What are some common pricing mistakes that can hurt your brand image and customer loyalty?

Restaurants are constantly charging too much or too little across all channels. That's because not enough are using data to test price elasticity. It's also because many are only reviewing prices every six months which is not enough in today's difficult economic climate. The cost of goods is changing rapidly and so is consumer spending behavior. The data is now available to determine if each menu item is over-priced or under-priced and this should be done by location and by channel for every given hour. Prices do not have to change so dynamically but the analysis should absolutely be considered when setting prices, especially on delivery channels.

Pricing of services or SaaS platforms is often complex. Start with market research: understand market dynamics, market trends and your unique value. You should also consider your immediate and future target market. When you are starting out and building your brand you may need more flexibility in your pricing to attract your foundational clients. It is important to consider your broader roadmap as you grow and scale and what trigger points will you reevaluate your pricing. Another critical component is forecasting future trends. Combining strategy and foresight is a winning combination and being first to market to capitalize on the shifts within your target segments will set you apart.

I have utilized a quote by Katherine Paine (aka the measurement queen, founder of the Delahaye Group) often through out my career to illustrate this point, she frames it well. "The moment you make a mistake in pricing, you're eating into your reputation or your profits!" It really is a fine line, part science, part emotion, part art, that is required to tread this line well.

A análise de sensibilidade ao pre?o, que pode incluir o PSM de Van Westendorp, identifica os pontos de pre?o em que os consumidores consideram o produto barato demais, caro demais, ou em um intervalo aceitável, ajudando a encontrar o ponto de pre?o ideal. Essa metodologia, pode ajudar a entender os limites do pre?os e tra?ar um gráfico que mostra a distribui??o da sensibilidade ao pre?o dos consumidores, com apenas 04 perguntas: 1.Em que pre?o você considera o produto t?o barato que come?a a duvidar da sua qualidade? 2.Em que pre?o você considera o produto barato, mas ainda assim uma boa oferta? 3.Em que pre?o você considera o produto caro, mas ainda assim você compraria? 4.Em que pre?o você considera o produto t?o caro que n?o compraria?

I think the number one issue for fashion brands is pricing with only your own historic data in mind: past sales, desired margins, brand perception etc. It’s imperative to consider the competitive landscape. Analyse your key competitors on a detailed level, what is their pricing strategy? What are their entry, mid and highest price points? What are their promotional activities? How do their price points differ by region and even by reseller? Overlay this with your internal data and you’re on the right path.

Costs are important but today we need to talk about "true cost". "True cost" goes beyond the price tag. It's the FULL cost of a product or service, including hidden impacts on the environment and society. Think pollution, unfair labor practices, or long-term health costs for communities. Traditional pricing only looks at direct production costs and profit. This ignores external costs that harm us all like polluted air and water, depleted resources, climate change impacts etc. Why bother? True cost thinking drives innovation, attracts conscious consumers, and forces businesses to take responsibility for their true impact. It's not always easy, but ignoring true cost has far greater long-term consequences for businesses and for the planet.

Ter me mente qual sua margem mínima desejada é uma forma de evitar esse erro. Sempre que precificar lembre desse numero, n?o fique abaixo dele, salvo casos pontuais. Por outro lado saiba qual a margem que você quer alcan?ar e busque-a constantemente, para isso reveja CMV, custos fixos e variáveis com frequência. Custo é como unha, sempre precisa cortar.

While I never recommend pricing based upon a ‘cost plus’ method it is imperative to understand all fixed and variable costs that go into your product/service. Don’t erode your profitability by solely looking at pricing as ‘what the market will bear’ – pricing is a communication of value and creation of demand. I have seen many components overlooked when refining pricing strategy … R&D, patents, delivery, a change in COGS are all things to consider … and more. Adequately understanding this breakeven allows you to thoughtfully extend this to the value you are providing and problems you are solving – which is a value based approach.

"Sales is vanity, profit is sanity." One of the most important thing to understand is costs (both variable and fixed). Without a clear understanding of your costs, you risk setting prices that do not cover all expenses, eating into your profits. This oversight can also prevent you from identifying opportunities for cost savings or pricing adjustments that could enhance your competitiveness and profitability. Keeping a close eye on costs and margins is essential for making informed decisions that ensure the financial health and growth of your company.

You always price your customers, and not your products. However, at that price you need to be contribution margin positive in order to sustain and survive. There are many scenarious where cost computations are not straightforward. Take for example, factoring in the cost of online order returns and RTOs. If the return rate is not stable, the net logistics cost would be difficult to figure out in advance. A very interesting cost, often overlooked, is the opportunity cost. You have invested certain amount of time and money in buidling a product. The same effort in some related case might have helped you make more money. That's the opportunity you are giving up to build your product, and so it must be factored in your costs.

In restaurants, the competition can change prices for a variety of reasons. So it is dangerous to blindly follow. There are now technologies available that allow restaurants to understand what the competition is doing in a real-time granular level, but all of this intelligence should be used to maintain and reinforce market position.

