Master the pricing and packaging of your services to sell more, boost profitability and grow your business.
Your business is well-established and you have a steady stream of income from several clients. Maybe you’ve even started to build a team with a few key hires. But, despite your success, you yearn for even more growth. The big problem, though, is that you’re not quite sure how to scale. One area to focus on is correctly pricing and packaging your services.
In this post, you’ll learn almost everything you need to know about pricing and packaging your services to help you scale:
- What pricing and packaging services entail
- Why even bother packaging your services
- How to package and price your services with a three-part framework (pricing and packaging strategies are included)
Pricing and Packaging Services: What It Entails
At a basic level, pricing and packaging services involve bundling services together, and charging one price. Just think about the creative agency that offers a standard service package that includes researching, writing, editing, search engine optimization and blog post promotion for $3,500 instead of providing each service separately.
A common practice, especially among SaaS companies (like FreshBooks), is to give clients the option of choosing between multiple service packages. These companies will usually present three different packages to the client, with each subsequent package offering incrementally more value and priced higher to reflect this value.
See how FreshBooks does it below with their Lite, Plus and Premium plans—and how they also provide custom pricing for those clients who may have outgrown a specific package.
Of course, pricing and packaging services is more complex and nuanced than merely creating a few packages, and slapping a price on it. Deciding what to include in your packages takes time and requires an understanding of your market.
And even once you understand your market, you need to decide how best to package your services to reflect the value that is important to clients: What services do you combine? What about packaging the service process instead of the service itself?
The good news is that pricing and packaging need not be complex if you use the right process. There is, in fact, a three-part framework you’ll learn about later that will help you create your service packages. But first, let’s explore the benefits of packaging your services.
Why Even Bother Packaging Your Services?
Here are eight compelling reasons to create service packages:
- Service packages make the intangible tangible
- They give prospects clarity on your offer
- Multiple packages are the perfect upsell
- Prospects don’t compare your services against the competition
- Your clients have more choice
- You appeal to prospects with different budgets
- Packages accelerate your workflow
- They help shift the focus from cost to value
Each of these benefits ultimately helps you sell more services.
1. Service Packages Make the Intangible Tangible
Unlike products, services are intangible. This intangibility makes buying services riskier than purchasing products because prospects don’t know what they’re getting until they’ve tried your service. As a result, many prospects remain on the fence about buying services.
Luckily, service packages help solve this problem by giving the prospects something more tangible to justify their purchase decision. Packages “productize” your service and remove psychological barriers that prevent prospects from buying.
2. Packages Give Prospects Clarity on Your Offer
Many small business owners mistakenly list all of their services on their website and expect prospects to wade through them to determine the right service for them.
All of this information only creates unnecessary obstacles to buying your services. Packages, however, help you present a limited number of options in a structured way, which improves your chances of winning more business.
3. Multiple Service Packages Help with the Upsell
Your existing clients are far more likely to buy products and services from you compared to new customers. It makes sense when you think about it: They already know and have a stable relationship with you.
But don’t take my word for it. Statistics from Invesp suggest these existing customers are 50% more likely to buy from you and are willing to pay 31% more for your services compared to new customers.
For you to sell more services to existing clients, you need to find ways to upsell. And creating service packages that showcase an increasing amount of value at different price points is one way to do this. For example, imagine you have three packages priced as follows:
- Package 1: $800 / month
- Package 2: $1,400 / month
- Package 3: $2,000 / month
Now also imagine that you have a client signed up for Package 1. Because they’ve already used your service and trust you, they may be easily inclined to upgrade if there are compelling services in the next level up.
4. Prospects Don’t Compare You Against the Competition
When you create multiple packages, prospects tend to compare these packages against each other instead of comparing you against the competition, which improves the odds of winning their business.
In fact, according to Bidsketch, proposals that offer multiple pricing options (for different packages) contribute to 32% more sales.
5. Customers Have More Choice
Offering different pricing and packages means you give buyers more choice when buying your services. Plus, well-structured packages will also scale with these same clients.
For example, think back to FreshBooks’ packages: Each package targets incrementally larger businesses based on the number of billable clients, and also includes features that different scales of business will need.
6. You Appeal to Clients with Different Budgets
Offering multiple packages at different prices ensures you’re able to appeal to clients with varied budgets.
7. It Accelerates Your Workflow
This is an often-overlooked benefit of packaging your services. When you offer services separately, you often chop and change between different types of work and processes, which require different skills. Alternating like this can cause overwhelm and impede workflow.
