Pricing any service or product so that it makes sense for you and your WordPress business is a big conversation. There’s a lot to consider, and in this post, I want to share some steps you can take to set your pricing and what you should consider before you launch your pricing structure. I’ll also talk about how you can transition your existing clients to a higher price point if you’re increasing your prices for existing customers.
Let’s get stuck in!
We’ve all been there, you’re charging too low!
When most agencies or freelance WordPressers start out, they charge too low for their services. So, if you’re providing plugin support, design or development services, new website builds, or WordPress maintenance packages, the chances are you’ve charged too little at some point.
You’re not alone and I did this myself when I worked freelance. I once spent so long on a new website build project, that once I’d added up all of my time, I’d actually lost money. 😅 That’s because I wanted/thought I needed the client and I was willing to do virtually anything to win them, including unlimited revisions, writing some content for them, and traveling for short meetings in person. This was a huge mistake and it didn’t position me as a professional at all. Working like this will exhaust you eventually, and I speak to a lot of agencies and freelance WordPress consultants providing WordPress maintenance packages every week who are in this same boat.
This same concept can be put into the world of MRR (Monthly Recurring Revenue). If you’re selling your recurring subscriptions at a low price point, even if you have tons and tons of clients, you’re not going to be able to scale your business because all of your money and effort will be spent on keeping you where you are rather than going towards growing and scaling your business.
How do you know if you’re charging too low?
Well, if you thought everything was fine at your current price point, you probably wouldn’t still be reading this post, so the chances are that you’ve already identified a few red flags around your pricing.
You’re probably working quite a lot of hours for little money or you could be ‘trapped’ in providing a service to your clients hourly (or worse, for free) which could be a rolling monthly subscription instead, bringing you in a stable monthly income. You’re probably finding that you don’t have enough money to invest back into your business on things that help you scale, like upgrading lots of the software you use to run your business. The WP Buffs white label program helps agencies and consultants selling WordPress maintenance services to get out of the ‘trading time for money’ scenario and start earning Monthly Recurring Revenue for their business. If you’re providing some other WordPress service on a regular basis to your clients, outside of care plans, but you haven’t set consistent monthly pricing, this post should help you to get started adding regular MRR into your business by helping you decide on a pricing strategy for your WordPress subscriptions service.
If you are already providing a recurring subscription service to your clients but you don’t seem to have enough cash flow or budget to outsource some work or invest in lead generation, or you don’t have the resources to provide some of the services you offer to high standards on a consistent basis, you could have a pricing problem.
What can you do about it and how should you prepare?
Before we look at some strategies you can use to set or reset your pricing, we need to look at how you can prepare.
The answer sounds relatively simple. Increase your pricing and/or re-evaluate your pricing strategy. Is it as easy as that? Not necessarily. Re-evaluating your pricing strategy will likely mean rethinking your pricing model (how you package up your service, for example, a tiered plan system) as well as the amount that you charge. Charging more can leave you feeling a bit uncomfortable but even moving past an uncomfortable mindset, there are still business challenges you should prepare for before you increase your pricing or set your pricing for the first time so that you’re able to scale and provide consistent value to your clients.
Prepare for the possibility of increased churn
If you’re considering a reset of your pricing and looking at increasing your WordPress businesses MRR, you should expect some level of churn during this transition time period. Like any change, some element of letting go is involved, and for you, this may mean having to let go of some old-time customers who no longer have the budget to pay for your service at your new price point. That’s a shame, but it could actually be a good sign for your MRR business. It means your business is scaling and you’re probably on your way to working with clients who have a more sustainable budget to pay you long term for your service, leading to a lower churn rate and higher LTV (Lifetime Value).
Use your network
Losing customers doesn’t have to mean that your relationship has ended. Make sure you have a handful of referrals from your WordPress network that you can whip out for any clients that are no longer a good fit for you. Just because they aren’t a good fit for you anymore, doesn’t mean you can’t be helpful and transition them to another service provider if it makes sense. You always want your last transaction with any client that leaves you to be a positive one. Referring out to people you know helps strengthen your relationships with people in your WordPress network, too, and WordPress is all about community!
How will you communicate your business changes?
The way you communicate your business changes can really determine whether it’s successful for your business or not. Most clients will understand that as a business grows, pricing changes occasionally occur, so if you communicate these changes ahead of time and you’re very clear on what this means (and what the options are for your clients) you should find that most customers are happy to transition. When you increase your pricing, you increase your value, and this means that you can provide a better service to your customers for longer.
Resetting your subscription pricing or setting up MRR pricing for the first time.
When setting pricing for your recurring subscriptions from scratch, some amount of research is going to be your best friend at the beginning. The first thing you should do is research your competitors or at least figure out what other businesses already doing what you’re doing, are charging their customers.
Start logging pricing structures already out there from highest to lowest on a Google Sheet or similar, so that you can get a good idea on the range of pricing that already exists for the service being offered. Once you’ve got your data, importing it into the free to use Data Wrapper Tool to create a nice visual chart for yourself will help you to see the range of prices already out there. This research can form part of your pricing decision, but we won’t stop there!
Competitor based pricing
When lots of companies that offer monthly recurring subscriptions first start out, they will often base their pricing solely on what their competitors are charging.
Basing your pricing purely on what your competitors charge isn’t the best option, but if your subscription business is brand new, you have no customer data at all, and you need to set pricing asap then it’s an option. It’s not the best option because when you set your pricing, you should consider a lot more than just what your competitors are charging. You’ll want to learn what your customers value in the service you’re selling and what they’re willing to pay for it. Setting your pricing based on competitor pricing could leave you grossly undercharging for a super valuable product or service.
