Two very good reasons not to price too low

I do go on a bit about pricing. Especially about making your prices higher. But please don’t think I’m encouraging you to be mercenary. Not at all. I mean, really, lots of you are pricing stuff so low that you’ve got a long way to go before anyone can possibly accuse you of being a money grabbing wench. Seriously.

I totally get why you price low. It should mean more customers and – let’s be honest – it’s easier on the nerves. No one needs buckets of self-confidence to be the lowest pricer of the pack.

 

So I know that low pricing feels like the safe option. But it’s not really. In fact it can make you do crazy stuff that ruins your business.

 

Here are two examples. The stories are true but I’ve totally changed the details to make the businesses unrecognisable. I don’t think it’s very kind to point the finger at them, because, as you’ll read, they are already in the poo.

 

Crazy thing #1: Making mistakes

 

Low pricing makes us make mistakes………

 

Dahlia sold buttons. She bought in bulk from a wholesaler and then resold in tiny quantities. Sort of like buying 100 buttons and selling them in two’s and three’s. Because she bought from a wholesaler Dahlia had to buy in pretty large quantities, so to make the business work she needed to have lots of customers.

 

To get lots of customers Dahlia sold the buttons very cheaply. Ridiculously cheaply in fact. And she became very popular almost overnight.

 

Even when she roped her friends into help Dahlia couldn’t keep on top of the orders. Buttons were sent out late, customers got cranky and Dahlia got stressed. Dahlia worked longer hours, got tired, mixed up orders, customers got cross. Dahlia got anxiety, mixed up more orders, customers got nasty. Eventually Dahlia had had enough. She did a bulk refund of every open order and shut up shop.

 

Crazy thing # 2: Cutting corners

 

Low pricing makes us cut corners………

 

Primrose made baby toys. She didn’t really know much about pricing so when she started out she set the price at just above cost. At first this was okay. Primrose enjoyed making the toys and the business fitted around her kids.

 

The toys were very gorgeous and so reasonably priced that Primrose soon had lots of orders. For a year Primrose worked super hard and made everything to an exquisite standard.

 

At the end of the year Primrose’s accountant did her numbers. Primrose thought there had been a mistake. But there hadn’t. After working her socks off for a year Primrose had made no money. Not a bean.

 

Devastated, and with an order list a mile long, Primrose decided to be a little more economical with the way that she made the toys. First of all she changed little things. A tad less embroidery here, slightly cheaper material there. When no-one noticed the changes she got bolder, started cutting a few corners, made toys more  quickly and was starting to feel that the business could at least make a little money.

 

And then a toy fell apart. A badly stitched seam. Poor quality stuffing. Baby put it in his mouth. Ambulance called. Scary stuff.

 

The baby was ok but the customer was upset. She told Primrose. Primrose panicked and didn’t respond. Customer made a fuss publically. Lots of other customers took a closer look at their toys. More faults were found.

 

It’s a long story. Turned into a witch hunt. Primrose was hung drawn and quartered by an angry mob of mums. I doubt she’ll ever run a business again.

 

The stories are awful aren’t they? And you know the worst bit? Dahlia and Primrose aren’t ogres. They are lovely people who messed up. Both of them started their businesses with the best intentions and they did great work at the outset. But they got in a muddle. Priced too low, had to sell too much. Made mistakes, cut corners. Got into trouble. Lost their businesses.  

 

Sigh.

Are you pricing too low?!

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