Every Company Needs a Good Map

Everyone has met the entrepreneur who wants to charge as little as possible. The person who asks customers what they want to pay. Then there is the person who wants to add only 10% to the cost of materials. The person who has no idea about what to charge and so values it at some value less than any competitor. To those of us who think we have graduated from this school, this series of posts may be a review. Then again, this series might be useful for helping a new member of the Modern Magellans club of voyagers on the seas of commerce.

Undercharging is a mistake that happens for many reasons:

• Fear of losing sales
• Desire to spread their beneficial product 
• Over-developed fear of greed
• Lack of confidence in the product or service quality 
• Attempt to undercut opponents

Aside from the last, most of these are amateurish mistakes. They often stem from a lack of understanding how selling and buying works. Price setting is an essential skill and one that is not always present in most entrepreneurs.

When considering what to charge there are a few things that are often overlooked:

• Total cost of goods (includes labor, shipping, and development)
• Perception (cheap = low quality)
• Easy to lower prices, Hard to raise them
• Benefit/Value to the customer (they saved time, money, or other resources)
  
• Distributor discount
  

I will discuss each of these points over the next few posts. If you have written a blog post, white paper, book, or web page on one of these topics I would be happy to hear from you. If it is relevant, I will be happy to link to it. Otherwise, I am left to my own resources and to search the Internet.

For example, there is this post from Small Business Trends Radio with Anita Campbell: Pricing Strategies To Help You Earn What You Deserve

or this one, where John Giles hits the nail on the head when, speaking to the printing world, he says "Printers “train” their customers to expect low or free..."

If you think that you may suffer from this malady, please feel free to submit questions to me and I will do my best to answer them. If you wish to remain anonymous, please say so in your email.