Nine Signs You May Need To Rethink Your Company’s Prices


One of the most critical factors that determines how successful any business can be is its pricing structure. A model that both earns high profits and satisfies customers’ needs is one that will support a business for a long time to come. But a model that fails in any way could spell disaster for a growing company. In this way, it’s important to check in on your pricing strategy from time to time to evaluate how it’s performing and what you can do to improve it.

To get you started, nine members of Young Entrepreneur Council list some of the signs you may notice when it’s time to reevaluate your pricing structure, as well as discuss what your first step should be upon noticing them.

1. You’re Seeing A Decrease In Business Coming In

It’s essential to keep a close eye on your pricing structure to remain competitive. It may be time to reevaluate your pricing if you notice a decrease in the number of clients or a lack of new business coming in. This could indicate that your current pricing is no longer meeting the needs or expectations of your target audience. If you notice this sign, you should first research your competitors to see how they are pricing their services. This will allow you to make informed decisions when it comes to adjusting your pricing structure to better meet your target audience’s needs. – Michael Garrido, E-Valve Technologies

2. You’re Unable To Invest In Talent Or Service Quality

One sign that you may need to reevaluate your pricing structure is if you’re unable to invest in top talent or enhance service quality due to tight margins. In a B2B environment, delivering superior value and service is vital for competitive differentiation. If your current pricing doesn’t allow for these improvements, it’s a clear indication that a reassessment is needed. Your first step should be to analyze your costs while keeping this in mind and targeting a sustainable margin. From there, devise a strategy that allows for investment in talent acquisition and service enhancements, ensuring these are factored into your new pricing. Ultimately, this reevaluation supports a shift from competing on price to competing on value, better positioning your agency in the marketplace. – Andras Berczeli, Sprintform

3. You’re Experiencing Negative Unit Economics

Negative unit economics is an immediate sign you need to reevaluate the pricing structure of your business. One way to quickly evaluate this is determining that your cost of sales does not exceed the revenue generated for your product or service. This exercise may result in needing to increase your price or lowering your cost of sales. Another metric to test to make sure your unit economics works is whether your customer acquisition cost exceeds the customer lifetime value, which is the amount a customer will pay you in the entirety of their journey with you. You may need to adjust how much marketing you can spend on converting a customer or you’ll need to improve the customer lifetime value. – Nanxi Liu, Blaze.tech

4. You’re Hearing Complaints From Customers

If your customers think that your pricing model is higher than what it should be, they will definitely start complaining about it. So, keep an eye out for negative feedback from your users. Customers will start comparing your prices to those of your competitors as well, so keep a close eye on how your competitors are structuring their prices. This will help you understand whether or not you need to reevaluate your prices. – Thomas Griffin, OptinMonster

5. Your Competitors’ Prices Are Changing

One of the best ways to tell when it’s time to update your pricing is to keep an eye on what your competitors are doing. If your competitors’ prices are much lower than yours, it may signal that there’s some mismanagement within your resources or tools. If their product is priced much higher, it’s time to reevaluate whether your undercut strategy is working. Armed with this information, begin the process of reevaluating your product. Do you want to appeal to bargain hunters by pricing your product lower? Or would you rather corner the luxury market by attracting a small but high-value customer base? While other factors like customer and sales representative feedback are valuable, researching a competitor’s pricing can offer a more comprehensive look into pricing strategies. – Bryce Welker, Crush The EA Exam

6. You’re Planning To Release New Products

In many cases, consumers expect the prices of older products to be more affordable as new versions are released. If this sounds like something you’re going through, I suggest researching the market and your competitors so you can adjust the price of your old products to make them appealing to first-time customers. Convert these people with an old product, and there’s a good chance they will eventually pay for the upgraded version. – Chris Christoff, MonsterInsights

7. You’re Running Frequent Discounts And Promotions

If you’re frequently discounting or running promotions just to generate sales, it’s a red flag. Relying on discounts implies your standard pricing isn’t resonating. What to do first? Remember, data is king. Analyze your sales data and determine which products or services move well only when discounted. It’s time to evaluate if the problem is with the product, its perceived value or if it’s genuinely priced too high. This analysis will guide your new, more effective pricing strategy. – Idan Waller, BlueThrone

8. You’re Noticing A Big Difference In Perceived Value And Price

One telling sign you need to reevaluate pricing is when you notice a significant disparity between perceived value and price, either too high or too low. If customers consistently balk at the price or competitors offer a similar product at a different price point without clear justification, it’s time to reassess. The first step should be a comprehensive market analysis. Understand what competitors are offering, your unique value proposition and customers’ willingness to pay for those unique features. Aligning your pricing with both market trends and your value will help you sustain both competitiveness and profitability. – Michelle Aran, Velvet Caviar

9. You Find Yourself Unwilling To Change

One sign your pricing model needs reassessment is if you catch yourself saying things like, “We’ve never raised our prices,” or “We haven’t raised prices in X years.” Business owners share such information with a sense of pride and think that it’s a good thing—not realizing it’s been unintentionally hampering their growth and profitability. The first step isn’t just to raise prices, but to review your offer within its broader context—brand, market positioning, perceived value, customers and competition. Pricing should never be a static aspect of your business; it’s an evolving strategy that should reflect the value you deliver. When in doubt, start higher, because it’s relatively easier to give a discount, run promotions or just lower prices later than it is to raise prices if you started lower in the first place. – Devesh Dwivedi, Higher Valuation



Source link: https://www.forbes.com/sites/theyec/2023/09/18/nine-signs-you-may-need-to-rethink-your-companys-prices/

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