How can you avoid common pricing pitfalls?

Don't let competitors dictate your prices. Now read that again. Focus on the unique value you bring to the table and price accordingly, showcasing your worth to customers.

In my experience, know your numbers, COGS (cost of goods sold), target margin and all direct and indirect costs. Project value of money into the future and back to present to account for inflation Calculate your break-even and perform a scenario analysis (most likely, best and worse scenario) Measure and track your key performance indicators Adjust as needed. Increase your prices until you get push back from customers (indicates you are in good price range).

Stick to your business model and know your margins. Your job as an operator is to get as close to achieving these as possible. Don’t pay attention yo the competition, r maybe the market a bit. Be able to justify your pricing model and then prove market fit with it. Know your COGS/expenses, ensure profitability to the bottom line, and in early stages A/B test pricing and keep raising slightly until theees substantial pushback.

You would be surprised how many people price based upon what similar companies are doing, and don’t even know this number in terms of breaking even. Making sure you always know this number makes things a lot easier for you when you’re making important decisions about the operations of your business!

In addition to researching your market, a crucial aspect to consider is the concept of value perception. Understanding how customers perceive the value of your product or service is key to setting the right price. Value perception is influenced by various factors such as product quality, brand reputation, customer service, and overall customer experience.

The more data you have the more informed decisions you can make. Let others who’ve come before you and the hard lessons they’ve learned teach you a lot “for free”. That said, don’t follow competitors, but, rather, stick to your financial model.

Test test test! Don’t be afraid to split test and also to keep raising prices until you experience significant pushback from potential customers citing price as the reason - in other words, they’d have bought if it were cheaper. Now you can offer bundles, discounts etc to make them feel special and still make sales.

You'll never know unless you test. But, here's what. Stay nimble and open to adjusting your prices as the market moves. Be ready to pivot!

The biggest test is asking yourself "Does this seem fairly priced if I was in their shoes". Profiteering rarely wins, know your costs and margins you need for growth, and understand your value proposition. Be able to clearly communicate why your product or service is worth the money. Look at Apple - not the cheapest, but they are able to clearly carve out why their products are worth paying more for.

Shake the spotlight on your ROI! Flaunt the return on investment your customers can expect from your product, proving that your price is a small investment for significant gains.

It is also important to review your pricing strategy because of market dynamics. Markets are dynamic and constantly changing. Consumer preferences, competitive landscape, and economic conditions can all impact the value customers place on your products or services. Regularly reviewing your prices allows you to stay in tune with these changes and adjust your pricing strategy accordingly. Failing to review prices may lead to outdated or uncompetitive pricing, which can result in lost sales or reduced profitability.

A conversion rate is the ratio between two currencies, most commonly used in foreign exchange markets, which designates how much of one currency is needed to exchange for the equivalent value of another currency. Conversion rates fluctuate regularly for all currencies traded in forex markets. Forex spot prices are quoted continuously with one day's break over weekends

Learning from others helps you to set benchmarks and avoid pricing pitfalls. By studying the pricing strategies of successful businesses, you can set benchmarks for your own pricing decisions. Understanding how competitors price their products or services can help you position your offerings effectively in the market and maintain a competitive advantage.

For #consultants, pricing can't be defined without considering scope of work. Traditionally consultants: 1) conduct a free or fixed-fee assessment and report with recs for next steps and ideal scope of work; 2) haggle for weeks as the prospect cuts your most impactful parts to meet an undisclosed budget; 3) implement a diluted solution while managing change orders to accomplish the original need. Far superior is program pricing that shortens the sales cycle and bills your best price for your best work. Build a solution for a single type of client with a defined scope of work. Assign a price based on the value of impact your solution creates, not time. Focus on a strategic-level value prop to eliminate change orders and scope creep.

Do not undercharge. Know the market value of your services and don’t be afraid to price at the top of the market as the expert in your field. If a prospective client says no, don’t assume that it’s because you are too expensive. Even if they say it is because of price, it is just as likely that they are the wrong fit for your services or they just haven’t seen the value yet. And when you quote a price, say it out loud and allow the client to consider it. Don’t rush them or start offering discounts. Observe their reaction and simply say ‘how does that sound?’ What happens next will give you valuable information about what else they need from you and how to proceed.

Pricing pitfalls can affect small businesses quite commonly, as pricing is a critical aspect of their operations. We often face limited resources, lack of expertise, price sensitivity, limited brand recognition, increased competition, and lack of overall pricing strategy. Therefore, small businesses should seek guidance from industry experts, conduct market research, monitor competition, gather customer feedback, and regularly review pricing strategies to mitigate the risks associated with pricing pitfalls.

Stage of the company and capitalization are both factors that can and often should flip the script when it comes to pricing strategies.

You are going to make mistakes with pricing. It’s completely normal. If there’s ever a situation where you undercharged on a product or service, it’s fine to raise the price. If somebody asks for the old rate, it’s ok to say things have changed and that rate is not profitable anymore. Being simple but honest in those kinds of situations can go a long way!