NO MATTER HOW WELL you design and deliver your services, they won’t make you money—and might even cost you some—if you don’t price them properly.
Several factors can affect your pricing methodology, including:
- Your predominant business model
- The services included in your offerings
- Your costs to deliver these services
- Your sales sophistication
- Your efficiencies in delivering the services
Note: The less efficient you are at delivering services, the higher your price points must be to maintain your desired net profitability.
Determining your predominant business model. Your predominant business model may influence not only your deliverables and how successful you are at marketing and selling them, but also your target markets, customers, vendors, and ultimately, profitability. If your predominant business model is product-centric, you may be challenged when attempting to sell and deliver services. That’s because achieving success in a service-centric model requires unique skill sets around effective consultative sales, long-term relationship-building, and customer satisfaction techniques.
Developing a service offering. In order to develop your service offering, you must first identify your target market and the pain or challenges your service will solve. This will help you choose the right vendors and fulfillment partners to align with, according to their capabilities, along with the right service-level agreements and price points. Each of your services will have its own unique requirements and appeal from provider, end customer, pricing, complexity, implementation, and maintenance perspectives, and include a unique set of solutions. Evaluate each potential solution carefully to determine which ones, and in what priority, you will incorporate into your offering.
Establishing true costs of service delivery. Once you have determined your service offering, the first step in establishing profitable price points is to identify your hourly cost of service delivery. To do so, you must understand your hourly labor burden, your hourly overhead burden, the number of hours it will take to support a new customer, and any ancillary and/or subscription costs for all third-party services you may be reselling.