In many cases, the pricing of your products and services determines your success. There are three level of pricing; the very low, the middle of the road and the very high.
In my opinion, being in the middle of the road means that your are trying to please everyone and at the same time, you are competing with everyone that offers similar products or service. This may be the one area where being neutral does not pay off.
Let’s talk about being the lowest; As a small to medium size business, competing in the low end is very difficult. You are working on low margins and there is always the risk of someone bigger coming in and cutting the price to a point that you have to close down. A good example is when both Walmart and Home Depot came into the Showlow Pinetop area in Northeast Arizona. So many “Mom & Pop” operations had to close down.
Another issue with the low price is the perception of the value of the services or products you provide. Rolex has withstood the test of time. You can buy watches at a fraction of the cost of a Rolex and it may have the same accuracy; but, people, if they can afford it, still value the Rolex.
Price should be set for the value the product or service provides. People are willing to pay, based on results, perception and reputation. Don’t be a good value for the price, it may make you look second-rate. American Express charged one dollar more than Diners Club and took over the prestige niche in credit cards.
Setting your price is like setting a screw. A little resistance is a good sign.