I’ve seen many young entrepreneurs undercharge for their products or services. Matter of fact, it has happened to me many times. Friends and family would ask me to reduce the price and I would actually shortchange myself just to get patronage.
It happens. Especially when you’re new in business. All you want is to sell, to get people to buy and so even when they come with prices you know are lower than and not enough, you still go for them.
There’s danger in that and so let’s talk about the dangers of underpricing your goods.
- You’re setting the stage for the future.
A lot of times, the major assumption for selling yourself short or underpricing is that, “when we become bigger, we can always increase the prices.” But it’s actually more difficult that way.
When you start with a low price, it’s hard for you to start charging higher. Everyone else starts saying, “Haba, that’s not what you charged so and so person naaa, give me the same or nothing.”
At this stage, you can’t just increase your price because it will cause a disruption to your market. Once you reveal your prices to the public and you’ve started underpricing, you’ve anchored your value with your current price point. It’s incredibly difficult to increase prices from a low starting position.
- Your customers are keeping track
Customers are more price-observant than ever before. Almost everyone wants to just pay little or nothing for what they need and they want it quality. Your customers keep track of your prices as a matter of fact it’s that low price that sticks the most.
By the time you start increasing your prices, they’ll feel like you are ripping them off. They will remember that the initial price was lower and is going up over time.
Customers always remember price increases – some even document and track your prices. Matter of fact, many customers will stop buying the product from you if they suspect limited price transparency in your pricing strategy.
- The quality of your product is highly in question.
Yes, customers love cheap pricing but they will definitely start making assumptions, asking questions and having suspicions. “If it’s so good, why is the price that low?”
Your customers will start to question the quality of your product while some will start suspecting that your products have a problem or defect and suggest that this is the reason why the price is so low. Meanwhile, you had good intentions.
- Underpricing leaves you no room to negotiate
As great as it seems to not charge a good amount for your products, it might lead you into a downward spiral. This is because underpricing gives you no room to negotiate.
You’ve got no bargaining power to adjust your price. There is only one price and that’s it. If it goes lower, customers will clamor all the more but if it starts getting higher like I said, customers will start suspecting you’re ripping them off and you’re not transparent or a person of integrity.
- You risk losing your business
The ultimate endgame of underpricing your goods is that your business might just shut down for many reasons.
First is that you’ll start getting frustrated. As much as you want to meet needs and sell, you should be making profit and by the time that’s not happening, frustration sets in.
You’ll realize you’re running at a loss. It might not start happening immediately but as you advance it becomes very obvious.
If you try to start increasing your prices, your customers will doubt your transparency and integrity and migrate to your competitors.
So when next you think of underpricing or short changing yourself, consider these things and don’t make that move.
How to prove your value to your customers
Customers these days want to get value for their cash. Including you. I’m sure you know and understand that the economy is hard, ain’t nobody got money to waste.
This is why for entrepreneurs we seem to always be stuck in a fix of how to prove to our customers that we are valuable to them. Worry no more, because today we will be giving you ways to do that because it is your job to show your value to your customers irresistibly.
- Emphasize on what they’re getting
A lot of times, you can even testify that when you’re getting something it’s mostly the price that’s on your mind. Before you get anything, you’re constantly thinking of how much it costs and trying to determine if it’s worth it.
That’s where you come in as an entrepreneur. The earlier you can take their mind off the price and focus it on the value, the better. That way, no matter how much you’re charging whether it’s one naira or 1 million, they don’t mind paying for the value.
So how can you emphasize the value they’ll be getting to them? Put yourself in their shoes, think about the problems they’re having that your products can solve and then advertise your products to the best of your ability.
- Watch your competitors closely
No matter how similar your product is with what your competitors are offering, there’s something that differentiates you both and your products and you must find it and leverage on it well.
How can you do that? Watch your competitors well, see what they’re offering, their features and highlight areas where your product or service beats theirs. Check for weak areas too of their products and how yours solves them and just in case yours isn’t solving them, get started! Cause that’s how you will prove value to your customers.
If you’re not doing your research on your competitors, you’re the one sleeping on a bicycle because your customers/ audience are definitely doing their own research cause they want one thing- VALUE.
- Know your product well
A lot of times, we have entrepreneurs who just started a business to make money with little or no interest on whether they’re meeting a need or solving a problem at all.
Hence, they know nothing about their products. But the truth is that if you don’t know your products or your customers, their needs and how to cater to them, you might make cash easily at first but you’ll easily fizzle out of the business space. You won’t last long.
So, know your products well. Another advantage of doing this is that you’ll be able to fully grasp all your products offer and the needs it’s meeting. This will help you highlight it to your customers.
Guess what? Your competitor might even be offering the same services but forget to list out all their features and what they’re offering. By the time customers are doing their research and seeing that your benefits are more, they’ll pick you.
- Don’t be so quick to offer discounts
This has happened to the best of us. We really want to show and prove our worth and just make money from the business so that we don’t fail or have to close down.
That’s not really healthy because when you start underpricing your stuff, it’s hard for your customers to associate that with value. Like, why are you reducing the price if it’s really valuable? Then you’ll just see that they pick your stuff when they need something affordable and go for your competitors when they need quality.
Make no mistake, this isn’t because your competitors are offering more quality than you but there’s just something in all of us that associates something being expensive to mean it must be quality.
So, while you’re there underpricing and killing your business, your customers aren’t even getting the point. Don’t always think that to prove value you must reduce your prices.