Pricing Your Service or Product: How to Earn What You're Worth
You’re undercharging. Most college dropouts are—especially early in their businesses. You charge $25/hour when you should charge $100. You price your product at $29 when customers would happily pay $79. Why? Imposter syndrome. Lack of confidence. Fear of rejection. The myth that “no degree = lower rates.” Stop. Pricing isn’t about what you think you’re worth—it’s about the value you create for customers. This guide shows you exactly how to price your services and products using psychology, market research, and value-based strategies that get you paid what you deserve.
Why Pricing Is Psychology, Not Math
Here’s the secret most people miss: pricing is 80% psychology, 20% math.
Customers don’t buy based on your costs. They buy based on perceived value, urgency, and emotion.
Example: A $5 latte costs Starbucks $0.50 to make. They don’t charge $1 (cost + 100% markup). They charge $5 because customers perceive it as worth $5—the experience, brand, convenience, and taste.
Your job: Position your service or product so customers perceive it as far more valuable than your price.
The Fatal Flaw: Cost-Plus Pricing
Most beginners use cost-plus pricing. It’s simple, intuitive—and wrong.
Cost-Plus Pricing Formula:
Price = (Your costs + Your time) × Markup
Example: You’re a freelance writer. A blog post takes 3 hours. You want to make $50/hour. You charge $150.
Why This Fails:
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It ignores customer value. What if that blog post generates $10,000 in sales for the client? You just left $9,850 on the table.
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It punishes efficiency. As you get faster (3 hours → 1 hour), you earn less. That’s backwards.
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It commoditizes your work. You’re competing on price with every other “3 hours for $150” provider.
Bottom line: Cost-plus pricing leaves money on the table and treats your work like a commodity.
The Right Approach: Value-Based Pricing
Value-based pricing flips the script: you charge based on the value you create, not the time you spend.
Value-Based Pricing Formula:
Price = % of the value you create for the customer
Example: A business consultant helps a client increase revenue by $100,000/year. They charge $15,000 (15% of value created). The client is thrilled—they net $85,000. The consultant earns far more than hourly rates would allow.
How to Identify Value
Ask yourself (and your customers):
- What problem does this solve?
- What does that problem cost them? (time, money, stress, lost revenue)
- What’s it worth to solve it?
Real examples:
Web designer: Instead of “I’ll build a website for $2,000,” ask:
- “How many customers do you get per month now?”
- “How many more could you get with a better website?”
- “What’s the lifetime value of a customer?”
If a better website brings in 10 extra customers/month at $500 each, that’s $5,000/month = $60,000/year in value. A $5,000 website is a no-brainer investment.
Social media manager: Instead of “$500/month for daily posts,” ask:
- “How much revenue does one new customer generate?”
- “How many new customers do you want per month?”
- “What would 5 extra customers/month be worth to you?”
If 5 new customers = $10,000/month in revenue, $2,000/month for social media management is cheap.
The Value-Based Pricing Process
Step 1: Quantify the problem Help the customer put a dollar amount on their pain.
Step 2: Demonstrate your solution Show how your service/product solves it (case studies, testimonials, examples).
Step 3: Anchor to value, not cost Present pricing as a percentage of the value they’ll receive.
Step 4: Let them do the math “If this generates $50K in new revenue and costs $5K, is that a good investment?” (Let them say “yes.”)
Market Rate Research: Know What Others Charge
Before you set prices, research what the market pays for similar services or products.
How to Research Market Rates
1. Check freelance platforms:
- Upwork, Fiverr, Toptal (filter by experience level and reviews)
- Note: These often skew low. Add 20–50% for direct clients.
2. Search job boards:
- Look for similar roles as full-time positions
- Divide annual salary by 2,000 hours to get hourly equivalent
- Freelancers should charge 1.5–2× the employee equivalent (you cover your own benefits, taxes, tools)
Example: A full-time graphic designer makes $60K/year = $30/hour. Freelancers should charge $45–$60/hour minimum.
3. Ask your network:
- DM people doing similar work (LinkedIn, Twitter, industry Slack groups)
- “Hey, I’m setting my rates as a [role]. What’s the typical range you’ve seen?”
- People are surprisingly willing to share if you’re genuine.
4. Browse agency websites:
- Find agencies offering similar services
- Their pricing = upper end of market
- Position yourself at 50–80% of agency rates as a solo provider
5. Test and adjust:
- Start at the middle of the range you find
- If you close 80%+ of prospects, you’re too cheap—raise prices
- If you close <20%, you’re either too expensive or selling to the wrong audience
Pricing Psychology Tactics That Work
Here are proven psychological tactics to increase perceived value and conversions:
1. Anchoring (Show a High Price First)
Present a higher-priced option first to make your target price seem reasonable.
