Pricing – the process of determining what a company will receive in exchange for its products. Sounds so simple, doesn’t it? Yet your pricing strategy – or lack thereof – can undermine your ability to grow your business and achieve sustainable success.
Having a good product or service doesn’t make it profitable. For your business to be both profitable and competitive, here are a few common pricing mistakes you’ll want to avoid.
1. Under pricing – Under pricing occurs when your products/services are priced below market value. You know who you are! You’re smart, gifted, intelligent, and bring a ton of quantifiable value to your clients. Yet your pricing looks like something out of the 99 cent store. A common phenomenon among start-ups, solopreneurs, and micropreneurs, under pricing originates from several causes including:
- fear of failure
- lack of belief in ones abilities
- missing pricing information of others in your industry
- miscalculation of actual costs incurred in the delivery of your product or service
- inability to articulate product/service value
2. Random pricing – Random pricing includes pricing that differs wildly from client to client to the more common pricing approach of selecting prices based on a dart throw. Random pricing occurs when the entrepreneur is missing vital pricing information including all costs involved with delivering the product or service. Without this critical information, any price will suffice – or so it seems – until you attempt to carve out a living wage for yourself and your staff.
3. Delayed price increase – The idea of raising prices in this economy may seem a bit risky. Concern over negative reaction from clients keeps many entrepreneurs stuck in low profit margins. However, if it’s time to bring your prices in line with actual costs needed to run a profitable business, small incremental increases may be easier to swallow.
Overall, your pricing objective is to achieve the profit goals you’ve outlined for your company and to fit the realities of your market place. The wrong pricing structure can leave your business struggling to achieve profitability and service clients.
What is the pricing dilemma your business is facing?