Prices: How to Avoid Losing Money?

Segmenting customers by prices they are willing to pay, showing the value of the product or service to charge higher prices and being careful when applying discounts are some of the recommendations from experts to avoid losing money.

Friday, July 3, 2020

Ariel Banos, founder of Fijaciondeprecios.com explains some of the myths that exist among business leaders when building a pricing strategy, and what could be the alternatives to not lose money.

Myth #1: Price should be the same for all customers
It must be recognized that the products or services sold are not equally valuable to all customers; for some it is the best option and the price is out of the question. But for another group of customers, it is just another supplier, so the sensitivity to change increases.

Therefore, consumers must be segmented by price. Customers who demand discounts should be asked for something in return, for example, to buy via the digital channel, to demand a minimum volume or to withdraw the product from the store.

This would be a way of segmenting consumers, differentiating between those who will enjoy a lower price and those who will not.

Myth #2: Cost determines price
Companies must be clear that customers will not pay them for the cost of the product or service, as they will value the benefits provided by the proposal or solution.

The value added, the differential that the product or service offered has, is something that must be evident at the time of negotiation to achieve better prices.

Myth #3: Sell more = earn more
In order to implement an appropriate strategy, companies should analyze whether applying discounts and increasing the amount of products or services sold will actually result in more profit.

Discounts do not always translate into more profits, because in many cases the required sales volumes are not reached.

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Check out the "System for monitoring markets and economic situation in Central American countries", developed by CentralAmericaData.



More on this topic

How to Stop Competing Just for Price?

December 2019

Charging tariffs consistent with the positioning of the brand and communicating its differentials with respect to the competition, is essential to stop competing for price and redirect the strategy according to the value of the product.

Ariel Baños, specialist in price management and founder of Fijaciondeprecios.com, explains three strategies to avoid competing only for the price factor, because in these struggles there are no winners and only attract the least loyal customers.

Keys to Stop Competing for Price

April 2019

Identifying a segment that values the differentials of the product or service and charging a price aligned with the company's strategy are essential to avoid competing with the lowest prices in the market.

Ariel Baños, specialist in price management and founder of Fijaciondeprecios.com, explains how through the implementation of an appropriate strategy, it is possible to compete in a market where there are suppliers who charge derisory prices.

Prices: The Myth of the Ideal Margin

August 2018

The search for the ideal margin is an aim that keeps a lot of business owners up late at night, but this kind of reasoning does not always help them be more profitable.

In general, those who ask themselves what price they should set for their product, start from an incorrect premise: using the cost as a starting point. 

How to Set Prices in 2018

December 2017

Planning adjustments to avoid the loss of profitability and redefining discount policies are some of the goals that companies should consider when deciding on their pricing strategy for the new year.

The last weeks of December are generally a good time to evaluate the results of the strategy implemented throughout the year that is ending, and to reevaluate plans for next year. Ariel Baños, a specialist in price management, recommends that companies commit to five principles in order to get the information needed to decide on plans for next year.

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