If your pricing structure is right, your business has the opportunity to increase sales and build customer loyalty. On the other hand, if your pricing structure is wrong, it will make it difficult for your business to serve customers and make a profit. When you need to decide on the price of your products and services, avoid the following common pricing mistakes.Sell below cost
To determine the actual price, you need to know all the costs involved in producing the product or service.
In fact, it’s easy to keep track of tangible costs. Some business owners price their products without taking these costs into account. They may also forget to add in initial costs like utilities or rent, etc. So they later discover that they’ve been losing money all along.
Keep up with the competition
If your pricing structure is based on your competitors, it is dangerous because the costs your competitors use to calculate their prices often have little relationship to your costs. They may buy more or less of their ancillary items than you do, they may have different technology than you do, and they may spend more or less on marketing than you do, etc.
That means you need to know what your competitors are charging so you can be sure that your prices are fair in the market. If you find that your numbers are significantly lower than your competitors, double-check to see if you’re forgetting to factor any costs into your pricing equation.
Compete on price
There are many ways to compete. Many people think about price when they are formulating competitive strategies. In fact, the idea that pricing is the only way to beat the competition is not a mistake.
While you may attract customers with price, they may not be loyal customers. If low costs attract them to your business, they may leave when other options become available at lower costs.
Besides the price factor, to compete, you should also think about other measures, such as: good customer service, improved product features or better quality, etc.
