Decide what you’re worth

Quality or price?

Small businesses often see setting prices as problematic, and owners find it hard to raise prices once they discover that they aimed too low, and are losing money on every sale.

They fear that raising prices will cause their customers to disappear. While this can happen, that is not always the case, since many customers shop according to quality a lot more than price.

No magic formula

Companies have always dreamed of a magic formula for best pricing.

What is the right price for a service or product? Answer: there is none.

In the end you will set your prices according to strategy, circumstances, competition, cost, instinct, and experience.

Pricing policies

You need to think through the issue of pricing and create policies.

  • Pricing products and services?
  • How will these prices compare with the competition?

Pricing has to do with positioning

  • How are you different from the others?
  • Does rarity play a role?
  • Is your product or service better than that of the competition? Does your price indicate that?

Common pricing mistakes

  • Being the lowest price provider
    It is unusual for lowest-price strategies to work well.
    They require large scale implementation and a great deal of visibility, all of which require lots of resources and capital.
    It is claimed that the lower the price and the higher the volume, will result in high volume sales. That may be true for large discount stores, but it won’t work for your business.
    If your price is too low, then high volume sales will only have you bringing more money from home, instead of generating income.
  • Underestimating or disregarding real cost
    Businesses often underestimate real cost, which affects their cash flow and puts them in jeopardy.
    Gross margin analysis is the selling price minus direct cost. Buy a widget for $ 5, sell it for $ 10; gross margin = $ 5; gross margin percent = 50 %.
    However, gross margin alone does not cover all the other expenditures such as: rent, payroll, electricity, insurance, along with hidden costs, like software and computers.
    The name for all this is overhead, which is often forgotten during pricing.
  • Mixed pricing messages
    Are you afraid folks won’t buy your widget because it is too expensive? Perhaps they’re not buying because they don’t see value.
  • It’s all about positioning
    Do you purchase products and services for your family only built upon price, or might there be certain products or services where value is more important than price?
    Example: A manager in a high tech company was hiring for a key position. He decided against hiring an interviewee he felt could do the job, because the salary requested was so low that the manager felt this individual did not value himself enough.
    How often do we feel good about an expensive purchase because we paid a high price?
    So much in business is about perceived value.

Pricing strategies can successfully tap into human behavior

Psychology of pricing is not about increased sales as a result of cheap prices. It is all about the price’s message and what it communicates about your product or service.

Break the price into payments.

  • Dividing a large payment into many smaller ones often makes the purchase more attractive.
  • Supermarket credit card purchases do this, cable TV companies do it– actually it is now so common place that consumers are prepared with a ready decision during the time of purchase.
  • Online, you might balk at having to pay $ 450 for a self-help program, but don’t reconsider while enrolling for receiving it piecemeal at $ 47/month. Then, naturally you get busy, and stop using the program. Eventually the seller has pocketed $ 470, before you finally decide to stop the subscription.
  • The same goes for gym memberships, where a one-time payment would be rejected, but a monthly outlay with opt-out, ends up being painless, but expensive.
  • Studies show there is greater customer satisfaction with this sort of purchase.

Pricing for prestige

  • You can justify a higher price by improving your product’s promise, packaging, look-and-feel, and delivery. Luxury brands are a perfect example.

Using anchors

  • While deciding to make a purchase, consumers will often use the highest priced item within a category, as an anchor for price comparison.
  • Retail stores and supermarkets know this and position products on shelves accordingly.

Suggested quantities

  • Consumers tend to purchase items in suggested quantities. Accordingly, when you package an offer with an attractive price, thus suggesting how many your customer wishes to buy, they will typically do as they are told. Example: An item publicized as 3 for $ 12.99.

Bundles and perceived value

  • A consumer will believe there is more value in bundles with numerous items.
  • Online marketing products and TV infomercials do this by adding related or non-related items to a purchase, so as to make a sale.


  • Significant discount announcements – online and offline – attract increased purchases by bargain hunters, or those who simply can not afford regular prices.
  • Show the price slash – don’t hide or delete it.

Art or science?

Experienced business people will tell you that pricing is as much an art as a science.
Pricing is largely about perceived value and customers don’t always look for the lowest price.

Cover costs!

Especially make certain you cover costs, that includes overhead. An inexperienced business person may overlook that to their detriment.

Image: Pixabay

Uber’s Tipping Policy is a Mistake

So far Uber has not agreed tipping in the belief that passengers don’t want the extra hassle. It is also feared that tips might be reduced or withheld due to discrimination against the driver.

Uber says, “…tipping is neither expected or requires….riders are free to offer tips and drivers are welcome to accept them.”


A business is the backbone of ANY entrepreneurial effort you’ll ever undertake.
Realize that opportunities can generate income based on your skill sets, hobbies, or passions. 

People fail because they don’t understand what EVERY business MUST have. And, they have no idea what questions to ask.

Understand important strategic decisions that go into setting up and running your own business. Listen to an experienced small business owner.


No magic. These are simple, proven, vital steps. And they can transform yours into a solid business:

Click to learn more.

Generate Income Create a Success Business Guide