The 5 Most Common Errors in Pricing Strategy

There is no faster and more effective way of dooming a good product to failure, than by choosing the wrong pricing strategy.

Thursday, November 17, 2011

Companies often put great effort and investment into launching new products. However, everything can go wrong when the pricing strategy fails. Let's look at five examples that can ruin a good project, according to Ariel Baños, economist at Fijaciondeprecios.com and author of "The Secrets of Prices" (Ed. Doubleday, 2011):

1 - Low introductory prices to gain a position in the market
"First impressions count." Companies should remember this classic piece of advice. Low prices, once assimilated by customers, define a position which is difficult to reverse.

2 - Inconsistency in prices between customers
Alarm bells ring when a customer is left with the impression that they have not bought at the best current price.

3 - Prices not aligned with value
"If my product lasts twice as long as the competition’s, its price is double." This logic cannot always be applied when deciding prices.

4 - Failures in communication with the market
Companies usually defend tooth and nail the unique characteristics and quality of their product, trying to justify their prices. However, sometimes the benefits of the products are not so obvious to customers.

5 – Waiting until the last minute to decide on a price
Once investments have been made and the costs of the new product or service have been detailed, the pressure increases and the scope for prices is reduced.



More on this topic

Prices: Discounts in Times of Pandemic?

April 2020

In the current complicated context, companies must reconsider their strategies so as not to fall into the error of making aggressive discounts, since they could affect the positioning of their products in the medium and long term.

Ariel Baños, a specialist in price management and founder of Fijaciondeprecios.com, explains some of the important conditions that must be considered when deciding to make discounts in an environment of high uncertainty such as that which has generated the current crisis of covid-19.

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.

Prices: Intelligent Strategies to Improve Profitability

June 2019

Applying segmentation techniques, making comparisons with the prices of other products, and applying discounts to customers who have eco-friendly practices are some of the strategies that can help maximize the sales profitability.

Ariel Baños, a price management specialist and founder of Fijciondeprecicios.com, explains how simple techniques completely applicable to any business can be turned into intelligent and creative pricing strategies to maximize profitability.

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.

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