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Pricing and Payments

13 Service Pricing Strategies for your Business

May 23, 2024 13 min. read
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A pricing strategy is the method a business uses to price its products and services. Instead of guesstimating costs, a true pricing strategy accounts for market conditions, variable costs, margins, and how much a customer is willing and able to pay for a service. 

The right service pricing model will help you to manage costs, stay profitable, and grow your business. The wrong one could discourage potential customers, eat away at your budget, and leave you short of reaching your business goals. 

That’s why it’s so important to implement the one that makes the most sense for you. But with so many to choose from, it can be difficult to know where to start. 

From hourly-based to bundle pricing, learn about the 13 most common service pricing strategies to determine which one makes the most sense for your business.

1. Competitive pricing strategy

Competition-based pricing involves researching what similar businesses in your area charge and setting your pricing accordingly. 

For example, let’s say a cleaning business owner researches competitors in their area to learn that most other cleaning companies charge between $80 to $100 per visit. To stay competitive, the cleaning service sets their standard cleaning rate at $90 per visit.

Pros: 

  • It’s a great option for competitive industries with saturated markets.
  • It prevents you from overvaluing or undervaluing your services. 
  • It can give you a good baseline for pricing. 

Cons: 

  • You’lll need to make more of an effort to stand out from competitors in other ways, like through positive reviews, guarantees, etc. 
  • If your competitors are pricing too low, you may not be able to compete without negatively impacting your bottom line. 
  • You’ll need to consistently monitor competitor pricing and make adjustments as necessary. 

A competitive pricing strategy works well for any service business that has a lot of local competitors, like commercial and residential cleaning, lawn care, and landscaping.

It’s important to remember that while competitor pricing can give you a good idea of where to start, your business is unique. Just because a competitor is charging a specific price doesn’t mean you should match or undercut them.

Instead, review the competitors that are most like you or best represent your business goals and evaluate their pricing to see whether it will work for you.

2. Bundle pricing

Also known as packaged pricing, this strategy is when you bundle different services together but charge a single price. The cost for bundled services is usually less than if the services were all charged individually. 

For example, if a home maintenance company offers a bundle of electrical, plumbing, and HVAC inspection services for a lower combined price than if each service was purchased separately.

Pros: 

  • Increases the overall value of each order. 
  • Gives you an opportunity to upsell your services
  • Reduces marketing costs by keeping you from having to market each service individually. 

Cons: 

  • If the price of each individual service is much higher when it’s charged separately, combining them can lose you money. 
  • If a good part of your pricing is based on materials, you may not have a lot of wiggle room when it comes to lowering prices for bundles. 
  • Customers who only need one specific service may be hesitant to purchase a bundle, so if you only offer bundles, you may miss out on jobs.

Bundle pricing works best for service businesses that offer services that typically go hand-in-hand, like lawn care, pressure washing, or residential cleaning.

3. Good, better, best pricing

Also known as tiered pricing or price bracketing, good, better, best pricing lets clients choose between different levels of service.

For example, a lawn care provider could offer a basic package (bronze) for $110, a standard package (silver) for $220, or a deluxe package (gold) for $300.

image of optional packages in Jobber
Image of optional packages on a quote made in Jobber

With good, better, best pricing, each package incrementally offers more value, and the difference in price gives the customer a chance to consider what they are willing to spend based on their needs.

Pros: 

  • It offers you an opportunity to upsell more valuable packages to customers based on what they’re looking for. 
  • It makes it easy for you to provide quotes and keep pricing consistent. 
  • It makes marketing your services easier since you can advertise and promote all of your packages at once. 

Cons: 

  • It only works if you have services that make sense to package together. 
  • While it’s great for basic and routine jobs, it doesn’t always make sense for one-off jobs and large projects. 
  • If you price your tiers too low, or material costs change, it will be hard for you to increase prices for existing customers who signed on for bi-weekly or monthly work at a specific rate. 

Good, better, best pricing is a good option for businesses that are able to package standard services together to give customers different tiers to choose from. It works best in the following industries: 

  • Lawn care and landscaping
  • Snow removal
  • Pressure washing
  • Window washing
  • HVAC

4. Value-based pricing

Value-based pricing is when you charge a flat fee based on the specific value or benefits your service provides. This value is typically different than what they would receive from a standard service and usually either saves the customer time or offers them peace of mind. 

Value-based pricing lets you charge a higher price for the specialized services you provide and helps to prevent haggling. Just make sure that you’re clear on the benefits your service provides and, in turn, what a client is actually paying for before providing a quote.

