Niche Site Lesson 3: How to Set Pricing for Your Services
In Lesson 2 of this series, I share how I was able to fulfill the orders of our “Unlimited WordPress Support” service.
We talked about how to source a team, but also how to test and make sure they can do the job while maintaining the quality standards of your business.
So let’s do a quick recap…
We found a complimentary niche to our main service, which was Custom Website Design services. Our customers wanted ongoing support to maintain their site. Through testing and validation we pre-sold the services and found a team to support the requests.
But, you’re probably wondering… “How did you determine the right price?”
I’ve done a lot of research about this topic… and price simply equates to the value that your preferred customer is willing to pay for.
There are many different strategies to pricing.
- Premium Pricing: which means you offer your services at a higher rate than your competitors. I’ve found that when you offer premium prices you cater to higher-end clientele. They see the value in what you offer and are willing to pay premium prices for your services.
- Low Price Leader: WalMart is a great example of a company that beat the competition by offering lower prices than all their competitors. For companies that plan to push high-volume transactions this is a great strategy.
In our case, I did a price comparison analysis of all of the competitors in the industry who offer WordPress Support Services. The biggest competitor was WP Curve. Fortunately for us WP Curve was purchased by GoDaddy and thus people were looking for alternatives to WP Curve.
We found their prices to be fair, competitive and value-added to the customer segment that we’re also looking to serve.
We marked our prices a little higher than their original offering because our developers are U.S. based, thus we have a higher cost of living and operating cost. Whereas we found most of their staff was overseas, which is why they could offer disruptive pricing model.
But as mentioned before…
The “right price” is determined by what the preferred customer is willing to pay for. I can personally think our services is worth thousands of dollars but if the customer doesn’t think that it matches the value then they won’t pay.
We found that at $99 per month it was a great service for offering people unlimited small task requests for WordPress support.
Expert developers charge around $65 per hour so at this price it’s an amazing value.
When we studied our competitors we also noticed they all offered “Tiered Pricing.”
Why is this you might ask…
Simply by offering more choices and stacking more value for each pricing package you give the consumer more options that fits their individual needs.
When I first pitched the business I had only 1 package and price option. My concern was that if I offered too many choices that people would become overwhelmed and have “analysis paralysis” and not make a commitment due to indecision.
But, I was wrong!
Remember when I mentioned I spoke to people on the phone during my initial offer?
Well, after speaking to them and getting real feedback they all agreed they liked pricing options.
Our packages are broken down as such:
Standard Plan: $97 per month
Premium Plan: $149 per month
VIP Plan: $199 per month
We have seen a 50/50 split between people who purchase the Standard and Premium Plan.
I don’t have anyone who purchased the VIP Plan yet. I’m going to keep the 3rd plan available and perform more tests to optimize the offering.
Here is a screenshot of how each package is broken down.
Monthly versus Annual
One pricing strategy we haven’t applied yet but do want to test in the future is giving people the option to purchase 1 year subscription upfront for a discounted rate versus paying monthly.
I know some customers who hate monthly subscriptions and would rather pay upfront if they know they plan to use our services long term. This helps them save money and not worry about recurring billing.
We will have to test, refine… retest, and test some more.
I know a lot of entrepreneurs also mention that by offering annual subscriptions it helps improve retention rates, as customers get accustomed to using your services throughout the year. I don’t have any data to prove this yet, but it will be interested to see what the customer retention rate is for our monthly subscribers.
At this point we have been able to pitch an idea, validate it with paid customers, fulfilled the services with a team, and offered competitive pricing.
It’s now time to build a website to help more visitors into paying subscribers.
Stay tuned for the next lesson.