Example:
- ❌ “$500/month” (no context)
- ✅ “Our premium package is $2,000/month. Our starter package is $500/month.”
The $2,000 anchor makes $500 feel like a bargain.
2. Tiered Pricing (Give 3 Options)
Offer three tiers: Basic, Standard, Premium. Most people choose the middle option.
Example (website design):
- Basic: $1,500 — 5-page site, basic template
- Standard: $3,500 — 10-page site, custom design, SEO ← Most choose this
- Premium: $7,500 — Unlimited pages, branding, ongoing support
Why this works:
- Basic option makes you accessible
- Premium option makes Standard look affordable
- Most customers avoid extremes and pick the middle
3. Charm Pricing ($99 vs. $100)
Prices ending in 9, 95, or 97 feel significantly cheaper than round numbers.
Example:
- $100 feels expensive
- $99 feels like a deal (even though it’s $1 difference)
Use charm pricing for consumer products. For B2B/premium services, round numbers ($5,000, not $4,997) signal quality.
4. Price Framing (Per Day/Month Instead of Total)
Break big prices into smaller, digestible chunks.
Example:
- ❌ “$1,200/year”
- ✅ “$100/month” or “$3.28/day” (same price, feels smaller)
5. Decoy Pricing (Make One Option Clearly Better)
Add a “decoy” option that makes your target option look like a steal.
Example (SaaS pricing):
- Basic: $29/month — 10 users
- Pro: $79/month — 50 users, priority support ← Best value
- Premium: $99/month — 60 users, priority support ← Decoy (only 10 more users for $20 more)
The decoy makes Pro look like the obvious choice.
How to Raise Prices (Without Losing Customers)
You’ve been undercharging. Now what? Here’s how to raise prices without torching your client base.
For New Customers: Just Raise Them
New clients don’t know your old rates. Simply charge new prices going forward.
Announce it:
- Update your website
- Update proposals/contracts
- Tell your network: “As of [date], my rates are now [new rate].”
For Existing Customers: Grandfather or Transition
Option 1: Grandfather (Keep Old Rates for Loyal Clients)
Let existing clients keep old rates as a loyalty reward. New clients pay new rates.
Pros: No friction, clients feel valued Cons: You’re leaving money on the table
Option 2: Gradual Transition
Give existing clients notice and raise rates over time.
Email template:
Subject: Rate Update Starting [Date]
Hi [Client],
I wanted to give you advance notice that my rates will be increasing to $[new rate] starting [date 60–90 days out].
Your current rate of $[old rate] will remain in effect until then. After [date], all invoices will reflect the new rate.
I appreciate your business and wanted to give you plenty of time to plan for this change.
Thanks, [Your Name]
Option 3: Value Add to Justify Increase
Raise rates but add something extra to justify it.
Example: “My rates are increasing to $150/hour, but I’m now including [free discovery call, monthly reports, priority support, etc.]”
Pricing Tiers for Different Customer Segments
Not all customers can (or will) pay the same. Tier your pricing to capture more market segments.
Segment 1: Budget-Conscious Customers
Price: Low ($50–$500) Offer: DIY products, templates, group programs Example: Pre-built website templates, online courses, eBooks
Segment 2: Mid-Market Customers
Price: Medium ($500–$5,000) Offer: Done-with-you services, productized offerings Example: Website builds, monthly retainers, consulting packages
Segment 3: Premium/Enterprise Customers
Price: High ($5,000–$50,000+) Offer: Custom, high-touch, done-for-you services Example: Full branding packages, custom software, executive coaching
Pro tip: Serve multiple segments with different offerings. A web designer might sell:
- Templates for $99 (budget)
- Website builds for $3,000 (mid-market)
- Full branding + site for $15,000 (premium)
Retainer vs. Project Pricing: Which Is Better?
Both models have pros and cons. Here’s when to use each.
Project Pricing (One-Time Payment)
What it is: Customer pays once for a defined deliverable.
Pros:
- Clear scope
- Upfront payment
- Easy to sell
Cons:
- No recurring revenue
- Constant sales cycle (always finding new clients)
Best for: Web design, branding, one-off consulting, physical products
Retainer Pricing (Monthly Recurring)
What it is: Customer pays monthly for ongoing services.
Pros:
- Predictable recurring revenue
- Client relationships deepen over time
- Easier cash flow planning
Cons:
- Scope creep (clients expect more over time)
- Harder to sell initially
Best for: Social media management, SEO, bookkeeping, content creation, SaaS
Hybrid Model: Retainer + Project Bonuses
Offer a base retainer for ongoing work, plus project fees for one-time add-ons.
Example: $2,000/month retainer for social media management + $1,500 for each ad campaign setup.
This gives you recurring revenue and upsell opportunities.
