Avoid these common mistakes when pricing your products

What are the most common mistakes companies make when it comes to pricing?

Setting the right price can make or break a business. Price too high and you risk losing customers, set it too low and you plunge into a financial crisis. As a CEO or a manager of any organization, setting the right price should be one of your top priorities. However, pricing isn’t always an easy task, and it's not uncommon for many businesses to make mistakes. In this blog post, we will discuss the most common mistakes companies make when it comes to pricing, so you can avoid them and make better pricing decisions.

Pricing based on cost

One of the most common pricing mistakes that companies make is pricing solely based on cost. While it's understandable to consider the costs, pricing your product solely based on production costs neglects the fact that the actual value perceived by your customers is different. You do not want to undercut your profits - what happens if your costs go up or demand increases - and you turn a profit? Instead, assess what price your customer is willing to pay for your product, what is the value they are getting? There are numerous models to calculate this, including competitor pricing, customer research, and premium pricing, which reflect the value the customer perceives in your product.

Not revisiting pricing regularly

It may be tempting to set a price and never change it, especially if you are popular with customers. However, market dynamics are in a consistent state of flux, and you need to revisit your pricing regularly. As the market changes so must your pricing strategy. It is essential to stay up to date with the economy, competitors entering the market, and the introduction of new technology. When your customer's perception of your value changes, so must your pricing.

Focusing only on acquiring customers

While gaining new customers is vital, it's not the complete picture, and keeping your existing customers happy is even more critical. An overly aggressive pricing strategy aimed at acquiring a customer base can irritate existing clientele. So, if you lower prices beyond what is sustainable to gain new customers, your existing base will perceive a drop in value in your product. Therefore, strategic pricing involving both maintaining customer loyalty and acquiring new ones is essential.

Not experimenting with pricing

Would it be best if you were always open to experimentation? Changing your pricing scheme can be scary, but remember, Starbucks, the famed coffee giant, has been tested and revised its pricing strategy multiple times, successfully. Find a balance in experimentation; analyze how all aspects of the business could be altered with the change and the effect on pricing on different markets.

Ignoring psychology.

People do not buy products based purely on price. Customers purchase your product because they value it, believe in its quality, and trust your brand. Thus, pricing should reflect the psychological expectations a buyer has when it comes to your product. While price can attract a customer, low-pricing frequently indicates inferior product quality, and may prompt your customer to investigate other brands. Therefore, a pricing psychology expert should analyze the pricing with respect to your brand, customers and competitor in the market.

Pricing your product adequately is vital, and avoiding common errors can make a massive improvement to your profits. Pricing based only on cost, neglecting to revisit your pricing model regularly, focusing only on acquiring customers, not experimenting with your pricing, and ignoring pricing psychology can harm your bottom line. By avoiding these mistakes and taking time and care to create a strategic pricing model, you can ensure your products hit the shelves at the right price. Remember, scientific and systemic pricing always wins in today's world; hence it is essential to not get lost in the social circles of opinions.