Are you pricing yourself out of business?

By: Darcy Juarez on: July 12th, 2012 11 Comments

The other day I was looking through a Pottery Barn Catalog and thinking about how they can charge so much more for something…

For example, a glass pitcher which they named “Tavern Pitcher” goes for $39.50. At Walmart an almost identical pitcher costs $5.00.

A “party bucket” designed to hold ice and multiple wine bottles, the Pottery Barn version is $129. A similar version at Walmart costs $32.99.

Now obviously these businesses are catering to two different demographics, but if Pottery Barn charged $5 for a pitcher people might not buy it because they’d think something is wrong with it.

And obviously their pricing strategy has not hurt their business one bit.

Pottery Barn, founded in 1949 and acquired by Williams-Sonoma, Inc. in 1986, is the leading home furnishings retailer in the country. They have 200 retail stores and a direct-mail business that distributes 100 million catalogs a year. Not to mention their online shopping store via their website.

In fact, they’ve been so successful, they spawned new businesses including Pottery Barn Bed + Bath, Pottery Barn Outdoor Spaces, Pottery Barn Kids and Pottery Barn Teen.

What to charge for your services and products is one of the biggest obstacles business owners face…and they routinely under-price their goods and services to try and “beat” their competitor’s price.

The fear of losing customers…being judged as too expensive are things that keep businesses from charging what they should for their products and services. Charging too little can and does cause  businesses to go under.

Often I hear business owners say things like, “I can’t charge more than I already am” or “I can’t get away with charging that much.”

The truth is, when you look around, chances are you will find someone charging more than you are.

And… when you charge too little or surrender to your “fear of price” by reducing prices, you are not only undervaluing your product or service, but you are jeopardizing your business in the long-term.

When it comes to setting your price, there are some simple dos and don’ts you should always follow.

Don’t lower your price to win a bid. One highly successful, more than competitive business owner I know of had the chance for one of the biggest deals of his life.  He had submitted a quote to a major company within his industry.

He felt sure he would win the bid as he had the experience required and was making a name for himself in his industry.

When he didn’t get the job, he asked his contact why. Their answer, “Your rate was much lower than we thought it would be, so we thought maybe you weren’t as good as we thought you were.”

Don’t give into fear. Dan Kennedy tells a story about a thriving $100-million-a-year company that gave over a significant share of profits and control of their operations to a bluffing competitor who threatened to destroy the business with lower prices and massive advertising.

Dan says that  it turned out that once the competitor became a partner, he destroyed the business from within in order to create a vacuum in the market so he wouldn’t have to compete head on.

The company owner didn’t go out of business because of the competitor, but instead because of his fear of price competition.

Do test out different prices and price strategies. Instead of picking a random price, test out different prices and offers. For example, try different payment terms such as a one-payment term, three-payment term and six-payment term.

At SuperConferenceTM, Ryan Deiss talked about a price test where the price was a one-pay at $197. There were 340 conversions at that rate. However when they changed the rate to two payments of $97 they had 977 conversions. But they didn’t stop testing there. The price that had the most conversions (1008 conversions) was the highest price with three payments of $97.

So as you can see, it’s not always the lowest price that brings in the most sales, but the most appealing offer.

Do consult qualified advice on price if you are having trouble raising your prices. Let me emphasize the word “qualified”. This isn’t your spouse or your next door neighbor. This most likely isn’t people in your niche or marketing other businesses in your area of town. It definitely isn’t your friends and family.

If your fear of raising your price is getting in your way, seek professional guidance. A marketing consultant or business advisor who specializes in price strategy such as Jason Marrs. The increase in profit often quickly makes back your investment.

No matter what you do, adding price strategy to your business plan is one of the most important tools you can use to not only increase your profit but help you stay in business for the long haul.  Don’t be afraid to try pricing strategies out. Raising your prices even 10% will have a huge impact on your business and your life. And you won’t have to work any harder to make more money.

NOTE: Are you short-changing yourself by failing to extract the maximum price for your products and services? If you are, consider this your invitation to access a goldmine of information on how to raise your prices and increase your profits with little or no resistance. Discover 10 ways to raise your price, 15 price strategies to make price irrelevant and how to separate yourself from your fears about price in our Price Elasticity Online Course. Click here to learn more.

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Darcy Juarez has created marketing systems in the direct response and information marketing world that have gained national attention. As the Director of Marketing for GKIC , Darcy has taught thousands of business owners her step-by-step strategies for creating their own success and obtaining more time and more profits. For more money-making marketing tips, tactics and strategies, go to

11 Responses

  1. Don Tepper says:

    My favorite story on this topic is from the perspective of a buyer. Back in 1975, I was in charge of having an annual publication typeset and printed. The company we’d used for decades kept raising their price. (Not necessarily a bad thing, but they’d now become very expensive for our needs. We were paying about $10,000–significant today, but much more so back in the 1970s.) I contacted a number of other printers and typesetters. A few others came in with slightly lower bids–maybe $8,500–but that wasn’t enough to get us to switch from a dependable, high-quality supplier.

