Today, while looking through some old boxes, I happened across a newspaper clipping titled “Common Mistakes that Cause Business Failure.” Judging from its condition, I would guess it’s been in the box for at least 35 years.
The list includes 17 items, most of which I agree with. But one that I’m not so sure about is something all of us have heard many times before: Underpricing goods or services.
This always seemed like sound advice to me, but as I’ve become more seasoned, I’ve learned to accept that there are exceptions to every rule. It goes without saying that one should always charge the highest prices the market will bear. The danger, however, lies in making an arbitrary judgment as to what those prices are.
For example, there are many marketing gurus who charge astronomical prices for their products and services. They are able to do this because they train their customers to believe that their seminars, courses, CDs, etc. are light years ahead of their competitors’ products and services and should therefore not be compared to them.
The rationale is that an inexpensive seminar given by the wrong person might be worth nothing, while a $5,000 seminar given by the right marketing guru might be worth a fortune — to the right person. By right person, I mean that regardless of price, if the customer doesn’t have the mental and emotional tools to effectively utilize the information, it’s worth nothing to him.
My caution is this: Don’t try to emulate folks who charge box-car figures for their products and services until you have built a following that is convinced your products and services are too good to be compared to others. If you haven’t yet proven your value in the marketplace, the entry fee for a customer to discover the value of your products and services has to be low enough to motivate him to take a look-see.
And keep in mind that history has demonstrated that you can also build a very successful business on low prices and high volume. Wal-Mart, Target, Marshall’s, Burlington, fast-food joints … as the U. S. economy continues to sink, the list of bargain-basement stores continues to grow longer.
So, when it gets down to it, I believe there is no hard and fast rule when it comes to pricing. Consider both sides of the pricing coin, then make a well-thought-out decision based on the nature of your products and/or services, your target market, your emotional makeup, and your goals. The reality is that fortunes have been made with both high and low prices.