What price should I ask for my services?

Setting the right price for your services can be complicated – especially if you introduce a new service or are totally new in business. Read more about the importance of the right pricing.

Going with right pricing is important for your success, so you need to invest time in finding the price level that works for you. If you go with too low prices, potential clients might get the perception that quality is also low and even worse, you might not earn enough money to cover your costs. If you go with too high prices, potential clients might get the perception that you are overpriced, and you might not get the number of clients you need to grow your business.

Large service companies have departments that do nothing but for calculating and making sure prices are just right, which underlines both the importance and the complexity of pricing services.

If we could, we would be happy to make it easy for you and tell you just what price you should charge, but as you will read in this article, many things can impact your price level. At the same time, and maybe equally important, there is also many things you can do to improve your pricing and your ability to compete in market, if you understand the art of setting right prices.

We therefor hope that we with this article can share with you some knowledge and techniques on how you become stronger in working actively with your pricing.

What is impacting you price level?

There are 5 main areas, that impact your price level – some of them even divided into sub areas:

1 – Quality
How will your client perceive the quality of the service you deliver compared to alternatives in market?

Your skills and treatment result
The result of the treatment you are doing (your professional skills of you and your staff) are most often playing the most important role, when clients judge the quality of your service, but it is by far not the only thing impacting overall quality perception.

Product quality
The quality of the products you are using are also impacting on the overall quality perception. Are they safe to use, are they efficient, are they free of bad ingredients, easy to understand, easy to maintain, do they have a smell, are you proud of the product quality yourself etc.

Service experiences
The quality of the service experience (how clean and nice is your salon, how service oriented and friendly are you and your staff, do you serve coffee etc.) is normally second most important for the overall quality perception. If the client get a “feel good” vibe and feels valued and serviced with a smile when visiting your salon, it has an important overall impact on the total quality perception.

Salon appearance outside and inside
Another thing to take into consideration is the appearance of your salon. How does it look from the outside and how does it look when you enter the salon. It is important that the look mirrors the expectation you want to rise. Imagine you are walking around looking for a restaurant – first you judge from the outside, then from the inside and finally ofcourse from the food served and the service experience. For the restaurant to get the highest possible price – and make the guest come back again – there need to be a natural link.

As you can see the quality perception is not only about how many years of experience you have or how skilled you are, but also about a lot of other things important to your clients. There can be more things than above. Often the clients are not fully aware of how much they value all the small things, but you can be sure, that by the end of the day, the total quality of your service – and the price you can ask – is impacted by much more than just the result of the treatment itself.

2 – Position

Where is your salon placed and how visible is it?

Where in country?
The area you are operating in have an impact on your pricing. First, in which area of the country, as the average price level of all types of services normally is priced higher in or around capital or large cities, whereas prices typically are lower far from capital cities and other very crowded areas.

Where in city?
Are you placed in countryside, in a suburb or maybe right in city center mall? Depending on where your customers naturally come the most, it makes sense that it is easier to attract clients if your salon is placed where they come anyway. Otherwise, they must travel for it which impacts convenience, that again might impact the price you can ask.

Visibility
Are your salon visible from distance? The more visible it is, the better the client is reminded, and new clients attracted, but regarding pricing it also seems, that clients can accept a slightly higher price of service, if they see you as dominating the street picture (in a good way). If your salon e.g. totally opposite is hidden in the basement and a little difficult to find, many clients will expect that to be reflected on pricing.

3 - Convenience

How easy is it to become and stay your customer? Client convenience is very often overlooked, but it has a quite big impact on the prices you can ask.

Booking appointment
How easy is it for the client to book or change an appointment, that fits the clients schedule? Do you make sure to rebook client for next visit already before they leave, so that they do not have to think about it? Is it easy for new clients to get a time with short notice? Is it easy to book online or do they have to call you? The easier it is to book a time, the more clients – often unconsciously – are willing to pay for your service.

Getting to you
If clients must travel to get to you, how easy it is to get to you with public transportation or find a nearby parking spot? Again, no matter how great a quality you deliver, most clients also look to conveniency when choosing service and accepting price.

