3 Myths About Pricing

1. Pricing Your Products to Cover Full Costs will Make you Profitable

This idea works on the notion that people make thier consumer decisions in a vacuum of knowledge. Nothing can be further from the truth than with the proliferation of the internet and water cooler conversations. You should instead determine your target customer's perceived value of each offering. After all it's the market that ultimately determines if your price is worth or not. One should determine if you are selling commodity (average) or extra-ordinary (niche) products. This will determine your volume distribution, and whether you will be focusiong on the "who" or the "how many"

2. Pricing to Grow Market Share will Make you Profitable
Market share is determined by the value of your offering and subsequent message. Mass marketers often get caught in this trap, trying to sell thier products to everbody. Finding a specific share of the market that you can profitaby serve, is much more effective in the long term. Yes this involves a bit of business planning - but don't let that scare you. Writing things down can be a great motivator to actually accomplishing your goals.

3. Pricing Your Products to Meet Demand Will Make you Profitable
There are plenty of busineses willing to compete on the lowest common denominator and go bankrupt in the process. Resist the urge to join them in their russian roulette pursuits. Instead of competing on price, try to find ways to add value to your product to justify your price. Dynamic pricing (think multiple pricing tiers) can help give your customer different levels of opportunity cost of doing business with you.

Despite what many Economists think, price is not overriding factor to purchasing behaviour compared to quality and other benefits. People care more about the pre/post sales support, delivery (on time), shipping, and what emotional bonuses you're willing to put into the relationship.

In short, instead of cutting prices, add value, and do it at every stage of the relationship. Don't wait for your audience to complain or react. Be the proactive leader, and champion your cause. Doing the right things is far more important than doing things right - especially with with early adopters/innovators.

Start with that, and your customers may end up marrying you!