100 Thoughts on Pricing: #54
Be careful basing your cost and pricing for new services, geographies, etc. on the cost profile of the first people you hire for that service line (or region, etc.). These people tend to be very senior, leading to high cost rates, which in turn push you to overprice your base rates.
Since base service pricing is rarely decreased YoY even when underlying costs decrease, this initial overpricing can result in years of compounding above-market pricing that significantly limits the uptake of the new offering with your customers- yet rapid uptake was the whole point of the new offering! Prevent this by building your cost rates off market salary bands for a range of experience levels, benchmarking cost and pricing rates to market, and diligently monitoring market feedback to tell you whether further adjustments are needed.