The Main Pricing Mistake Entrepreneurs Make
Pricing means more than we think it does. It tells your potential customers if what you offer is truly valuable or not.
It is the answer to the question: Are you a commodity or a luxury item?
Our brains trick us into thinking that we’ll make more money if we have a lower price we’ll get more sales…WRONG.
Would you really purchase more of a product that you care about just because it is cheaper? What if it was an important beauty product (like shampoo)? What if it was a medication that you need for your migraines?
As you can see in the examples I gave you above, when you truly care about the value being offered, you won’t think that price is the most important or the only thing that matters.
If you have worked on your business plan and foundations, you have made sure that you have identified your ideal client: the one that truly wants and understands the value of what you offer. If this is true for you, those people will be happy to pay a fair price for it.
When you are getting price objections you are either talking to the wrong market or you are not doing a good job at explaining the value and benefits of what you offer.
What does truly happen when your price is too low? The truth is that you won’t automatically get more sales, in contrast, these 2 things can happen:
- You’ll need to sell a lot more product to make more money. This means that you have to do a lot more work.
- People associate a lower price with less quality, less value…less everything. This means that they will start doubting your quality and potentially go for your competition instead of you.
I’ve worked with probably 30 different categories of products at small stores, pharmacies, and supermarkets. Never the lowest priced product made more sales in $. The only exceptions were commoditized items such as toilet paper, that was sold around 80% on promotion.
The implication of being a commodity is that your focus on price vs. value makes your clients expect just that: the lowest price at all times. Your true price is no longer the regular one because like toilet paper, that is being sold 80% on promotion, the price that people buy at is lower than the regular one.
I talk a lot about pricing in my work because it’s one of the most important parts of your business, especially if you have a product since there are a lot of costs associated with this and it is a lot harder to change or adjust than with services.
People pay for what they value, period. They will pay more for what is offering them a better solution for their problem or a bigger opportunity.
The truth is that a lower price not only makes you automatically make less money, but it will also be associated with a lower value.
Instead of thinking “what a good deal” people will think “hmmm, there must be something wrong with this”.
This post was originally written by our member Leyla Razegh on her blog. Wisdom Wednesdays is a collection of content submitted by our members.
Leyla Razegh is a Consultant, Trainer, and Speaker known for her high energy, sense of humor and for her unique delivery that combines unapologetic honesty with kindness. As a Business Strategist, she believes that it’s possible to make money while making a positive impact on the world and society. To learn more about Leyla’s visit her website here.