As consumers we’re constantly surrounded by pricing. Pricing when grocery shopping. Promotional signs in the store window. The latest email offer. With all the prices we see, it’s natural to build a comfort level with pricing and the purchase decision process. After all, we’re asked to compare offers, make tradeoffs and assess whether the price is ‘worth it’. Then why do entrepreneurs struggle with pricing?
We attribute this disconnect to misconceptions of how prices are set and managed. What we see time and again, is this perception that pricing from the entrepreneur’s consumer experience can be translated over to the commercial side of their business. The unintended consequence is the product’s value is under-marketed and -sold, and ultimately monetization and growth opportunities are missed.
Here are 3 common pricing misconceptions we come across working with entrepreneurs and companies.
Pricing carries with it many misconceptions that start from our lives as consumers. Yet continuing on this path can be harmful to the value entrepreneurs are building each day in their company and product.
Short-term, monetization opportunities can be lost, revenue growth not fully realized and development of necessary management processes are slowed. Longer-term, coming back from pricing mistakes and corrections carries both a financial and growth liability as well as a reputational and brand cost with customers and the market.
Being proactive is key and starts with the business leaders of the company to recognize gaps, and develop not only the technical component, but the processes and culture to actively manage pricing as a key competitive tool.
Pricing is a benchmarking exercise
This is one of the most common misconceptions of pricing. There is a perception that prices are set and managed by benchmarking; if you know what others are charging then you know what to charge.
The problem is the thinking is counterintuitive. If your company is selling something – a product or service – that is ‘disruptive’ or better than the rest, then why do you allow the competitors you’re ‘better’ than to set how much you monetize?
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