Pricing your services can be one of the most challenging aspects of running a service-based business. Many new entrepreneurs struggle with this, often underpricing their offers or even giving them away for free out of fear that no one will pay what they’re worth. However, understanding the psychology behind pricing can help you confidently set prices that reflect the true value of your services and attract the right clients.
One of the most important aspects of our Profit Path, Profit Framework is helping our clients create irresistible premium offers that align with the value they deliver. Throughout this article, we’ll explore the key considerations for pricing your services and invite you to take the next step in mastering this critical business skill.
Why People Pay: The Value Equation
People don’t pay for a product’s look or packaging—they pay for the solution it provides. According to Alex Hormozi, a successful pricing strategy is built on what he calls the “Value Equation,” which is about maximising perceived value and minimising perceived cost. The Value Equation breaks down into four key components:
Dream Outcome: What is the ultimate goal your customer wants to achieve? This is the most important part of your offer. The bigger and more desirable the outcome, the more people are willing to pay.
Perceived Likelihood of Achievement: How confident are customers that they will achieve this outcome? The higher their confidence, the more they are willing to invest.
Perceived Time Delay: How quickly can customers expect to see results? The shorter the time frame, the higher the perceived value.
Perceived Effort & Sacrifice: How much work do customers need to put in to achieve their goal? The less effort required, the more attractive your offer becomes.
By increasing the first two components (Dream Outcome and Perceived Likelihood of Achievement) and decreasing the last two (Perceived Time Delay and Effort & Sacrifice), you create a highly compelling offer that justifies a premium price.
Things to Consider When Pricing Your Offer
Now that you understand the Value Equation, here are practical steps to consider when pricing your services:
Understand Your Market: Identify who your ideal clients are and what they value most. Are they more concerned with saving time, achieving specific results, or reducing effort? Tailor your pricing to reflect these priorities.
Focus on Outcomes, Not Features: Clients pay for results, not the features of your service. Ensure your pricing reflects the tangible outcomes you deliver, not just the processes you use.
Anchor Your Prices: Use a pricing anchor by introducing a high-end version of your service. This can make your standard offer seem more affordable in comparison, while still reflecting the premium value of your work.
Use Value-Based Pricing: Instead of basing your prices on cost or competitors, set them according to the value you provide to your clients. If your service significantly improves their lives or businesses, your price should reflect that.
Test and Adjust: Pricing isn’t static. Regularly review and adjust your prices based on market demand, your growing expertise, and the outcomes you deliver.
Throughout our Profit Path, Profit Framework, we emphasis the importance of pricing your services correctly to create irresistible premium offers. This ensures you meet your revenue goals while delivering exceptional value to your clients.
Practical Exercise: Apply the Value Equation to Your Offer
To make this practical, let’s walk through a brief exercise. Answer the following questions about your service:
Dream Outcome: What is the most significant result your client will achieve by using your service?
Fill in the blank: My service will help clients achieve [desired result].
Perceived Likelihood of Achievement: What proof can you provide that clients will achieve this result?
Fill in the blank: Clients have a high chance of achieving [desired result] because [proof or case studies].
Perceived Time Delay: How long will it take for clients to see the results?
Fill in the blank: Clients can expect to see results in [time frame].
Perceived Effort & Sacrifice: How easy will it be for clients to achieve the desired outcome?
Fill in the blank: Clients will find it easy to achieve [desired result] because [low effort or done-for-you services].
By filling in these blanks, you can start to craft a compelling narrative around your pricing that resonates with potential clients.
Conclusion
Pricing your services is more than just picking a number—it’s about understanding the psychology of value. By applying the Value Equation and considering what truly matters to your clients, you can set prices that not only reflect the worth of your services but also attract the clients who are willing to pay for the outcomes you deliver.
If you’re ready to take your business to the next level and create an irresistible premium offer, we invite you to join our next cohort of the Profit Path Group Coaching programme.
Book a call with me or one of my coaches to assess your business and see if you’re a good fit for our programme. Together, we’ll help you unlock the true value of your services and achieve your financial goals.
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