Is Your Pricing Hurting You?

One of the key mistakes that starting entrepreneurs usually do is not pricing their services properly. This is usually a problem that results from not knowing your target market or not understanding your clients' needs. Most entrepreneurs are too humble in pricing their services. I have rarely met a starting entrepreneur who is inclined to charge high prices for his services.

Starting entrepreneurs would typically look at experienced business people and the prices they are charging and conclude that they must charge below those people because they are less experienced and less known in their fields. That is not the right way you should approach prices. Your prices should be based on the VALUE of what you offer your clients not on your insecurities. If what you offer is very valuable to clients, how much others are currently charging for their products is really irrelevant.

Cheap prices can also negatively impact your image and positioning in the market. Would you want to visit a surgeon who charges a very low rate per session? I bet you would hesitate to do so. You would probably even classify him as a low-quality surgeon. On the other hand, you would be happy to pay the high fees of a more expensive surgeon because you would probably associate him with massive value, experience and safety. I know of a retailer in Dubai who is constantly displaying 75% discounts on all his products all the year. This strategy significantly hurt the retailer because the year-long discount made people perceive the retailer's products as very inferior.

Some of you might say but I need to lower my price in the beginning of my business operations and then raise it later. That is probably a reasonable strategy to penetrate the market by offering some sort of discounted prices until you build a database of clients. But that is not what I am talking about here. I am talking about people who do not value their service properly, feel insecure about charging what they deserve, and think that the only way to compete in a market is through cutting prices. You can always choose to lower the prices or offer discounts if these moves are purposeful. But you will never build a sustainable business if you choose to compete ONLY on prices. That is because there will always be someone out there who is willing to charge even lower prices than you do. To escape this price war, you need to differentiate yourself and your products from your competitors. Your target market should be willing to buy what you have to offer regardless of the price. You need to offer so much value that you eliminate the excessive focus on prices people typically give during the buying decision. Always remember that if you do not place high value on what you offer, nobody will.