Common Pricing Mistakes Dropouts Make
Avoid these pitfalls that cost you thousands:
1. Charging Hourly (The Freelancer Trap)
Hourly pricing caps your income and punishes efficiency.
The fix: Charge per project or retainer. Price based on value, not time.
2. Competing on Price (The Race to the Bottom)
Trying to be the cheapest option attracts bad customers and kills margins.
The fix: Compete on value, results, and service. Position as premium, not budget.
3. Not Asking for Testimonials or Case Studies
Without social proof, it’s hard to justify premium pricing.
The fix: After every successful project, ask: “Can I use this as a case study?” or “Would you write a quick testimonial?“
4. Pricing the Same for All Clients
Not all customers are equal. Enterprises can pay 10× what solopreneurs can.
The fix: Create tiered pricing or custom quotes based on company size/budget.
5. Discounting Too Quickly
Offering discounts devalues your work and trains customers to expect them.
The fix: Hold firm on pricing. If you must offer a discount, make it conditional: “I can offer 10% off if you commit to 6 months upfront.”
6. Forgetting to Raise Prices Over Time
Your skills improve, your reputation grows—your prices should too.
The fix: Raise rates 10–20% annually for new clients.
Real Pricing Examples by Industry
Here’s what college dropouts in various fields are charging:
Freelance Writing
- Beginner: $0.05–$0.10/word ($50–$100 per 1,000-word article)
- Intermediate: $0.15–$0.30/word ($150–$300 per article)
- Expert: $0.50–$1.00/word or $500–$2,000 per article
Graphic Design
- Logo design: $300–$3,000
- Social media graphics (monthly): $500–$1,500
- Full branding package: $3,000–$15,000
Web Development
- Simple 5-page site: $1,500–$5,000
- Custom 10-page site: $5,000–$15,000
- E-commerce site: $10,000–$50,000+
Social Media Management
- Basic (3 posts/week): $500–$1,500/month
- Standard (daily posts + engagement): $1,500–$3,000/month
- Premium (daily posts, ads, analytics): $3,000–$8,000/month
Consulting (Hourly)
- Beginner: $50–$100/hour
- Intermediate: $100–$250/hour
- Expert: $250–$500+/hour
SaaS / Digital Products
- Templates/Tools: $19–$99 one-time
- Courses: $49–$997
- Software (monthly): $29–$299/month
Pro tip: Start in the lower range and raise prices as you gain experience, testimonials, and case studies.
Action Checklist: Set Your Prices Today
Ready to price like a pro? Follow this checklist:
- Research market rates for your service/product (use 3+ sources)
- Calculate the value you create for customers (quantify the problem you solve)
- Set three pricing tiers (Basic, Standard, Premium)
- Add psychological pricing tactics (anchoring, charm pricing, etc.)
- Draft a pricing page or proposal template
- Test your pricing with 5 prospects
- Adjust based on close rate (>80% = raise prices; <20% = refine offer or messaging)
- Plan to raise prices 10–20% annually
Conclusion: You’re Worth More Than You Think
Pricing isn’t about “what the market will bear” or “what someone with a degree charges.” It’s about the value you create. If you solve a $10,000 problem, charge $2,000–$5,000. If you save a client 20 hours/month, charge accordingly. Stop undercharging. Start earning what you’re worth.
Build Your Business with Confidence
Now that you understand pricing, keep growing your skills:
- Start & Scale Your Business — launch and grow a profitable business from scratch
- Lean Startup Guide — validate your idea before investing time and money
- Negotiating salary without a degree — apply these tactics to salary negotiations
Strengthen Your Financial Foundation
- Taxes for the self-taught — keep more of what you earn
- Budgeting for irregular income — manage variable business income
- Build a $500 emergency fund — protect your business cash flow
Ready to raise your rates? Join our newsletter for weekly pricing tips, case studies, and strategies. Have pricing questions or success stories? Drop them in the comments below.
Sources & Further Reading
[1] Fried, Jason & Hansson, David. (2010). “Rework.” Crown Business.
[2] Pfeffer, Jeffrey & Sutton, Robert. (2006). “Hard Facts, Dangerous Half-Truths, and Total Nonsense: Profiting from Evidence-Based Management.” Harvard Business Press.
[3] Cialdini, Robert. (2006). “Influence: The Psychology of Persuasion.” Harper Business.
[4] Brennan, Patrick. (2013). “Double Your Freelancing Rate: Price Your Services, Earn More Money, Get Better Clients.” Self-published.
[5] Freelancers Union. (2024). “Freelancing in America: Annual Report.” FreelancersUnion.org.
Disclaimer: This article provides general information and educational content only. It is not personalized business or financial advice. Pricing strategies should be tailored to your specific market, experience, and business model. Consult with qualified professionals before making business decisions.
