This is post number 4 of a series of posts going through 2020 Day 21: Surfing Universes – Life Coach – 60 Needs that Healers Have. I’m focusing this series on individual healers serving other individuals.
In 2020 Day 26: Helping Healers identify products and services to offer I offered some questions that you can ask yourself in order to brainstorm and narrow down the products and services you wish to offer to your desired target market. In this post, I’d like to discuss how to determine a price to charge for your products and services.
For a sustainable business, the price you charge for a product or services needs to be greater than the cost to the business and less than the amount that the customer is willing to pay. The amount the customer is willing to pay is different than the value to the customer. The customer may not even be aware of the actually value of the product or service. In fact, it may have no value or infinite value, and both the healer and client may be unaware of the true value. What does matter somewhat is the customer’s perceived value of the product or service in the moment that they commit to purchase the product or service.
Cost of Product/Service < Price of Product/Service < Price Customer Will Pay
Price Customer Will Pay < Customer’s Perceived Value
While it is difficult to determine the value of a product or service to a customer, especially for those in a healing profession, it is not difficult to determine the customer’s perceived value. This can be done easily by setting different prices for a product or service and seeing how many people pay that price. If you want to geek-out on this, you can calculate and graph the price elasticity of demand for each of your products and services. I would encourage you to have an intuitive feel for how changes in price affect the demand for your offerings. This will give you information either about your customer’s perceived value of your products/services or their ability to pay.
Price Customer Will Pay < Customer’s Ability to Pay
It’s good to know which of these, your customer’s perceived value or their ability to pay, is more of a factor in limiting the price your customer will pay. You can gain information on this by offering a sliding scale along with trying different top prices. You can also gain information on this through adopting a “gift” price determined by the customer.
For the minimum price to charge, you must know the full cost of your product/service. If it’s a product, it will have a Cost-Of-Goods-Sold (COGS) amount which includes the total per-item cost of the product. You will also have the overhead for you business which includes all of the fixed costs that don’t directly depend on the amount of products/services you sell. Advertising is best considered as a separate cost. Ideally, you would have focused advertising and track your advertising costs for each product/service. Then you can more easily calculate your Advertising Cost of Sales (ACoS) for each product/service. For services, the COGS should include the total costs of the employees, including yourself, who are providing the services. Your per item Profit will then be your Price charged minus the COGS and ACoS.
Profit = Sales of Product/Service – COGS – ACoS