Pricing your products and services is not always intuitive. In fact, it’s one of the more challenging aspects of crafting a business plan.
Here are some common mistakes that owners make when it comes to pricing, and some insider tips on how to price intelligently in the digital age.
1. Falling Short on Research
“Market research is a given when setting up a business model, and pricing is a key component of that game plan. Consider every aspect of your costs and the profit you can make on each product. It takes a scientific mindset to get it right.” – Raul Porto, Owner and President of Porto’s Bakery.
“Pricing isn’t always intuitive, especially if you’re offering services with different structures and time horizons. You owe it to yourself to research heavily across your industry when starting out, rather than making ballpark estimates about the right price to ask.” – Chris Gadek, VP of Growth at AdQuick.
“I’ve seen many businesses in my industry just throw out numbers and prices like it’s nothing, with no research to back up their figures. This might seem like an easy way to make a buck in the short term, but it will come back to bite them down the road.” – Omid Semino, CEO of Diamond Mansion.
“You don’t want to be the company with prices that have no basis in reality. Do your research, crunch the numbers, and put the puzzle pieces together. This is how you find fair prices and set your brand up for success.” – Jeff Goodwin, Vice President of Direct to Consumer and Performance Marketing at Orgain.
2. Missing the Competitive Edge
“Your competitors are the roadmap for your pricing structure at first, but you need to blaze your own trail eventually. What differentiates your company from everyone else, and how does that play into your pricing? These are the key questions that demand honest answers.” – Brittany Dolin, Co-Founder of Pocketbook Agency.
“It can be hard to look at your company objectively in the midst of a competitive industry, but that’s a necessary part of a strong business plan and pricing strategy. Put the ego aside for a second and determine what you can reasonably charge with the information you have.” – Ben Thompson, CEO of Hardwood Bargains.
“I’ve always said to emphasize the superiority of your products compared to the competition, then price accordingly. There’s plenty of evidence showing that people are willing to spend more for quality products – use that truth to your advantage.” – Shaun Price, Head of Customer Acquisition at MitoQ.
“Many companies offer the exact same prices as their competitors, somehow expecting this to work in their favor. It has the opposite effect. Go higher, or go lower, but don’t be the same!” – Roy Ferman, Founder and CEO of Seek Capital.
3. Failing to Focus on Value
“Don't sell yourself short, because then, nobody will value you. Set a fair price for you, your services, whatever you have to offer. Rather than setting a low price, realize your own value and set it slightly higher. You’ll see better results that way..” – Author and Marketer John Kremer.
“Commonly, business owners can become more focused on the sale, rather than on the return on investment (ROI). In other words, you’ll want to not just make a tiny profit, but also to have enough revenue to put back into your company. Set fair prices that are comparable to those of your competitor’s, but offer more features to make your products or services of greater value.” – Dylan Fox, Founder and CEO of Assembly AI.
“If you have deep and genuine confidence in your products, you won’t have to worry so much about price. Customers will recognize top-quality stuff and keep buying while recommending it to friends and family, too.” – Annabel Love, Co-Founder and COO of Nori.
“I see too many companies sweating about pennies when they should really be 100% dedicated to improving their products, customer support, and the things that matter most. Prices take care of themselves when you offer undeniable value all around.” – Bill Glaser, Founder of Outstanding Foods.
“A common mistake owners make with pricing is charging too little. When first growing a business, it’s tempting to win on price and lower what you charge with a variety of discounts and coupons, yet in the long run, lowering prices can hurt your brand as customers come to expect discounts. Instead, determine your market value and price accordingly.” – Darren Litt, Chairman and Co-Founder at MarketerHire.
4. Unwillingness to Raise
“You’ve worked for years to develop a unique product that’s better than your competitor, so let your prices reflect that! Use that strong messaging and marketing to show why customers should spend a bit more. Chances are, they will.” – Bing Howenstein, Founder of All33.
“The companies that are hesitant to raise prices often find themselves struggling in other ways, whether it's talent retention or innovation. Boosting prices is a message to yourself and customers that the bar has been raised in every sense of the word.” – Nik Sharma, CEO of Sharma Brands.
“You can determine the long-term strength of a business by how much agony they endure in raising prices.”– Warren Buffett, CEO of Berkshire Hathaway.
“You aren’t accomplishing much by keeping prices super low for years at a time. If you’ve got the customer base and quality products, people are willing to pay a bit extra. Don’t make it a big deal – and it won’t be a big deal. Simple as that.” – Benjamin Smith, Founder of Disco.
Setting a fair price won’t happen immediately – it takes research and hard work like any other aspect of the business.
But if you put in the time and effort, you’ll set the perfect price, keep customers happy, and earn the profits you deserve.