But, when you create packages, you set a clear structure and process for all projects that you can easily replicate from one project to the next.
8. Shifts the Focus from Cost to Value
When you provide an itemized cost for services, prospects usually become cost-focused, which can lead to price haggling. But because service packages have one total price, prospects are less focused on cost and more on the value of the entire package. And, customers who think in terms of value are willing to pay far more for your services.
Pricing and Packaging Services: Your 3-Part Framework
Now that you have an understanding of what pricing and packaging services entail and the reasons why packages will help you scale, let’s look at how to do it. The upcoming section details a three-part framework you can use to price and package your services:
- Part 1 deals with gathering information from your market to build the right kind of packages
- Part 2 details the different ways to package your services and also provides some service packaging guidelines
- Part 3 covers pricing. A discussion on service packaging wouldn’t be complete without mentioning pricing. After all, the profitability of your packages and business depends on how they’re priced
Part 1: Collecting Information to Narrow Down Your List of Services
Start gathering as much information as you can from your customers, market, competition and business. This process helps you determine what services to bundle together and ensures you only offer relevant services to your market.
1. Research Your Customers
Rachel Kurzyp, a business owner recently featured on the Flying Solo podcast, detailed how she made the bold decision to revamp her website to offer service packages targeted at freelancers—despite having several big clients like the World Bank.
You see, Rachel started receiving an overwhelming number of requests for help from freelancers in the professional community. In one week alone she spent 15 hours helping freelancers! She also discovered that most of her potential clients would only look at her social proof—testimonials and client logos—when choosing her services.
As a result, she knew she could confidently recreate her website to target this new segment without losing existing business—as long as she kept her social proof. So, she created new service packages aimed at solving freelancers’ problems—all of which are now prominently displayed on her website:
Rachel’s story underscores the importance of paying careful attention to—and collecting information from—your customers when creating your service packages.
So, when deciding how to build your service packages, listen to your market. Speak to your clients and prospects. Engage in conversations to learn about their core problems. Review what services they’re currently buying. Revisit what they purchased when you started working together and see if those needs may have changed.
2. Analyze Your Own Business
Another way to determine what types of services to combine is to review your own business:
- Reflect on past projects to see what worked, what didn’t and what you want to keep. You’ll likely discover certain services aren’t worth keeping given your earnings vs. time spent.
- Review your past sales to determine what services to keep and what services to cut. Chances are, you’ll probably find that some services bring in more revenue and profits compared to others.
3. Research Competitors
Finally, research your competition to see what services and packages they offer. Use this research to give you ideas and insights for creating your own service packages.
Part 2: Building Your Service Packages
Once you’ve narrowed down the list of services, it’s time to build your packages. The following section details three packaging strategies and provides guidelines to help you construct your packages.
Packaging Strategies: 3 Ways to Package Your Services
1. Bundle Services Together
This strategy is suitable when your client needs change or when clients begin to compare your services against the competition based on price.
With this strategy, you bundle together several services to create a more robust and convenient offer for your client. Usually when you’re working for clients, there’s something they need to do with your work before and after you can do it.
For example, you might run a content marketing agency that focuses on writing posts, eBooks and more. But maybe you realize you’re relying on your clients to provide SEO research and a content strategy. That opens up an opportunity for you to expand your offering and introduce a new up-levelled tier.
2. Package Different Service Levels
This strategy caters to clients with different needs and different budgets. It also gives clients a choice and encourages the upsell.
As you saw earlier, the idea is to present several packages alongside each other to allow clients the choice of different levels of service. The packages usually range from the low- to high-end. Each package includes different deliverables and provides incrementally more value.
For instance, continuing with that same copywriting example, the copywriter could present two extra packages:
- Starter package: Research, writing and editing a 2,000 word blog post for $1,000 per month
- Mid-range option: All of the above, plus search engine research and optimization of the blog post for $1,600 per month
- Premium option: All of the above, plus accompanying design elements and social copy for $2,500 per month
This packaging strategy is ideal for getting clients to try your services for the first time because you have an inexpensive option positioned alongside a middle and premium one.
3. Package Your Service Process
This is an often-overlooked method of packaging services. With this method, you package how you deliver your service to demonstrate expertise and build trust.
For example, a web design firm may decide to detail and package the steps involved in creating a website, such as a client briefing session, creating the wireframes and so on.
Or, a landscaper may choose to detail all of the steps involved in completing a new project—from visiting the jobsite and compiling an estimate, to doing the actual work of hardscaping and softscaping, and getting paid.
