Don’t Send the Wrong Message

Many times inventors and entrepreneurs will unwittingly price products at a point where they are sending the wrong message.  Virtually everyone who has their own business, whether they are selling a product or offering a service, has fallen victim to the same problem at one point in time or another.  When you are starting out it is tempting to offer a low price in order to get started.  The trouble with this method, however, is that many people use price as a way to inform themselves about quality.  If your price is to low then many will assume that what you have to offer is not of a high enough quality and simply go elsewhere. 

While the problems associated with setting a price that is to loaw may seem counter intuitive, people who are unfamiliar with your goods or services need to rely on some kind of objective indicia to determine whether you are providing something that want.  There are some common ways around what seems to be a catch-22 situation. 

First, what you can do is offer a lower price for a base product or package of services.  This allows you to advertise a low price initially to get people interested, while then having higher levels of services or better goods, which can be sold at a higher price.  This technique is employed all the time by business, but it to presents some pitfalls to try and avoid.  For example, many people are not appreciative of companies that hide the ball in terms of pricing, so if you are going to do this you are probably best served to be up front about costs.  This will also save you time by not having to deal with responding to inquiries from those who cannot really afford what you are offering. 

Additionally, if you try this you don’t want to offer the base product or packages at a point where they are not any good.  You want your company name associated with quality. 

Finally, always remember that if your “come on” price is so low some people simply won’t investigate further because they will believe that the price is nothing more than a gimmick.

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2 comments so far.

  • [Avatar for Gene Quinn]
    Gene Quinn
    March 12, 2008 12:35 pm

    This is indeed a slippery slope. If you start out to low then you might be tempted to lower your price in order to attract business and that could only reinforce the “its junk” though by possible customers and/or clients. I encountered this problem when I was a mobile DJ many years ago in college.

  • [Avatar for markmalek]
    markmalek
    March 11, 2008 08:46 am

    Setting the initial price is definitely a slippery slope. Too high and you are priced out of the market. Too low and you may run the risk of someone identifying your product as junk, but worse, you might not be building in enough profit to eventually break even from the start up costs.