Years ago when I first started my solo business, I knew I was undercharging.
Deep down, in my gut, I knew it.
Yet it felt like there was some sort of invisible wall that stopped me from changing.
My positioning was perfect. The right clients gravitated towards me, people who valued exactly what I did were ready to throw money at me.
Yet quote time came and the knowledge I had about price and branding, everything I'd learnt, got thrown out the window.
I found myself quoting prices to be competitive.
To be at a level I THOUGHT my customer's wanted to pay.
I soon figured out I'd fallen into a psychological trap that was allowing others in the market to set MY prices.
Something I like to think of as reverse price anchoring.
And now, I can't unsee that when talking to and working with solopreneurs.
Doing It In Reverse
You probably know it, but price anchoring is suppose to work for you.
In your favour.
You present an initial price that is designed to influence a customer's perception and cognitive bias of a subsequent price or offer. It becomes an anchor or reference point, a ceiling, for anything that comes after.
Yet most new Solopreneurs fall for this exact trick without even knowing it.
Actually, they do know it, it's done on purpose, they just don't realise it's bad.
It's something that you might even be caught in right now.
Here's how it plays out:
You open Google or an LLM
Start researching "competitors"
You see what they're charging. $3,000, $2,500, $2,800.
You make up a price based on that assumed market rate. "I'll go $2,600 to be competitive"
You might even then work backwards to make sure it's profitable
And right now, you're probably thinking, "well that's just competition-based pricing."
It is. And it's a standard practice and widely accepted... IF your offer/service/product is the same.
BUT, if you've built a brand and an offer with a real differentiator, for a specific audience, you don't really have "competition".
All you've done is let some random person or business who might do something loosely similar to you, set your ceiling price.
That's no longer competition-based pricing.
That's reverse anchoring.
It means you're now using their pricing as validation for yours.
You're making huge assumptions about people you've never met.
That they know what they're doing.
That they're even targeting the same segment of the larger audience you are.
That the customers they do work with even value their services, or that they have a true problem-solution market fit.
That they're even getting customers.
Or that they're profitable.
But Why Does This Happen?
What does it even matter what someone else in the market is charging anyway?
There are elements of both instinct and psychology at play here.
To start with, there's the instinctive play which is where a new solopreneur will research competitor pricing.
And thanks to the prevalence of discount marketing, most are conditioned to think that you need to be cheaper or on par to win. A race to the bottom kind of mentality.
Which is why those market prices are used as validation for what must be reasonable in said market. Which happens for 3 primary reasons:
1. We naturally benchmark against others. It's human nature.
2. The safety in numbers theory. If they're charging $X, I'll be safe charging $X.
3. And the biggest, loss aversion. A fear of losing out by being "too expensive".
So a few things at play there, which is why I like to bundle it up into the single psychological phenomenon, price anchoring. Well, reverse price anchoring.
Because regardless of how you look at it, a value has been anchored to another price in the market.
Really, for most people, you could probably take away point 1 and 2, and the outcome would still be the same. Because the fear of losing a potential sale due to price is huge, especially for new solopreneurs.
And the longer you live in this trap, the longer it takes to undo the damage.
You see, beyond just charging less, you also end up:
Burning out from working harder for less money than you'd like
Training the market to accept lower prices
Attracting price-sensitive customers who often have higher demands
Scaring off your ideal customers
Reverse The Reverse Anchoring
So, how do we get out of this trap?
It's not too complicated.
But boy is it tough.
Because it's psychological.
You're fighting against yourself.
You need to first form the new belief that pricing is NOT positioning.
Your positioning and that piece of real estate you own in the mind of a customer has got nothing at all to do with what you charge.
But they have everything to do with you how can solve the problem that your customer has. Or how you're able to form an emotional connection with them.
What you charge simply reflects the value of that.
Doing this is what I teach and help to implement via my Gravity cohort.
But at a high level:
1. Ignore the market
For starters, forget about prices in the market for a minute. Chances are, you already have a rough idea of what the going rate is anyway. And if not, you probably have a number in your mind that's the bare minimum you'd get out of bed for anyway.
Besides, beyond pricing, worrying about what others are doing in your market is of little value. Yes, it's good to observe, but not to obsess over.
2. Find your core
Define exactly what it is you do, and for who. What problem you solve and why. Maybe you've loosely done this, and if so, make sure it's tight.
Research your customers, and obsess over them.
This should result in a single succinct sentence.
"I help [specific people] do [specific thing] so they can [specific outcome]."
If you currently can't answer what you do, and for who, in a single sentence, your positioning needs work.
3. Price your offer based on value
What is this worth to your customer?
Does your solution save them $20,000 each month?
Does it help them to claw back 20 hours a week?
Does it automate or completely remove a hurdle?
Does it give them the feeling of luxury?
If you're a creative, are you giving them something that no one can easily replicate?
Does it do something to their self confidence?
Decide on a price, based on the value you provide and what their psychographics tell you about them.
4. Most importantly, test your positioning, not your price
Talk to potential customers.
Create content specifically tailored to them.
If you find that customers are challenging you on price, most of the time it's not a pricing issue. It's a positioning issue. It means they don't see the value in what you do, and so you're not appealing to the right audience.
Adjust your offer articulation until value is clear.
5. Compared to who?
Ultimately, your goal in positioning, and pricing you've set, is for it to be impossible for a customer to object on price and ask why you're more expensive than the 10 others offering the same thing.
When it gets to the point where that no longer happens, you've nailed your positioning. You're now selling a unique solution rather than a commodity.
Set Your Own Prices
Pricing is not positioning.
Pricing is a reflection of value.
You don't need to use market prices to validate and justify your own pricing.
If you can get crystal clear on your positioning, understand exactly who your ideal customer is, and why they need you, you can set your own prices.
Until next edition.
- Jye
