Would you like to make more money by doing the same amount of work? Of course, everybody would. This is why “pricing your services” is such a hot topic amongst those who run creative agencies. Whether self-employed or a team of creatives, the price you charge for your work determines how much you make for the work that you do.
We’ve discussed methods of charging for work in the past. Some popular methods of setting your pricing are:
No matter your approach to pricing, there is a psychological effect that you can leverage when you present your pricing options to your clients. It’s called “price bracketing.”
What is Price Bracketing?
Have you ever seen three different prices for a product or service? Maybe something like this:
- $15/mo - Basic (some simple stuff)
- $30/mo - Plus (more stuff, but not as much as what comes next!)
- $99/mo - Pro (all the things, because hey, you’re a pro, right?)
You don’t even know what I’m pitching here, but I’m guessing you are already thinking which bracket you might fall into. Perhaps you love doing everything on the cheap, paying as little as possible, and would love to think you are still able to use the same product as all these schmucks that are paying more. However, if I can convince you that the “Plus” package is 10x better than the Basic, while only being 2x more, then the cheapskate in you is now turned on by the middle-tier, and at least it’s not that crazy-expensive pro tier!
What I’ve just done here is provide you with price brackets. Humans love to compare things, especially price. If I offered you one price, you’d go shop that price around with other options for a similar service. But if I provide you with some comparison prices on my own pricing page, then you get to flex your price comparison muscles right here on one page!
When you offer multiple choices to your clients for a price, they will feel better about the choice that they’ve made, because they’ve chosen it against other options, and you will have the opportunity to maximize your profits based off of your client’s willingness to pay money.
This is crazy, but true, some clients will always choose the highest package simply because they want to associate themselves with the highest tier, which is why naming this level something like “Pro”, “Enterprise”, or “Gold” will draw these certain types in simply with your price bracketing.
Does this work with service-based businesses?
The previous example was for software. Or was it? Perhaps you can bracket your retainer packages for your clients. Even if no two projects are the same for your business, just describe three common project types and show them at different price points.
For example, let’s say you build websites for people. You design, develop, launch, and maintain them. Some packages might look like this:
- Bronze ($2,000) - A choice of pre-designed templates with minor customization running off of Wordpress. Maintenance not included.
- Silver ($5,000) - A choice of pre-designed templates that can be fully customized, running off of Wordpress. 6 weeks of maintenance and updates included.
- Gold ($20,000) - Custom-built template based directly off of the needs for your business, may be run off of Wordpress or a handful of other solutions depending upon needs. 1 year of content coaching, maintenance, and updates included.
Now, you might still build custom packages outside of these, but at least you’ve provided some options for your clients to start thinking about.
When coming up with pricing for your product or services, I’ve heard this ratio over and over again as one that seems to work well:
- 1st Tier: 1x base price
- 2nd Tier: 2.5x base price
- 3rd Tier: 5x base price
This ratio separates the tiers enough that each one is taken to a new level from the previous, without going too high and no longer reasonable for consideration.
There are no hard and fast rules when it comes to price bracketing. Sometimes you’ll have to experiment and see what appeals to your customer base the most. You can also take that last tier and change the pricing to “starting at x” to provide more wiggle room to go higher for clients who have larger budgets. I’ve even seen a “call for pricing” slapped on that highest tier as these higher-end clients would rather talk to someone and get a custom quote than be put into a pre-existing tier.
Remember, humans love to compare, and love feeling like they are getting a good value for their money. Price bracketing does just that. It provides a framework for them to size up the value for the money, and leads them towards spending an amount that they are comfortable with that could lead to higher profits for your business.
P.S. Want to learn more about price bracketing and other pricing strategies? Download our free Pricing Strategies guide.