Business Marketing

Why Lowering Your Prices Isn’t the Best Marketing Strategy

When you’re struggling to build and grow your business, it may be tempting to increase your customer base by underpricing your competitors. 

Although this makes sense logically—charge less than everyone else and more people will want your services—this isn’t the best marketing strategy. Why?

It’s All About the Margins

In the business world, companies rely on margins to survive. If you’re unfamiliar, margins are the difference between what your products and services cost you and their selling price. 

Discounting your goods “kills your margins,” Russell Ruffino told International Business Times. This is because you wind up attracting clients who are more interested in saving money than in solving whatever problem it is you solve.

If you’re unfamiliar with who Russ Ruffino is, he is the founder and CEO of Clients on Demand, a multimillion dollar company that has achieved great success by helping coaches, consultants and other service-based providers take their businesses to higher levels. 

So, what does he recommend for overcoming this all-to-common strategy?

The key to commanding premium pricing is to invest in a client-first system says Ruffino. This enables you to enroll your clients earlier in the sales funnel versus requiring repeated contacts in order to make the sale.

Setting Your Initial Price

That said, if you’re new to business and setting your initial prices, Marketing Donut shares that there are few factors to consider to help you set them appropriately. They are:

  • How much customers are willing to pay
  • The value your customers attach to what you have to sell
  • What your competitors are charging
  • What it costs you to deliver your goods and/or services
  • How often your pricing needs to change to keep up with the market

By considering each of these things, you’re able to set your prices in a way where you are competitive, yet not underselling your goods and services and attracting customers who aren’t as interested as they should be in the outcomes you provide.

Additional Pricing Tips

Admittedly, pricing is one area where many entrepreneurs struggle. So, if you’re still having a hard time trying to figure out how to price your products or services, Small Business Trends shares a few additional pricing tips. 

For instance, if possible, use A/B testing to help you get a clearer idea of what your consumer will pay, as well as what type of consumer you attract at different price points. This can give you a better idea of where your pricing should be to be the most appealing to the market you want to work with.

Another option is to use tiered pricing. This involves having a few different packages available so that you attract the consumer who shops solely on price and the consumer who is willing to pay more in order to achieve the desired results. With this type of pricing, you will quickly see which features your customer base finds the most value in, as well as giving them the ability to select the package that best suits their own needs.

Finally, whatever your pricing, sometimes you just have to ask for the sale before it will happen. Although this sounds simplistic, some customers won’t commit until you explicitly ask them to. In this case, if you never ask them to make the buy, they won’t, regardless of how good your products and services are.

In the end, setting your prices isn’t just about asking the lowest amount. Instead, it’s about understanding how much value your customers find in your goods and services and being willing to price accordingly. When you do this, you’re able to make a decent living while still filling the needs of your target market.

About the author


Sheza Gary

Sheza Gary has been a Project Strategist since 2009 and also involved in the launching of startups and tech companies in New York for over 5 years. She has keen interest in writing her own experiences about business plans and upcoming business supporting technologies. She loves public speaking.