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As I’ve written about before, one of the top reasons that businesses fail is that they incorrectly price their products. You need to find the “Goldilocks” zone of your pricing — not too high, not too low, just right for your target market.
Many new business owners assume that higher prices lead to higher profits. However, they also want to lower their prices to lure customers away from competitors. These are two sides of the same misconception: pricing for profit. And sadly, this misconception makes businesses unsustainable.
Myth: You Can Compete On Price
A well-established business has a significant advantage over a new competitor: brand recognition. Consumers are willing to pay higher prices for the experience they’ve come to know. That’s why it’s a mistake to make your price point a key differentiator. People are creatures of habit, so they’re not always willing to switch brands even if it would save them a buck.
This approach also hinders your potential income. When you start with low prices, it’s more difficult to raise them later. This means you’ll need to (a) drastically increase your sales, (b) operate on a shoestring budget, or © both to stay afloat. There’s also the concept of perceived value: consumers see cheaper options as less valuable or lower-quality. That’s…
