Pricing Strategy For Service Business

According to Entrepreneur, setting the prices of goods or services is one of the significant challenges that new businesses face.

Any mistake in pricing may lead to substantial losses for the company, and it may take quite some time to adjust these without causing significant challenges for your customers. Thus, getting this right from the outset is critical. (1)

Setting prices for services is significantly more complicated than doing so for products. This is because, for services, every job is different from the other, unlike the more standard pricing on products.

Based on this, choosing the right pricing strategy for your service business needs an appropriate amount of research and math to get it right in order for you to maintain sustainability.

How to Price Business Services

Estimating software can help

We are fortunate to be doing business at a time when smart technology can really help. Advanced software which specializes in your specific market niche can really help to simplify the price estimation process.

An excellent example is this free service invoice template offered by Jobber which is aimed at businesses operating in the field service industry.

Apps such as this come with free estimate templates to support specific service businesses such as cleaning, construction, electrical work, window cleaning, landscaping, pressure washing, snow removal, tree trimming, and many more.

Once you settle on your pricing strategy, the template lays everything out for you so as long as you fill in all the blank fields with your specific details, the program does all the calculations for you, making it faster and more accurate than pen-and-paper approaches.

That said, here are some popular pricing strategies for service businesses that you may wish to consider:

#1. Discount pricing

Discount pricing entails setting a lower price for your services than the usual full price. The ultimate goal is to boost sales volumes and perhaps revert to the standard prices with time.

You can opt for this strategy if you have clear goals and reasons for discounting your prices.

A typical objective might be to attract new customers. Once you attain your target number of new clients, you can stop the discounts and proceed with your standard pricing. Other discounting goals include the following:

  • Gaining repeat buyers
  • Clearing old inventory
  • Increasing sales volumes

But do note that there are several risks to discount pricing. Keep the following in mind before setting discounts for your services:

  • Customers may think discounted services mean lower quality.
  • Your profit margins may end up being too low
  • Customers who were attracted by the discounts may abandon you as soon as you raise the prices
  • Inconsistent customer loyalty due to compromised value proposition

#2. Competitive pricing

Competitive pricing takes advantage of the prevailing market price averages influenced by competitors. It’s usually applicable once a service has reached a level of equilibrium. In other words, the service must have been on the market for a considerable time, and so far, several businesses are offering similar services. (3)

This gives you three options when setting your prices:

  • Below the competition: You can do this and perhaps take the loss if you believe that the customers you draw with the lower prices will order additional services priced at or above the competition.
  • At the competition:Taking the prevailing market prices is still a good option, especially if you want to avoid the associated dynamics of setting prices below or above the competition.
  • Above the competition: You can set your prices above-market averages and guarantee your clients unequaled quality of services.

#3. Tiered pricing

Tiered pricing is also known as good-better-best pricing or price bracketing. It entails price segmentation for different levels of services.

You’ve seen this with most software vendors, with terms like gold, platinum, bronze, silver, and free packages. The higher-priced plans come with more features than the lower-priced ones.

Changing your offerings in such a manner appeals to a wider customer base. That’s why some experts term it as the absolute pricing strategy to motivate clients. It’s indeed a genius approach to marketing your business.

Your customers appreciate the kind gesture of bundling up your services to cater to their different budgets. Additionally, your conversion rates mightimprove as you meet a wider range of customer needs. (4)

#4. Psychological pricing

Certain prices have a more significant psychological impact on clients than others.

For example, many customers would choose an item priced at USD$99.99 instead of one costing USD$100. But on further scrutiny, the difference of one cent is almost negligible.

It’s all about playing with consumers’ emotional and mental constitution. (5)

Here are some more psychological pricing strategies you could try out:

  • Round off the figures: Instead of the complex USD$99.99 or USD$101.11, opt for the simpler USD$100, and your customers will quickly process it and order your services.
  • Buy one, get one free: The greed in humans will push them to order your services, even if they hadn’t planned to.
  • Comparative pricing: Offer two similar services but price one of them higher. You’ll be surprised at how many clients go for the more expensive offer, as they subconsciously relate higher prices to quality.


Setting prices for your services requires an in-depth analysis of factors such as overhead costs, desired profit margins, competition, and consumer psychology.

A firm grasp of these variables helps you settle on a suitable pricing strategy for your services. And once you do that, make use of industry-specific estimating software to generate professional estimates for your client’s review.


  1. “How to Set Prices When You’re New in Business”, Source:
  2. “Discount Pricing Strategy Pros, Cons & When To Use It”, Source:
  3. “Competitive Pricing”, Source:
  4. “Tiered pricing: the ultimate pricing strategy to incentivize your customers”, Source:
  5. “5 Strategies of ‘Psychological Pricing’”, Source: