Myths are often times exaggerated or sorely mistaken. In business, believing every pricing myth you hear can be an expensive mistake. What are some of the pricing myths you might hear?
Start with the idea that price is what determines customers??™ interests. This is just a matter of elementary school business thinking, right? Customers want the cheapest product and will always buy the lesser-priced item. Wrong! Price is not always the most important aspect of shopping, whether a customer is shopping for a million dollar yacht or a bottle of cooking oil. This is a myth perpetuated simply because many customers??”in specific markets??”do look for the cheapest item.
However, most studies and polls suggest that pricing is merely one of the most important criteria for consumers, always neck in neck with quality, marketing, popularity, and so on. There are people out there who will pay hundreds of dollars for a simple shirt or a toy. It??™s never just about pricing.
How about the idea that you should always price your products or services lower than the competition? Again, a myth that may or may not prove to be effective in your business. (As opposed to ???his??? business, which may have had an altogether different marketing plan)
Many businesses do find it profitable to match or beat a competitor??™s price??”however, not every one of these companies is successful. There are many ways to differentiate your product from the competition so that you can charge standard or higher prices.
Many commercial vendors have kept their prices above the typical 115% price match by making their products unique. They may specialize in a certain niche and only carry relevant products that other stores do not carry. They may add bonuses to the standard cost purchase or make special concessions in delivery.
They could showcase their experience or credentials, making their services seem of higher caliber. They could limit accessibility, partner with larger companies or make impressive guarantees.
This list is endless and only limited by your own imagination as to why your products are ???better??? than the cheaper alternatives.
How about the myth that says if your sales are lagging you should drop the price? Wrong??¦you should continue to sell your product or service at a price that is higher than your cost of production and promotion.
Otherwise you will lose money. Haphazardly dropping prices without figuring the budget may only cause you to close up six months ahead of schedule.
Finally, what about the myth that says cost+profit=price? Not always true, since most businesses don??™t even know their costs right away so are unable to make such an accurate formula.
This formula may not take into account the quality of your product or the market demand for it. Don??™t let these pricing myths cheat you out of money that you rightfully deserve for running a top-notch business!