The price is right

One of our toughest challenges is setting the right price for our services.

Price too low, and we risk undervaluing our work and attracting clients who don’t appreciate quality.

Price too high, and we might scare away potential clients.

So, how do we find that sweet spot?

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The Pricing Dilemma

Many freelancers grapple with this pricing dilemma. It’s a common problem where even experienced professionals struggle to balance competitiveness with profitability.

Traditional methods like market research or competitor analysis often leave us with more questions than answers.

They can provide a range but not the specific, optimal price for our unique services.

What Most People Try (and Why It Doesn't Work)

Typically, freelancers resort to two main strategies:

1. Copying Competitors: Looking at what others charge and setting a similar price.

2. Cost-Plus Pricing: Calculating costs and adding a desired profit margin.

While these methods offer a starting point, they often fail to capture the true value of our services in the eyes of clients.

• Copying competitors might lead us to undervalue or overprice our offerings.

• Cost-plus pricing doesn't consider the client's perception of value, which is crucial in service-based industries.

Introducing the Van Westendorp Pricing Model

This is where the Van Westendorp Pricing Model shines. Developed by Dutch economist Peter Van Westendorp, this model helps determine the price range that customers perceive as acceptable.

It’s a straightforward approach that involves asking potential clients four simple questions about pricing:

1. At what price would you consider the product/service to be so expensive that you would not consider buying it? (Too expensive)

2. At what price would you consider the product/service to be so inexpensive that you would feel the quality couldn’t be very good? (Too cheap)

3. At what price would you consider the product/service to be starting to get expensive, so that it’s not out of the question, but you would have to give some thought to buying it? (Expensive/high side)

4. At what price would you consider the product/service to be a bargain—a great buy for the money? (Cheap/good value)

By analyzing the answers, you can pinpoint four critical price points:

1. The optimum price point (OPP)

2. The acceptable price range

3. The point of marginal cheapness (PMC)

4. The point of marginal expensiveness (PME)

5. The Indifference pricing point (IPP)

This helps you set a price that clients perceive as fair and valuable.

Why the Van Westendorp Model Works

The Van Westendorp Pricing Model works because it focuses on the client's perception of value.

Unlike traditional methods, it doesn't just look at costs or competitors but directly involves potential clients in the pricing process.

This ensures the price you set aligns with what clients are willing to pay while still reflecting the value of your services.

Setting the right price is more art than science, but tools like the Van Westendorp Pricing Model can provide the guidance we need to hit that sweet spot.

By understanding client perceptions and expectations, we can price our services to reflect their true value, attract the right clients, and ensure our business thrives.

Until next time, happy freelancing!

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Philip Wallage — philipwallage.com
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