Pricing Your Services Correctly Now

Greetings, fellow digital enthusiasts! In this installment of the Digital Dynasty series, I’m excited to share a critical aspect of my journey in building Oxspring Group, my budding digital agency. Today, we’ll explore the art of pricing our digital marketing services and the strategies we’ve chosen to adopt. Whether you’re a seasoned entrepreneur or just starting your own venture, you’ll find valuable insights that can help you navigate the world of pricing with confidence.

Understanding the Pricing Methods

Pricing in the digital marketing world isn’t one-size-fits-all. To establish the right pricing for our digital agency’s packages, we’ve delved into some of the industry’s key pricing methods. Let’s take a quick look at three primary approaches: Cost-Plus Pricing, Value-Based Pricing, and Competitive Pricing.

1. Cost-Plus Pricing: The Chosen Model

For Oxspring Group, we’ve chosen to employ the Cost-Plus Pricing model as the foundation for our package pricing. This model involves calculating the total cost of providing a service and adding a markup to ensure we cover expenses and earn a reasonable profit. However, we’ve taken it a step further by incorporating a fundamental principle of accounting called “absorption costing.”

Understanding Absorption Costing

Absorption costing is a method that allocates fixed overhead costs over the units or, in our case, the service packages provided. This approach ensures that fixed overhead costs are distributed in a way that reflects the actual utilisation of resources for each package, offering a more accurate pricing structure.

Incorporating absorption costing is essential for our pricing strategy to be transparent, accurate, and sustainable. It allows us to distribute our monthly overhead costs of £200 across our different service packages, depending on the number of customers we anticipate for each package. This strategy transforms our fixed overhead costs into variable costs, proportionate to the number of customers for each package.

Let’s integrate our pricing tables into the discussion:

Here’s a glimpse into how we calculate the price for the “Pulse” package, now with absorption costing considered:

• Total Estimated Labor Hours (Sum of all tasks) = 36 hours

• Cost for “Pulse” Package (Including Absorbed Overheads) = (36 hours * £50 per hour) + (£200 / Number of Pulse Customers)

2. Value-Based Pricing: Perceived Value Matters

Value-Based Pricing is another valuable approach. It involves setting prices based on the perceived value of our services to clients. Market research helps us understand how our target audience perceives the value of our services. If we believe our services bring exceptional value, we can price our packages higher.

3. Competitive Pricing: Staying in the Game

Competitive Pricing involves setting prices based on what our competitors charge for similar services. This approach requires a deep dive into the competitive landscape, helping us position our packages effectively. We can choose to match, undercut, or slightly exceed competitor pricing, depending on our unique value proposition.

Discounts for Long-Term Commitment

In addition to our penetration pricing strategy, we’re excited to offer discounts for clients who commit to our services over an extended period. We believe that fostering long-term relationships is key to our agency’s success. Therefore, we’ve introduced special pricing for 3, 6, and 12-month contracts. Here’s how it works:

• 3-Month Contract: 5% discount on the total package price.

• 6-Month Contract: 10% discount on the total package price.

• 12-Month Contract: 15% discount on the total package price.

This approach not only incentivises our clients to engage with us over an extended period but also reinforces our commitment to delivering exceptional results consistently.

Penetration Pricing Strategy

As a new entrant in the digital marketing arena, we’re embracing penetration pricing. This strategy means adding a 20% discount to our “Pulse” package, reducing its cost significantly. This move is designed to attract early customers, quickly gain market attention, and build a reputation for delivering exceptional results.

Let’s add the pricing table for the “Pulse” package:

With the 20% discount applied, the new cost of the “Pulse” package becomes: £600.00 – (20% of £600.00) = £480.00. This deliberate strategy sets the stage for a dynamic entry into the competitive market.

Penetration pricing is an initial strategy, with the intention to gradually increase prices once our agency establishes itself and gains a solid customer base. It’s a strategic move to make our services more accessible and to create a buzz as a newcomer in the field.

Tips for Pricing Your Own Products and Services

As you embark on your pricing journey, consider these tips:

1. Understand Your Costs: Have a comprehensive understanding of both variable and fixed costs.

2. Know Your Market: Research your target market, competitors, and pricing expectations.

3. Value-Based Pricing: If you offer exceptional value, you can charge a premium.

4. Monitor and Adjust: Pricing is dynamic; regularly assess and adapt your strategy.

5. Value Bundles: Bundling can increase perceived value and allow for higher prices.

6. Customer Feedback: Listen to your customers and adjust your pricing based on their feedback.

Conclusion

Pricing is a dynamic process, and the right strategy can lead to customer attraction, profitability, and long-term success. At Oxspring Group, we’ve carefully considered our pricing model, incorporating absorption costing for accurate overhead allocation and penetration pricing for an impactful entry into the competitive digital marketing landscape.

Our journey in the digital dynasty is just beginning, and we’re excited to provide top-notch digital marketing services that not only benefit our clients but also establish Oxspring Group as a formidable player in the industry. Stay tuned for more updates in the Digital Dynasty series as we continue our quest to build a thriving digital agency from the ground up.

Next Steps in the Digital Dynasty Series

In the upcoming chapters, we’ll actively address a compelling question in the world of marketing: “Is cold calling dead?” To answer this, I’ll personally undertake an experiment where I’ll conduct over 100 cold calls.

We’ll actively delve into the effectiveness of this traditional method in the modern digital age, actively analysing its impact on lead generation and client acquisition. This real-world experiment is an exciting part of our journey, actively exploring new avenues in our ever-evolving industry. Stay tuned for the next thrilling chapter in our quest to build a digital dynasty!

Further Reading

Ready to dive deeper into the Digital Dynasty series and continue your journey in building a successful digital agency? Explore these installments for valuable insights and practical guidance:

Designing My Logo and Visual Identity: A Creative Journey

Join us on a creative odyssey as we craft the visual identity for our agency. Discover the art and science of logo design and branding, actively exploring the importance of visual elements in making a lasting impression. This installment will empower you to leave a memorable mark in the digital landscape.

Creating My Agency’s Website: Strategy and Passion

Your website is the online face of your agency. In this chapter, we actively share the strategic steps and the passion that went into building our agency’s website. Dive into the world of web development, uncovering the secrets to a compelling online presence that actively engages your target audience.

Website Design and User Experience: Making It User-Friendly

User experience is at the forefront of our web design journey. Explore the art of crafting user-friendly websites that actively resonate with your audience. Uncover the principles that drive user engagement, conversion, and overall satisfaction. This installment will actively empower you to create digital experiences that keep your clients coming back for more.