By basing your pricing off of someone else’s, you run the risk setting a price that isn’t setting your business up for long-term success, because you haven’t taken a look at covering your costs or what your customer is actually willing to pay or the value they expect to get from paying you. Basing your pricing only on what your competitors are charging can work in some cases, but it’s not recommended that this be your only strategy. Don’t leave your business vulnerable to a high level of churn by only using a competitor based pricing strategy.
Cost based pricing
Cost-based pricing (or cost-plus pricing) is product pricing that’s calculated once all of your outgoing costs and expenses are accounted for. It means that you have diligently calculated your business outgoing costs so that you know how much to charge to cover these and so that you can work out how much extra (the plus) you’d need to charge to make a profit.
Of course, knowing your business outgoings is fundamental to your long term success. So, if you don’t know how much you’re spending on your operating costs, you’re running a business based on guesswork and that is not stable and it’d definitely not smart. You can use this simple form calculator over at Business Know How to calculate your expenses.
Cost-based pricing is probably not your best option when it comes to calculating your subscription prices. It’s not based on what your customer is willing to pay, your customer doesn’t care about your costs, and cost base pricing doesn’t allow you to sell the value of your product.
If you’re providing a better service and more value to your clients than your competitors, why should you charge the same or lower just because your pricing is based on your costs? Looking at the value you’re providing to the people buying your product or service will get you to a much better price point and you’ll work with clients who actually value your product or service, which is great for LTV (Lifetime Value).
Value based pricing
Basing your pricing on value is, in most cases, your best option. If you use a mixture of cost + value pricing, you should be able to get to a price point that’s realistic to what your customers are willing to pay and you’ll know you’re covering costs. Value-based pricing means doing some research on what your ideal customer would pay for your service. One way to find this out is to ask people in your network what they would pay for your service, but you could also survey your existing customers since they should already see the value you provide.
Whilst pricing up based on value, you should take into account the value of each feature of your product as well as the product or service as a whole. Figure out how much time you’re saving your customers or even better, try to find out the average yearly amount you’re able to save your customers by providing the service that you do. Everyone likes to save money, and your customer wouldn’t be buying your WordPress product if it didn’t save them money or time.
This strategy definitely takes more time than if you were to use competitor or cost-plus pricing alone, but it’s worth it to get to a price point that allows you to scale your service and your business.
Once you’re all set with value-based pricing, you should be in a good position to put money back into your business to update your service or product to continually improve it and to deliver even more value to your customers. When making changes to your product, it’s a good idea to let your customer know by use of a changelog.
How can you transition existing clients to your new pricing model?
If your motivation for reading this post about pricing up your WordPress subscription services is because you think you’re charging too low, you’re probably about to go through some significant business shifts. Increasing and changing your pricing needs to be handled well, which means communicating these changes clearly, concisely, and ahead of time to your clients whilst providing your clients clear options to move forward.
You should prepare for a slightly higher level of user churn during this transition period (although, that’s not always the case). The chances are, you will lose a handful of customers who simply can’t afford to move over to your new pricing model. As mentioned before, this shouldn’t be seen as a negative. It just means that your business is scaling and this is just one of the challenges you’ll come across during that process, over and over again as you grow your business.
Due to the possibility of a higher churn rate (which is difficult to predict) during this process, it’s a good idea to make sure that your MRR is at an acceptable level for you for your business to be able to handle it. If it’s not, you’ll want to make sure you have some income from other areas of your business whilst you transition so that you can cushion the churn blow for a month or two.
Reset the value your client sees
Increasing your pricing means that you’re able to put more money back into your business. This equates to be able to do things like upgrade the software you use in your business, higher more staff, increase staff pay, increase the features of your product or develop more features. Regardless of what this extra value looks like, you should communicate this clearly to your customers. Show your customers how much more you’re able to do for them by increasing your pricing. Transparency is everything when it comes to business.
How to communicate these changes
How you actually communicate these changes largely depends on how you would usually communicate with your customers. If your communication method is usually email, then it’s probably recommended to stick to the method that your customers are comfortable with.
Some important points you’ll want to include in your communication:
- Existing pricing structures
- New pricing structures
- Why – cover all of the extra value you’ll be providing to serve your customers better
- The time period this change will be happening (How much ‘warning’ are you giving your customers before this change comes into effect?)
- Do your customers have to do anything?
- Don’t forget to thank your customers for sticking with you as your company scales and grows to be able to provide them more.
If email isn’t your prefered way of communicating, this same information can be put into a video or meeting with your clients.
How exactly will this change help your business scale?
Charging what’s fair for you and your clients allows your business to grow.
When you charge based on your customers’ perceived value, you know that you’re charging a much more realistic price to the people wanting your product. To start, this will decrease your MRR churn and reduce the risk of lots of people leaving for pricing reasons.
Charging fairly also allows you to put money back into your business to allow you to scale your product or service. It leaves you more room to outsource more work or use white label programs to free you up, you can upgrade your own resources to be able to do more and work smarter.
My pricing is all set, now what?
Getting your pricing into a good place is just one part of the puzzle to running a profitable business for years to come. This whole process will need to be reviewed again and again to ensure that you continue to price your service appropriately for both your business and your customers.
Once you’re settled into your new pricing, you might want to look at other avenues to expand your MRR revenue. This could mean looking at strategies to sell upgrades to your clients or providing add-ons to existing clients and providing even more value. There are tons more ways to expand your existing MRR.
Once your existing customer expansions are outdoing your customer churn, you’ll be hitting Net Negative Churn and you’ll be seeing some awesome business growth!
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