Guidelines to Follow When Packaging Your Services
Regardless of what packaging strategy you choose, it’s essential to follow a few guidelines when constructing them. Here are five:
1. Double-Check That Your Packages Are Optimized
As you saw, your package should include features that matter to your audience. If you’re offering multiple packages, ensure that each subsequent edition does indeed provide incremental value.
Test your service packages by getting a client to review them and provide feedback. They’ll be able to quickly identify aspects that don’t make sense.
Also, pay attention to bigger companies and how they package their services. Whether it’s your cable provider or app subscription, there are savvy ways to get people to “up-level” their spend. Remember these big businesses have this down to a science, so study their packaging and pricing strategies.
2. Be Specific to Prevent Scope Creep
If you don’t specify what’s included in your packages, clients will eventually ask for extras they think are part of the service. Just like that, you’re having to deal with the dreaded scope creep.
By that point, you’ll have a hard time saying “no” because you realize you’re partly to blame for not specifying the deliverables up-front. That’s why you need to be specific in your package descriptions from the start.
3. Naming Your Service Packages
What you choose to call your packages is up to you, but if you want them to be truly memorable, spend a little more time naming them.
Here’s a fun process you can use to start coming up with names:
- Start by writing down all of the words that come to mind when thinking about your service and topic.
- Then, ask yourself: How will customers feel after using my service? Write down those emotions. Maybe they’ll feel happy, pumped up or inspired.
- Now, list words that describe the benefits customers will receive from working with you. Perhaps they’ll get more sales, feel more organized or be more relaxed.
- Use online dictionaries to find synonyms for any words and don’t be afraid to make up new ones.
- Once you have a final list of words, mix and match all of the words to see what you come up with. Remember the package names should relate to each other with a sense of progression: Think “sprout, seedling, evergreen” or “walk, run, sprint.”
Once you have a list of names, whittle down the list and choose a winner. Then, compare your chosen name against Glenn White‘s five golden rules for naming a product, which are that it should be:
- Readable and writable
- Short, punchy and memorable
- Look good written down and sound cool to say
- Evoke an emotion, feeling or idea
One final note: Be sure that your names don’t “belittle” your lightest package. You don’t want people to feel small or bad for choosing that option. This is partly why “Lite” is such a common starting package—it still feels very positive.
Part 3: Pricing Your Packages
Finally, after you’ve packaged your services, it’s time to price your packages. Pricing is important because if you get it wrong, your packages will become unprofitable.
For example, if you price them in a way that leads people to cheap out, you’ll almost always sell your lowest package, which won’t help you grow like you want to.
So, how exactly do you price your service packages?
The critical thing to remember when packaging your services is that you’re forcing clients to think about the value and not the cost. This means old pricing assumptions are invalid. You can, and should, charge more for your services based on the value they now provide.
One value-based pricing strategy you can use is tiered pricing. Used when packaging different service levels, you charge an incrementally higher price to capture the subsequent increases in value.
This pricing strategy allows you to experiment with the different prices of your packages to encourage customers to purchase a specific one.
For example, you can increase the price of your low-end package relative to the middle- and high-end ones. This increase makes the latter two packages more attractive because clients now get more value for a marginally higher investment.
Also, consider the price jumps between packages. No matter how much “value” is in your second package, if it’s double the cost of the first, people will think, “It’s double!” So make those jumps feel more like organic progressions.
Finally, remember that the lowest package sets a tone for the kind of business you are and the kinds of clients you’ll attract. Your pricing should be set at a level that attracts the right kind of business, not just any and every client.
Regardless of what price you do eventually set, make sure you once again get feedback from your clients to see what they think.
Your First Few Service Packages and Beyond
Pricing and packaging your services can be tricky. There’s undoubtedly much more to the process than deciding on a few packages and putting a price to it. You need to:
- Research and understand the market to create packages that actually capture the value that’s important to your clients.
- Choose from several packaging strategies such as bundling your services and offering different service levels.
- Follow certain service packing guidelines like providing specific service descriptions.
- Adopt a value-based pricing strategy to ensure you’re not charging based on cost.
By following the above framework, it’ll only be a matter of time before you have your first few packages and are selling more services.
But remember: The first version of your packages will not be your last. The market changes. Your client needs also change. And as a result, your service packages will probably need to change too.
We’re certainly not saying you need to update your service every month or quarter. What we are saying is that you should remain attuned to your ever-changing client needs and, at the very least, review them yearly and revise as needed.
The only remaining question is: Are you ready to package and price your services?
This post was updated in August 2019.