Top 5 pricing mistakes made by modern manufacturers

Have you finalized your decision of opening up a manufacturing business? If yes, it is important to be watchful in order to make it a profitable business venture. While deciding your marketing plan, do not underestimate the importance of setting the right prices of the products, since pricing acts as the main pillar of your marketing strategy. rnIf you charge your customers too much, they start shifting to your competitors. On the other hand, if you charge them too less, this increases their concerns about the quality and also reduces your profit margins. The key to success is to consider two pricing aspects and then set your product price according to the results. • What price your customers are willing to pay for the product? • How much your competitors are charging for the same product? rnMany modern Manufacturers lose big capital in the initial few months of their business and leave the industry because they implement wrong pricing strategies. Some manufacturers may get success initially but after some, their strategically mistakes in product pricing lead them to failure. Some common mistakes, which most of the modern manufacturers frequently make are. rnPricing as competitive advantage!rnMany manufacturers, in the start of their venture, use pricing as a competitive advantage over their competitors. They try to build their brand by offering products at extraordinary huge discounts and bargains. This helps them to survive in the market only for a short period of time. Extremely low profits in the longer run do not allow them to sustain even small business losses and eventually forces them to shut their businesses down. rnPrice does not justify the value!rnIn order to create a unique brand name, many manufacturers set their prices higher than their competitors’. In doing so, they forget to add extra value in the product against the extra price they charge from the Wholesale Suppliers. Customers in the initial days of the business presume these products higher in quality but after some time, they realize the price does not justify the products’ value. This puts a tag of being an overpriced manufacturer on them and trade clients of relevant market start avoiding them. rnIgnoring the real cost per unit!rnSome manufacturers consider the cost of buying material and the cost of converting it into a finished product as the total cost of production. They divide this cost by the number of the products to identify the cost per unit. However, they neglect to add payrolls, utility bills, administration expenses and other business expenditures in identifying the real cost per unit. Setting prices based on only basic manufacturing cost and not the overall business expenditures leads them to setting unjustifiably low product prices. In this way, their profits are sacrificed. rnEntering into price competitions!rnMany manufacturers set competitive prices but they so much rely on their competitors that they forget the potential of their own products. When their competitors slash down their prices, they follow them. The competitors in repose to that decrease their prices further and they again follow them. In doing so, they start selling at extremely low profits and sometimes at their own expense. With no or such low profits, pulling off business further does not make any sense. rnIrregular & large price increases! rnWhen the cost of the material or labour goes up, some manufacturers take longer than usual to increase the prices accordingly. When they finally make a decision, they make irregular and large increases to match their product prices with that of their competitors’. They forget that customers react more negatively to the large and irregular price increases than small or regular price increases. For instance, 2.5% price increase in intervals is better than one 5% price increase in one go.