    One company, though, came in with a bid of $3,500. Obviously, something was wrong. Maybe their quality was terrible. Maybe they planned on throwing all sorts of other charges at us once we’d committed. Maybe they misunderstood our specs. Superficially, they seemed OK–good references, a knowledgeable salesperson, etc. But something HAD to be wrong. So we stuck with the high-priced company. Next year, same thing.

    The third year, we simply couldn’t afford the high-priced company. With a lot of fear, knowing something would blow up in our faces, we switched to the $3,500 company. Turned out the cheaper company did a fine job. On time, on budget, and no complaints from the members who received the book.

    The irony is that if that company’s bid had been, say, $7,500 rather than $3,500, we’d have immediately chosen them. And beyond the obvious moral (raising your prices actually can help you get more business), there’s another one: If you’re offering a valuable product or service, you may be doing your customers a huge favor by pricing it where it needs to be to get their business.

    • Ken Jensen says:

      Yes. Perception is everything. We learned the hard way that our lower price would also net us customers ill-suited for what we offered. The monetary gain was never equal to the struggle inherent with working with these companies. Great example Don! Thanks!

    • Mike Stodola Admin says:

      Don…great point! Here’s a little story about marketing that you might find interesting. Back in the 80’s Smirnoff Vodka was competing head to head with Wolfschmidt Vodka. They were in pricing wars a they were both down to about $8 a bottle. Then Smirnoff started a new campaign with some product placement in movies and raised their price to about $12 a bottle. Their sales exploded. When they were priced the same as Wolfschmidt everyone perceived them as the same and just picked one or the other, maybe based on color of the bottle, or the name or whatever. When they increased their prices, the were perceived as better and while $4 from a percentage standpoint was a lot more, it wasn’t enough to keep people from buying it instead. Remember, when you give options on price a small percentage (people you probably want to get rid of anyway)will choose the lowest, most will choose the middle, and about 20% will choose the highest price. Create a luxury version of whatever you offer right now and you’ll immediately see an increase in income.

  2. Ken Jensen says:

    My partner and I experienced the effects of charging too little, when we first began. We let our “newness” dictate our comfort level as we set our rates. This enabled our first customers to (unintentionally) walk all over us. We became martyrs. But we learned. The rates went up. We continued to work just as hard as we always did but our efforts were appreciated more, not to mention we were paid what we were worth.

    • Mike Stodola Admin says:

      Keep going Ken. When was the last time you raised your prices by more than just the cost of inflation? The more you get from a customer, the more you can spend to get a new one.

  3. Rishi says:

    Awesome Post! Loved the Ryan Deiss example

  4. Stanley Rao says:

    perception is what matters in the business organization,.

  5. John Yaeger says:

    Perception is good but it does not always follow that what we perceive is real . I mean it’s a case to case basis. Decoding perception is more important skill in any business organization.

  6. I make wooden boxes of all sorts. At the moment, I am making wine boxes. I am in the initial stages of my first wholesale situation as I delivered my first order of 20 boxes to a retail store yesterday; a winery. It was a great and proud business moment. I priced them at $23 each for wholesale as it was much better and more realistic than the $12 per box price my painfully frugal and out-of-touch co-workers (in my regular job) thought I should sell them for, especially considering my cost to make one is $12.41. So, $23 it is. That creates a $460 per order gross profit. Yay me! I WON! Oh, wait, my cost for those 20 boxes, based on a measly $12/hr wage for myself, is $248, which leaves a $211 still not quite net profit. I have not charged for delivery (30 miles away in a suburban). Also, over the last few days, I realized that this store could concievably fetch up to $50 each for these awesome boxes when paired with one of their bottles of wine, which leaves me earning a very low profit on each box, and them 100%+ on each box for no work. Where did I go wrong? Am I really that stupid that I priced myself out of business before I even started? Was I wrong in wanting to keep my cost low so retail stores would have some wiggle room in their price point and actually be able to make a profit on my boxes? Is my percieved value of my own product so outrageous that I am afraid to project it upon the demographic or retailer? What should a retail store’s profit margin even BE on something like this? They retail online at Etsy and such for $45-$65 each, so should they expect to pay $23 and get $50 for it? Or would $30 be more realistic for them? What is the standard retail markup anyway? Someone throw at me what my first/next step needs to be to raise the prices after the first order. I am thinking more like $27.50 at a minimum per box.

  7. Dominic says:

    This topic is something I have never read.Great post, I really have been taught by this topic

  8. I recently had a discussion with a peer about this exact topic. She feels that you need to start low until you build clients and then start increasing prices. I completely disagree and now I have something to show her to back my opinion. If you have a valuable product/service you shouldn’t discount it. Otherwise, you may attract low-end shoppers instead of high end shoppers. Great information!

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