service. They’ll question your expertise. They’ll question your ability to drive results. They’ll question your quality. No – this isn’t a fear that big box stores have, but you’re not a big box store. You are a business that is completely reliant on your own reputation. Your prices – mindfully set – reflect on your reputation.
Rule #2. Price your services or products according to the pace you can sustainably maintain with your business.
If your prices are too low, you will be forced to work unsustainable amounts of time or be forced out of business entirely because your margins are so low. Having reasonable prices contributes to the sustainability of your business over time.
To be mindful about your earning power, you really need to come to terms with what your goals for your income are and how that affects your ability to do business long term. You also must consider your goals for how you will contribute to the greater economy. What services or products (whether necessary or frivolous) do you want to purchase from others? What kind of home do you want to live in? Will your business be employing others?
These decisions are not made in a vacuum. If you put a cap on your own earning by setting your prices too low, you are in essence being negligent of your responsibility as a contributor to the economy. Your role in society is limited.
Rule #3. Price your services or products with your colleagues in mind.
Mindful earning takes into account the price your colleagues – or if you prefer, competitors – charge. When you mindlessly engage in price cutting to attract customers that don’t really want your product or service, you start to devalue the whole industry. You deflate the true value of what you and others do.
Your business becomes less sustainable and again, you put a cap on your own income potential.
If you really feel that your business isn’t worth what others are charging, you probably need to reevaluate the service or product that you’re offering. But more likely, you are unfairly judging your experience & value to a customer in relation to another producer’s value. Been there, done that. Try not to do it anymore…
Pricing wars don’t help anyone – including customers. Charge what your service is worth, expect others to want to pay that price.
but what does it all mean?
Earning money, and sizable sums of it, is not a crime. Charging what you need to stay in business, help grow your industry, and give back to others through your own purchases is an essential part of growing a sustainable business that has a conscience.
Earning money mindfully means that you and your business contribute to the larger economy in the best possible way!
Don’t be afraid to earn what you’re worth. Don’t be afraid to grow your business for the benefit of yourself and others. Be truly mindful of what you need to earn and build your business accordingly.
Like this post? You’ll love Megan’s post on how earning more means there’s more to give!