Is the price right? Top 10 pricingmistakes

r[tHERE are good pricing policies

I. and bad pricing policies. Here are l0 of the most common mistakes companies make when pricing their products and services.

Mistake #l: Compunies ba.se their prices on their costs, tlot their customers' perceptions ol value.

Prices based on costs invariably lead to one ol-the following two scenarios: (l) if the price is higher than the customers' perceived value the cost of sales goes up, discounting increases, sales cycles are prolonged and profits suffbr; (2) if the price is lower, sales are brisk, but companies are leaving money on the table, and therefore are not maximizing their profit.

Results: Higher c:ost, lower reverttte, lower profits.

Mistake #2: Companies base their

By Per Sjofors

prices ort "the marketplur:e."

The marketplace is ofien cited as the "wisdom of the crowds," the collective judgment of the value of a product. But by resorting to "marketplace pricing," companies accept the commoditization of their product or service. Instead, management teams must find ways to dif-ferentiate their products or services so as to creatc additional value fbr specific market segments.

Results: Products soltl on price alone leads to lower profits.

Mistake #3: Ctmpattie.s (tltetnpt t()

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