Understanding and Explaining Price versus Cost
Oooh money. It used to be my least favorite topic to talk about. I would cringe when someone would inquire about my pricing, because a year ago today I did not have a clear pricing structure, at all. I looked at money in an entirely wrong way. I didn't understand how to price my products, both shop products and custom offerings. I would give discounts left and right, for fear that my customers and clients would look elsewhere for a cheaper option.
Have you ever done this before? I used to look at fellow creatives running similar businesses to mine, who seemed to be running successful companies, and do two things. One, I would gawk at how they were charging such a higher dollar amount than me, and still getting customers to pay for their product or service. Two, I would be baffled as to how they even got to that dollar amount in the first place!
The topic I want to focus on today relates to the first thing I mentioned: price versus cost, and explaining it to your customers and clients. The second point is complex and deserves a separate post in and of itself. I learned all about pricing my products and services effectively when I attended Creative's Academy. If you're struggling with it as well, make sure to read to the bottom of this post for a great savings offer!
price versus cost
So, what in the world is the difference between price and cost? Until a few days ago when I received an email from Jennifer of Creative's Academy, I likely would have scratched my head and given you a vague answer. Now after reading her insight, I can accurately explain it to you in a way that I hope makes sense!
Price is the number attached to your shop item or service offering. The dollar amount.
Cost relates to the value associated with your shop item or service offering. It is what you should really be focusing on when you write your product description or have a consultation with your potential clients. It is what will make your customer/client SO excited about your product/service that they don't even have to think twice about the dollar amount. It is what makes your product/service desirable, an investment that people will want to save their pennies for.
Is that starting to make sense, loves? Here are two examples about how I add value to both my shop items and custom service offerings to further explain the difference between price and cost.
The price of this will you be my flower girl card is $4.50. It is a 4.25" x 5.5" flat card with a blank back, printed on 120lb eggshell ultra white paper, and comes with a blush envelope. That is the product description. Very important details, but what would make a potential SJM Shop customer want to buy this card, as opposed to simply calling her flower girl and asking her over the phone? Explaining the cost, that's what.
Before I even get to the product details in my shop listing, I have a short paragraph that gives insight into how my customer would use this in her life. I say: "You've found the man of your dreams, and now it is time to ask the important ladies in your life to be a part of your wedding day! Ask your sweetest little one to be your flower girl with this darling watercolor blush stripe and foliage wreath "will you be my flower girl?" card. She is going to feel so special and happy that you thought to ask her, and will definitely ask mom to put this on their fridge!"
That last line. That's the ringer, what pulls in my customer and makes her realize the cost of NOT sending this card to her flower girl. If she doesn't send a card, will her flower girl feel as special? Of course she'll still be excited with a phone call, but with this card, she'll have something so wonderful to showcase on her fridge. That makes it all worth it, and the $4.50 price seems like nothing compared to the cost of thinking her favorite little sweetheart won't have something to proudly display to her friends and family.
Now that you can see how to add value to your product and explain the benefit to make your customer appreciate the cost, I'd love to show you how I add value to my service offerings!
I recently started offering one-on-one coaching sessions for creative entrepreneurs. There are many other small business owners offering similar sessions, at similar prices. The price of my 60 minute coaching sessions is $150. That price might seem expensive at first, which is why I need to explain in the session details what the cost would be if the creative didn't book a session with me.
So, in the very first section of my coaching page, I have yet another short paragraph detailing why I find these sessions so beneficial, "I am a firm believer that you should never stop learning and growing. I have such a heart for teaching others, and would absolutely love to work with you! Owning a small business is hard work, and you shouldn't have to do it alone! There were so many questions I had when I first started my business, and it was invaluable to have mentors guiding me through the processes I was facing along the way. I'd feel honored to be your go-to person for questions!"
In that paragraph, I relate to the creative entrepreneur who is feeling so lost in her business right now. Flooded with so many questions. Thinking that if she has to Google yet another question, she might go crazy! That is the cost of not booking a coaching session with me. The value added is that she has a mentor to go to who will answer all of her questions, and who will be a friend to turn to when she needs a cheerleader.
So loves, can you see how beneficial it is to explain the value you are adding to your product and service so your customer and client knows the cost of not purchasing it as opposed to simply seeing the face value of the price?
I owe all of the information from this post to the Creative's Academy course. The module on Your Money added enough value to the course to make the price worth it tenfold. Being able to understand the most confusing aspect of my business in a way that allowed me to make real steps toward becoming more profitable was amazing. And, I want you to be able to experience that same feeling of relief and knowledge as I did.
Since I love CA so much, I'm offering $450 off your registration fee with code SIMPLYJESSICA - just enter the code when you register for Creative's Academy and you're all set! Remember those coaching sessions I mentioned earlier? I'll also be having mini coaching sessions with everyone who signs up using my code! I'm so excited for this year's CA attendees, and can't wait to see who registers!
Disclosure: This is a sponsored post that contains affiliate links. Although this post is sponsored, all opinions are 110% my own!