In salon convenience
How easy is it to find and use the bathroom, how easy is it to pay for the services, how easy is it to get recommendations and buy products for home use to support the service, and how easy is it to complain if client isn’t fully satisfied? Every little thing you can do to improve client convenience will make your clients more satisfied and less price sensitive.

4 - Time

Time is getting more and more valuable, not only to you, but also to your clients. Ofcourse you need to make sure, that you keep an hourly rate paying your bills, but also for your client, the time spend in your salon cannot be spend anywhere else.

Duration of treatment
If your service is a relaxing getaway or spa service, client might appreciate to spend some more time with you in a relaxing environment, but if your treatment-service on the opposite is mainly focused on the result or efficiency, then your client might appreciate not spending too long time in your salon.

If so, it is a win-win situation, because if you can deliver the same quality experience and speed up the treatment using less time, which many clients might find more satisfying. You can charge just a little higher price for less time, and your resulting hourly rate will increase, allowing you to earn more money during the day by having space more clients.

Differentiated pricing
In many salons Thursdays to Saturdays is busier than Mondays to Wednesdays, and late afternoon times is busier than morning times. The busier hours tells that these hours are more valuable time slots for clients, and hence they are often willing to pay a little more for these slots.

If you struggle with having your booking calendar equally filled during the day or week, or if you struggle with having free time slots available for short term booking (important especially to new clients), then you might consider differentiating the price, so that e.g. Thursday to Saturday afternoons is just a little higher priced than normal.

5 - Promotions

How much marketing do you expect to do ongoing?

The more noise you do, the more clients you attract, and the more clients you attract the better price you can achieve, ofcourse under the condition, that you do not use your voice just to communicate price promotions. Therefore, looking into promotions, it’s important to focus on promotions that highlights your quality and convenience rather than just price. If you chose to let the level of promotions impact your pricing, it’s also important that you do promotions ongoing, and not just from time to time.

So, how do I find my price?

When you have had a look at the different areas impacting the price you can charge, you need to set the battlefield. What is the highest price level you have seen other successful salons is charging for similar treatments in your area (what is e.g. the most skilled and exclusive salon charging for the service) and what is the lowest price level you have seen other salons charging for a similar treatments?

Next you compare yourself to them within the following 6 areas (handling your skill level as a separate level due to importance), e.g. by giving them and yourself a score from 1 – 5 within each area:

• Your skill level (client perceived treatment result compared to market alternatives).
• Overall quality experience by client compared to market alternatives.
• Position (countryside, home salon low score, capital city main street high score).
• Convenience perceived from new and existing client’s side.
• Time efficiency compared to market average seen from client’s side.
• Promotion level compared to market average seen from client’s side.

Add all the scores together for each of you, and compare the scores:

• If you score higher than the best and highest priced, you could go with same or higher price and still stay competitive.
• If you score in the middle between the salons you compare with, your pricing should probably also stay somewhere in the middle to stay competitive. At the same time, you could benefit from looking if you can improve any of the areas that improve the price level, so that you score higher and can charge a little more.
• If you score lower than any of your “competitors”, then you need to focus on the area where the gaps between you are and their scores are the biggest, and then work on closing these gaps one by one to be able to improve your pricing.

By the end of the day, the most important thing is that you feel that you have the right prices, that your clients are happy and visits you again and again, that it is possible for you to attract the new clients you need and – most important – that you run a healthy business where you earn the money you need and disserve.

Set goals and revisit your prices once a year!

The market change, your competitors change, your customers change, and you change. Therefor it’s a good idea to do above exercise once a year, to evaluate if your prices are still right, or they e.g. could be increased a little. It’s better to increase prices with e.g. 5% each year, than to increase them with 25% every five years.

It’s also a good idea to set development goals for yourself (and your team if you have employees). After scoring yourself within each of the 6 areas, pick the area where you score the lowest (and feel you have the best possibility to improve), and then plan on how you can improve during the next 12 months. Should you or your employees seek education, should you practice smiling service, should you get yourself a more customer friendly booking system, should you freshen up your salon, should you invest a little more in promotions etc. etc.?

Break your plan down in smaller pieces by quarter, so that it is easier for you to handle and stay on track, not changing too many things at the same time.