Top 10 Business Plan Mistakes #4: Lowball Pricing

(Note: this is the seventh of a 10-part series listing my revised top 10 business planning mistakes. The list goes from 10, the least important, to 1, the most important.)

Are you thinking that it’s important to offer better service, or better products, at a lower price? Forget it. That hasn’t been true since the days of Adam Smith and microeconomics and selling lumps of coal.

For lumps of coal, yes, the lower the price, the higher the volume. But that means nothing to the entrepreneur going out into the market with quality goods and services. In the art of positioning, price is the first message you send, and the strongest message.

Markets like the high-priced, high-quality offerings. Don’t be cheap. Low price and low volume works for Walmart and Costco, but they have enormous resources, and you don’t. Price higher, and give more value. Offer high quality, and price accordingly.

Thank goodness this seems to be getting better these days as people become more aware, in general, of the magic of positioning and your price as the first message you send.

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  • Don’t Compete on Price. Please. says:

    […] I have pretty good indications that you also agree: of more than 1,250 posts on this blog, my post warning against lowball pricing is in the top 20 by page views. I put that as #4 in my top 10 business plan mistakes, but, […]

  • Brenda Ochodnicky says:

    Amen Scott Asai……as a service provider (and business consultant) I constantly remind my clients that they always need to be extremely aware of client ‘wants’. All too often I see people in trouble because they invested way too much energy ($$$) in trying to provide a client with what they think they need vs. what the client wants. You have to be an outstanding listener if you want to get it right!

  • Scott Asai says:

    This is good to hear, myself being a service provider, that people pay for what they “want” not necessarily what they “need.”

  • Kay Plantes says:

    I agree. Unless you have a business model like Amazon or Wal-Mart Stores designed to be the lowest price, avoid trying to win on price. But before you think about pricing on an individual product or service, take a step back and think about your underlying business model. I believe that business models are becoming the new basis of competition. What do you think?

  • Andrew McFarland says:

    One of the most common mistakes I see is companies pricing their offerings (whether products or services) as if the sale is the end of the customer relationship. In fact the sale is the first step. Pricing with an eye on the holistic costs of end-to-end service (selling through customer support) enables subsequent sales. And yes, strong service can/does sell for a premium:

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