An example would be a specialized eco-friendly cleaning service that charges higher prices due to their use of environmentally safe products. 

Pros

  • It sets you apart from competitors by highlighting what you do differently. 
  • It ensures you cover the additional costs of the specialized services you provide. 
  • It tells customers why they may pay more for your services than someone else’s.

Cons: 

  • If you don’t effectively communicate why your prices are higher, you may lose out on customers. 
  • You’ll be targeting a niche market which will likely be smaller than a general market. 
  • The value you provide needs to be worth the additional cost. 

Value-based pricing works best for service providers in the following industries, who offer additional value to customers above the standard service: 

  • Residential cleaning
  • Painting
  • Pressure washing
  • Lawn care and landscaping
  • Window washing
  • Junk removal

5. Hourly-based pricing

Hourly pricing is one of the most common and simple ways to price your services. It’s when you bill your clients per hour for the services you provide. When providing quotes, all you need to do is estimate the number of hours the job will take and multiply it by your hourly rate. 

For example, if a plumbing business charges $60 per hour and a job takes three hours to complete, the customer will pay $180.

Pros: 

  • It’s easy and straightforward. 
  • It makes quoting and invoicing a breeze. 
  • It’s a common pricing strategy that customers are familiar with. 

Cons: 

  • Over time, as you become faster and more skilled at what you do, your rate won’t reflect that. 
  • If you underestimate how long a job will take, it’ll be hard to get the customer to pay for more than the initial quote. 
  • The focus is on the cost of the service over the value you provide, which opens you up to price haggling. 

Hourly-based pricing is a standard pricing strategy that every service business can use. 

6. Market penetration pricing

Market penetration pricing is when you set lower prices to attract customers when you first start your business, and then raise them as your client base grows. 

For example, a new landscaping service may choose to offer a 25% discount for the first six months to attract new clients, then charge the full price after that. 

Pros

  • It gives you a chance to generate more business when you get your business off the ground. 
  • It gives you something straightforward to focus your marketing efforts on. 
  • It appeals to customers with smaller budgets. 

Cons: 

  • Some customers may associate lower costs with inferior service. 
  • Customers who originally took advantage of the discount may not want to pay the full price in the future. 
  • You have to work harder to cover costs and you’ll have less profit to work with. 

Market penetration pricing can be used by any service business in any industry.

7. Skimming pricing

Unlike market penetration pricing, skimming pricing is when you set a higher price initially, and lower it over time. Although it’s not a typical pricing strategy for service businesses, it may work if you have something special to offer. 

For example, if a high-tech home security installation company starts with a high price because its services are unique, then lowers it over time as more competitors begin to enter the market.

Pros: 

  • You’ll maximize profits upfront, giving you more opportunity to grow and develop your business. 
  • Depending on what makes your service business unique, you’ll have a competitive marketing edge to leverage. 

Cons: 

  • If you can’t justify your prices, or your potential customers just aren’t willing to pay them, you’ll struggle to get your business off the ground. 
  • You’ll make less profit once you lower your prices down the road. 

Skimming pricing is difficult to apply to service businesses, but it does work for those within a niche offering specialized services with little to no competition.

8. Premium pricing

Premium pricing is when you charge a higher price for a service (or level of service) that’s unparalleled by your competitors. 

For example, if you offer a warranty or service guarantee that your competitors don’t. Or if you use exclusive tools or technology that make your business easier to work with and deliver results that stand out.

Pros: 

  • Premium pricing helps to attract clients with bigger budgets. 
  • You can market yourself as a high-end service provider. 
  • It helps you to cover the costs of more expensive tools, materials, and technology that you need to offer a premium experience to your clients. 

Cons: 

  • Higher pricing will deter potential clients with lower budgets. 
  • The costs of running your business will be higher. 
  • You’ll be held to a higher standard as customers will expect more from you compared to a lower priced competitor. 

Premium pricing can work for service businesses in just about any industry, including plumbing and HVAC, cleaning, and lawn care.  

READ MORE: What to do when customers say your price is too high

9. Promotional pricing

Promotional pricing is when you offer services at a lower price for a limited time to attract customers and increase sales. 

For example, a snow removal company might offer a 20% discount on snow plowing or removal for any customers who sign up in September or October.

Pros

  • It’s a great way to draw attention to any new services you offer. 
  • It helps to boost sales in slow periods. 
  • It gives you a competitive edge over other businesses. 

Cons: 

  • It’s only a temporary pricing strategy used for specific offerings, so you’ll still need a standard pricing strategy for everyday business. 
  • It can attract customers who only plan to use your services once in order to take advantage of the deal. 
  • You’ll make less money. 

