Your business’s pricing strategy is an important aspect of your marketing, revenue, and overall business strategy and success.
That doesn’t mean you must choose the perfect strategy right out of the gate or suffer eternal ruin. But it does mean that you should be putting a bit of thought and time into how you price your products, services, packages, etc.
And often, a great way to learn how to create and implement a successful pricing strategy is to learn from others and their pricing strategy pitfalls.
So here are some common pricing mistakes and some ways to avoid or work yourself out of these pitfalls.
Pricing Mistake: Pricing for Short-Term Targets
The best example that can showcase the power of short-term pricing and its general unsustainability in the long term is the success of Black Friday.
Black Friday (and the more recent Cyber Monday trend) creates an amazing 4th quarter for many retail businesses and several other related industries. However, if you continue Black Friday pricing year-round, you’ll not only be potentially losing money, but you also won’t likely reach the amazing sales numbers month over month that you got on that single November day.
One of the top common pricing strategy pitfalls is leaning into short-term success and forgetting to plot out your long-term strategy. Yes, sales and discounts – as well as heavily competitive pricing – can help you reach a daily, weekly, or monthly goal. But without a longer strategy, the power behind these short wins will be followed by longer windows of much lower volume and revenue.
Pricing Strategy Pitfall: Thinking Pricing is Stagnant
Inflation, cost of production – there are a few reasons that directly correlate to raising prices in the minds of consumers and business owners alike.
But what about your competitors changing their pricing strategy? Or are there shifts in demand that would facilitate a subscription model, recurring payments, or an alternative to the shopping cart-based transactions you currently have on your website?
Pricing models, payment options, and the popularity of your products and services are going to ebb and flow over time – and your prices should too. There’s a great example of popularity affecting the price of the product in this example about the history of Converse shoes. These shoes have been at the height of popularity as well as the “bargain bin” shoes since they were first invented, and the pricing strategy for them has adjusted to account for that.
It’s important to review and update not just your prices (to combat the rising costs we mentioned above) but also your pricing strategy.
Pricing Mistake: Overcomplicating Your Prices
Subscription models and recurring payments are a great way to keep your customers engaged and purchasing from your brand with low effort. But some businesses rely on an overcomplicated set of pricing strategies and tiers.
You may ask: why does it matter to our customers if we have a complicated pricing strategy? It still works, right?
And you may be right – for a while. But one of the things that leads to a lot of pricing strategy pitfalls often stems from the lack of transparency that your prices are offering.
There are tons of examples of how complicated pricing strategies deter business and can even lead to brand distrust or the failure of a company, even.
For example, think about hospital bills in the United States. There are often factors that seem innocuous that will greatly increase or decrease a final bill for a patient’s treatment or procedure, without much explanation from the hospital.
That is an extreme but very prevalent example showing that your pricing is much more than a sticker on an item.
Another way to think about this is to compare certain brands against each other. Let’s say you bought a purse at Target, you’re likely spending around $20-30 for a purse from there, but definitely not more than about $100, right?
But consider this: Hermès, one of the top luxury purse brands in the world, sells straps for purses that retail at more than $3,300 – if you implement that pricing strategy at Target, you won’t see the same revenue for purse sales coming through each month.
Your pricing strategy should align with your brand’s values, its place in the market, and your goals. And to do that, it also needs to be a transparent pricing strategy – transparency builds trust, generates positive feedback, and creates more revenue for your business in the long run.
Avoid Pricing Strategy Pitfalls with ReliaFund
ReliaFund is a payment processing platform that allows your business to process all kinds of payment types, from credit cards to recurring payments, online and check payments, and more.
The pricing strategies you want to implement or optimize can be carried out within our payment platform, and so can reports and reconciliation, and much more. We created the platform to work for your business, not the other way around.