The right pricing strategy is crucial to business success, whether you sell products or services. However, this area can be overlooked because business owners are unsure of how to price competitively, assess value of their products or services and have detailed information on overall running costs for their business.
This article considers four frequent and costly mistakes made by small businesses in setting and negotiating their prices and suggests ways to avoid these.
Mistake 1: Basing your prices on your competitors
How to avoid this mistake:
Do you know how your competitors have decided on their price? More than likely, your answer is “No”.
You are unlikely to know how much was spent on research before launch of product or service, actual overhead costs, marketing budget or even if the product or service is positioned as a loss leader. Therefore, you should ensure you calculate your own costs (money and time) of providing your products or services, then make your assessment of how competitive your pricing will be in your selected target market.
Mistake 2: Lowering your prices to match competitors
How to avoid this mistake:
Your competitors may have lowered their prices for reasons that don’t necessarily align with your goals, and would have factored losses into their budgets that you hadn’t considered. Ensure you know the real costs of delivering your services or products to customers before setting your price.
Mistake 3: Not building customer service into costs
How to avoid this mistake:
Excellent customer service is an invaluable commodity in itself. Providing value for money to your customers by giving them great service is of course paramount. Don’t undersell yourself and undervalue the service and solutions you provide.
Mistake 4: Underpricing a service
How to avoid this mistake:
Remember that a service, unlike a product, is intangible, so people tend to judge the quality of your service on two factors – recommendations and price. If you underprice your service it can appear ‘cheap’ and inadvertently be rejected by your ideal customers.
Remember also:
If your customers are other small business owners, then you should find the ‘hungry crowd’ who are willing to invest in themselves and their business to achieve longer lasting and higher returns for their business. Assess both value for money and how your product or service fits with the values of your customers.
When you know which of your customers prefer premium packages of your services or products, then it will be a joy to work with them to deliver even greater value for their business, as well as yours.
Veronica will be hosting her informative talk on Pricing Strategies on Weds 20th September. Book your tickets now!
About Veronica: Experienced Business Coach, Mentor and Pricing Strategist
Veronica has developed a niche on Pricing for Profitability and pricing strategies for small businesses. In addition to running Pricing for Profits masterclasses for business owners, provide one-to-one assistance to review pricing in businesses as well as negotiate contracts and help business owners with plans. She works with business owners and their senior mangers to find solutions to promote business growth, expand revenue streams and reduce time to launch new or improved services.
Contact details
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Small Business Research and Enterprise 