Promotional pricing works for any service business in any industry looking to promote their services to grow their client list.

10. Dynamic pricing

Dynamic pricing is when you adjust your prices based on seasonal demand, time, or other factors.

For example, an HVAC business may charge higher rates for emergency repairs during peak summer months due to increased demand for their services.

Pros: 

  • It helps to ensure your prices reflect different market factors so that you maximize profit through different times of year.
  • Adjusting prices to be lower in your off season can attract more customers.
  • It gives you more control over your pricing strategy so you can make adjustments as necessary. 

Cons: 

  • It could start a price war with your competitors. 
  • It requires constant monitoring and adjustments. 
  • You may lose customers who don’t appreciate price increases when they need your services the most. 

Just about any service business can apply dynamic pricing, but it works best if your work has peak seasons.

11. Economy pricing

Economy pricing is when you offer services at a low price point to target budget-conscious customers. 

For example, a house cleaning service that offers a no-frills, basic cleaning package with just the essentials like vacuuming and dusting for $50.

Pros: 

  • Economy pricing often brings in high volume sales. 
  • It appeals to a large number of customers. 
  • It’s easy to implement. 

Cons: 

  • In order for economy pricing to work, your overhead costs must be low. 
  • Potential customers may associate low pricing with poor results. 
  • It can make it difficult to build customer loyalty.

Economy pricing isn’t limited to a specific type of service business or industry, but it works best for those with low overhead and who want to target customers with smaller budgets.

12. Cost plus pricing

Cost plus pricing is when you calculate what it costs to provide your service to a customer, then add a markup to make a profit.

For example, if you know your time and materials cost $200, and you want to make a 20% profit margin, you would charge $250. 

Pros: 

  • Cost plus pricing ensures you always cover costs and make a profit. 
  • It’s straightforward and easy to implement. 
  • It accounts for increased costs of materials. 

Cons: 

  • Your prices won’t be consistent. 
  • You’ll need to spend time calculating job costs. 
  • It doesn’t give you a significant competitive edge. 

Cost plus pricing is one of the most common pricing strategies for service businesses and works for any industry.

13. Project-based pricing

Project-based pricing is when you charge a flat fee for a complete project, including the cost of labor, materials, and overhead. 

For example, a remodeling company might charge a set price for a kitchen renovation project based on the project scope and materials.

Pros: 

  • It makes quoting, invoicing, and payments easy. 
  • It allows your customers to set aside a specific budget. 
  • If you happen to complete the job below cost, you’ll make additional profit. 

Cons: 

  • It’ll be hard to convince your customer to pay more if the cost of the job increases. 
  • It doesn’t account for unexpected costs, meaning you may have to swallow costs for increased material prices. 
  • It’s risky for jobs you haven’t done before or don’t have much experience with. 

Like many other types of pricing strategies, project-based pricing is one that can be a fit for any service business.

How to choose the right pricing strategy

The best pricing strategies are the ones that align with your business goals and keep you profitable. That’s why picking one that works best for you depends on your business’ financial situation, industry, and objectives. 

Before choosing one to move forward with, follow these steps to determine which pricing strategy is a best fit: 

  1. Consider your overhead costs. How you price your services is greatly impacted by your overhead costs. If they’re low, you have more room to experiment with competitive and economy pricing. But if they’re high, you may want to consider cost plus or premium pricing. 
  2. Review your business goals. New businesses may prioritize building a customer base quickly, while established businesses may want to introduce new services or start offering package deals. 
  3. Know your industry. Not every pricing strategy works in every industry. Think about the services you offer and what makes sense for your service list. For example, handyman services are usually charged on an hourly basis, while many home cleaners opt for tiered pricing strategies. 
  4. Research your market and competitors. Take a look at how your competitors approach pricing and compare your target customers before setting a price. If you have similar services and go after the same customers, you may want to price within the same range. But if one of you targets premium customers and the other goes after budget-conscious customers, be sure to price accordingly so you reach the right people. 
  5. Look at your current pricing strategy. If you already have a pricing strategy in place, take a look at what is and isn’t working. Are your profit margins good? Are you attracting the right customers? Is it supporting your business goals and growth? From there, consider which pricing strategy addresses your current issues and whether it would be a good choice.

And remember — when it comes to picking a pricing strategy for your service business, you aren’t limited to just one. You can take a mix and match approach to customize your pricing in order to appeal to more customers and maximize profits.

Originally published in September 2019. Last updated on May 14, 2024.

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