Common pricing mistakes
Set realistic prices that take account of all tangible costs, such as the price of supplies, and intangible costs such as the skills, time and expertise, involved in producing your product or service.
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Knowing how much competitors charge enables you to confirm that your prices are realistic for your target-market but you should avoid making the mistake of basing your prices solely on competitor prices.
Remember!
The costs competitors use to calculate their prices are not the same as your own. They may pay suppliers less or more than you do and may have larger or smaller marketing budgets.
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Consumers benefit from price-wars, enjoying lower prices. But getting into a price-war with your competitors without adjusting the value of the product or service offered is not good for your business or theirs.
Remember!
Setting prices solely to beat the competition will win customers who are likely to choose a lower-priced product than yours in the future. Sound pricing decisions help generate sales and build customer loyalty.
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Delivering a product at a lower price without changing service delivery can lead customers to think that your initial price was too high. This may encourage them to negotiate a lower price.
Remember!
Lowering your price leads to lower margins, and reduced profit and service levels.
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Don’t underestimate the volume lift in sales needed to compensate for a price drop.
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