The importance of a good pricing

I made a mistake with my pricing, and I want you to avoid it.

Estimated reading time: 2minutes and 12 seconds

Some time ago, I made a mistake that cost me 25% of my revenue foolishly. What was this mistake? I lowered my prices for the wrong reasons.

A few months ago, a competitor entered the market offering much lower rates than mine. I panicked. I feared that all my customers would flock to this enticing offer. So, I made a hasty decision: to lower my prices to match the competition.

Yet, this decision turned out to be a big mistake. Why? Because I was comparing incomparable things (different quality, different features...), and our customers weren't complaining about the initial price. But that's not all.

Less appealing affiliate marketing
Lowering prices = less interest among affiliates to promote a product.
Since affiliate marketing is a percentage of sales, the higher the price, the more money the affiliate earns. Thus, given equal recommendation ratings between two tools, an affiliate could prefer to highlight a tool that earns them more.

Diminished perceived price value
The perceived value of a service is linked to its price. Lowering a price = reducing the perception of the service's quality.

Harder negotiations
Lower prices mean reduced ability to negotiate with big clients. By reducing our prices, our margin also decreased, making it harder to offer discounts to large enterprises.

Clients
Lower prices often mean needing more clients to achieve profitability or satisfactory revenue.
More clients means… more support needed: more messages with questions, more tutorials to create. This time is significant and will take away from improving your service.
Additionally, the lowest-paying clients are often the most demanding.

Lastly, this price reduction did not impact the number of subscriptions; we had the same growth in subscribers (but it slowed the revenue growth).

This experience taught us a crucial lesson: the value of our product does not lie in its price. On the contrary, it lies in the quality of our solution, the exceptional service we provide, and the added value we bring to our customers.

Then, before lowering your prices to stay competitive, take a step back and carefully evaluate the long-term consequences of this change. Maintaining fair prices aligned with the real value of your product is the best decision you can make to ensure the growth and sustainability of your business.