Competitor benchmarking is good for setting ‘guide-rails’, but ‘pegging’ can be risky. Competitor-based pricing assumes that the competition is: 1. Making the right decision about the consumer’s price sensitivity and 2. That your customer will have the same sensitivity to their prices. 3. That you have the same cost structure & economics to support the same pricing strategy as your competition. McDonalds is a recent example of a Brand many QSR restaurants use to set their prices. Their loss of customers to grocery stores in ’23 due to to over-aggressive pricing means that many smaller chains will have experienced the same, but won’t have the same marketing clout to recover the traffic losses in 2024.

What if you are the industry disruptor? In commoditized markets there can be a good amount of transparency to help guide your pricing strategy. If you are a pioneer you also need to consider multiple complimentary and adjacent pricing mechanisms to construct your pricing. Don’t be afraid to take the best of prevailing practices in the market and combine for your own unique offering.

Ecommerce marketplaces and eretailers fear that if their prices are not at par or better than their competition, they will lose market share. The real answer is maybe, and maybe it is ok to lose that portion of the market share. If customers are switching their loyalty based on minor price differences, they were never yours to claim. A counter productive appoarch is to blindly follow the competition. Let's say you underprices vs your competitor's prices and the competitor does the same wrt your prices. It's not hard to image that it is a scenario where everyone will end up on the losing side. The spiral down effect will make sure that margin are wiped out, and it is no longer fun to be in that business. Oops!!

Understanding market trends and competition is vital for businesses. In competitive markets, adding value, including through pricing, is crucial. While copying pricing strategies may seem easy, it can lead to product commoditization and market share loss. Long-term success requires pricing differentiation, customer understanding, and being true to the values and behaviors of your organization.

You should be aware of your competitors positioning but should not base your pricing positioning on your competitors prices. Above all if you had to base your pricing on your competitors one, by how much should you be above or below your competitors? How do you define it? And if your competitor did a mistake, would you position yourself based on a mistaken price positioning? No you should define clearly your positioning, your value added and then price it against the next best alternative.

As inflation has made frequent price increases a necessity for many businesses over the past few years, the use of fees and surcharges has emerged to avoid overtly increasing prices. Often the logic for the fees is to show the customer that the additional cost is coming from 'outside forces' so the products don't appear overpriced. Even sympathetic consumers don't want to hear about the economics of your business or how much the government forced you to pay your employees or how much gas your delivery drivers use. They are also likely to see the surcharges as a deceptive way to stick them with extra charges you think they won't notice. When you've decided to raise prices be transparent. Don't announce it, but don't hide it either.

Inconsistent or confusing pricing is a strategic misstep that undermines customer trust and can damage brand reputation. Businesses should prioritize clear and consistent pricing across all channels to maintain customer confidence and demonstrate a commitment to transparency. This approach fosters a positive customer experience and builds a foundation for long-term brand loyalty.

I have seen too many founders and CEO’s get mired in their desire to offer flexibility. Flexibility to customers is beneficial and can build trust and loyalty. However it can easily spiral into an overwhelming and complex discovery process; often leading to missed opportunities. Even when you do have a myriad of products and services, ensure your messaging and marketing material is on point. You can always delve deeper into nuances, add ons, promotions once you establish initial interest.

In many ways the fundamentals of pricing is the value exchange, poor value exchange occurs when customers perceive that the benefits received do not justify the cost. If they feel the product or service doesn't meet their expectations or isn't worth the price paid, it leads to pricing dissatisfaction. It's crucial for businesses to align perceived value with customer expectations to avoid such dissatisfaction.

Testing and optimizing prices - YES. But watch out for Confirmation Bias! It's our tendency to favor information that supports what we already believe, while ignoring or downplaying anything that contradicts our ideas. Pricing shouldn't be a "set it and forget it" task. Confirmation bias keeps you stuck. To truly find the prices that maximize your results, you need to embrace data, continuous testing, and an openness to being wrong about your initial assumptions while testing on your current clients but also (and especially) on your not-yet clients

At launch it is imperative to understand customer behavior, preferences and perception of value to set your prices. This is underpinned by understanding competitive pricing. If you get it wrong you could miss out on significant opportunities and worse crash and burn. Get feedback during your beta and soft launch not only specific to price point but also what consumers value the most and see as sticky. Pricing and pricing strategy is not a set it and forget it exercise. Consumer perceptions, market dynamics, and competitors all change. Stay up to date and even ahead of these shifts through superior customer engagement and experience teams. Too many companies and products have failed due to assumptions being made in a vacuum.

Poor Discounting Strategies: Overusing discounts can train customers to wait for sales, which can damage brand value and reduce profitability. Additionally, poorly timed or unstrategic discounting can confuse customers and undermine brand perception.

Price testing is essential, but project-based a/b price test approach is slow & outdated. In a rapidly moving & complex world prices need to be evaluated quickly through ongoing data streams, planned processes, and multivariate methods. Pricing should be part of a comprehensive decision intelligence program that generates continuous learning about price as a strategic lever, not a tactical reaction to cost increases. Price is inextricably linked to customer experience, marketing, profit, competitive positioning & the economic environment. A well built pricing program, is really a comprehensive model of a business’ fundamental demand dynamics and can be used as a basis for more than price optimization. .

