In 2020 Day 28: Helping Healers determine what to charge for their offerings, I discussed how to determine what to charge for products and services. I presented a couple of equations:
Cost of Product/Service < Price of Product/Service < Price Customer Will Pay
Price Customer Will Pay < Customer’s Perceived Value
I also noted that it can be difficult to determine the customer’s perceived value of a healer’s offering. If measured by the benefit to the customer, the value could be unbounded in many cases. However, often customers use the price of similar offerings to create a perceived value without considering the actual value to the customer. For instance, if a customer can find multiple places offering $50 one-hour massages, then they may come to perceive the value of a one-hour massage at $50.
A different way to determine a customer’s perceived value is to give customers a coupon for any one of a group of products and/or services and see which one they pick. With enough coupons, this will give you relative values of your products and/or services.
A third way is to just ask your customers how much they value your offerings. Understand the non-monetary value in as much detail as possible. From this you may be able to find competing offerings that would give the customer the same non-monetary values.
If your offering requires your customer to commit a certain amount of their time, then you need to factor in how much your customer values their time. Imagine a customer who makes $100/hr after taxes. Then they are already spending $100 of their time for a one-hour massage. Whether they consider this consciously or not, these customers will normally be less price sensitive than someone who values their time at only $25/hr after taxes. This is not just a factor of the amount of disposable income each person has. It is related to how much they value their time.
The perceived scarcity of your offering will greatly affect its perceived value. If your offering is seen as a commodity, then it will have a value similar to that commodity. If your offering is seen as one-of-a-kind, then its value is determined by your offering price and the demand from customers who can afford your price.