I find that many business leaders will use the word "Value" as a synonym for low prices, but consumers process a wide variety of the intrinsic and intangible attributes of a product and weigh all of those against price. Often subconsciously, sometimes overtly focusing on certain attributes that will catalyze the purchase decision for them. Identifying those attributes as differentiators and emphasizing them elevates value perception as much lowering the price, and more profitably. The trouble is, improving value perception through differentiation is harder to execute. The danger inherent in raising value perception through discounting is that it can de-value a brand or product - potentially resetting value perception at a lower price point.

Value comes into existence only when your customers believe it exists. A great way to enable your Account Executives to articulate that value is by giving them a 'value calculator', that allows them to plug in inputs from their prospect around the pain they're feeling and calculating the value you're bringing to the table. Be transparent on the assumptions so the prospect can follow along and create joint understanding of the ROI

Good communication is the cornerstone of every customer relationship which leads to building trust and ultimately a strong brand. Most ecosystems are moving toward personalization. This goes beyond articulating your value proposition and features. It becomes about what tangible and ancillary benefits the customer will attain by using your product. Will they mitigate risk, reduce costs, gain efficiency, etc? Creating a compelling and relatable narrative often tips the scale to a customer feeling this a ‘must have’ product.

Personally, I find this one of the most important aspects. Often in pricing one aims to find the optimal price to achieve a specific goal. Truth is, in many cases that optimal price will depend on how well you are able to communicate value. Price is not based on value, price is based on perceived value. Value communication is by definition the task of Marketing or Sales. However I also believe that as Pricers we have an important role to play in supporting marketing and sales to justify the pricing - especially in products or services where the price is build on technical value drivers (rev increase, cost decrease etc).

De acordo com o artigo "Is It Time to Rethink Your Pricing Strategy?" publicado no MIT Sloan Management Review, a precifica??o eficaz é um processo que vai além de simplesmente definir pre?os; ela envolve a cria??o, quantifica??o, comunica??o e captura do valor percebido pelos clientes. Se uma empresa n?o comunica claramente por que seus pre?os s?o justificados — baseados no valor oferecido —, corre o risco de os clientes basearem suas decis?es de compra apenas no pre?o, ignorando os benefícios reais. O artigo enfatiza que as empresas que alcan?am sucesso na precifica??o s?o aquelas que desenvolvem e difundem habilidades de precifica??o em toda a organiza??o.

Let's look at the example of what happened to Wendy's during the week of February 26th, 2024. A comment from the CEO suggesting the company would test dynamic pricing was picked up and misconstrued by the media, causing a tremendous public backlash. Other industries (and I would argue other QSRs) have implemented dynamic offers and demand based pricing strategies quietly, without specifically announcing it or putting a name to it. One of the many lessons learned here is that if the dynamic pricing strategy will ultimately benefit the consumer (and in Wendy's case, their crew members), then just do it. There is no reason to announce that you're doing it.

A common pricing mistake experience-based brands make is commoditizing themselves by deploying strategies that under-estimate intangible value & consumer behavior & too much weight on commodity pricing strategies. When consumers assess the value of an Experience, such as a restaurant they focus on intangibles such as the taste, service, environment, emotional impact (happy, polite, rude, fun). The intangible value is the premium the consumer is willing to pay above the intrinsic (commodity) value & it creates greater profit margin than commodity markup alone. Over-use of commodity-base pricing strategies to brands with strong intangible appeal is essentially squandering the long term profit opportunity of the brand for short-term gains.

A pricing strategy that has become quite popular is increasing prices during peak demand periods. This strategy can be a great way to get an immediate bump in revenue, however brands that cultivate a deeper connection with their customer should be cautious about short-term transactional strategies. Restaurants, for instance, invest heavily in cultivating loyalty and strong emotional connections with customers by creating an experience. For many restaurants peak demand periods don’t coincide with highest quality food and service experience. Where high volume adversely impacts execution, more customers will have a lower quality experience at a higher price. This diminishes the value perception and makes return visitation loss more likely.

There are two broad categories of customers (a) price shoppers - they look for best/lowest price option, and (b) product shoppers - they look for superiour product or service experience. Depending on the industry you are in, and the life stage of your company -- you might be dealing with a certain category of customers (price vs. product shopper), and the biggest mistake one can make is to develop pricing strategies that are not in alignment to your customer category. An early adoptor is not looking for price comparison. A customer who is looking for deals may be willing to trade features vs price. Companies need to invest in understanding what category of customers are they dealing with and plan accordingly.

I’ve learned that the subtleties of pricing extend far beyond simple numbers. Each pricing decision is a message to our customers, conveying the worth of our services and our understanding of their needs. By focusing on clear and transparent communication, we foster trust and loyalty. Furthermore, a disciplined approach to pricing—grounded in thorough cost analysis and market understanding—ensures that we maintain our financial health while meeting customer expectations. This delicate balance is achieved through continuous reflection and adaptation, reinforcing the necessity of staying informed and responsive to market dynamics.