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4 Common Pricing Pitfalls and How to Avoid Them

February 1, 2022 4 Min Read Growth & Performance
Thomas C. Yankanich, CPA
Thomas C. Yankanich, CPA Director, Audit & Accounting, Leader - Government Contracting, Professional Services, and Architecture & Engineering Industry Groups

I visited a client last summer and when I pulled up to their facility there were signs along their street indicating that they were hiring, which is not uncommon in today’s environment. The signs listed positions available and hourly rates.

I made another trip to this client in the beginning of the New Year and those same signs remained, only this time when I looked at the hourly wages, they had gone up approximately 40 percent. During my visit, I asked the owner if he had reviewed his pricing model and how these increased wages affected it. As the conversation progressed, he realized he had not given  enough attention to his pricing strategy amidst all the changes to labor and material costs.

As the conversation continued, I began to realize his business was experiencing a few common pricing missteps we see quite often.

Below are four common pricing pitfalls and considerations to avoid them.

  1. Setting lower prices than your competitors. Setting the cheapest prices may seem like a strategy that will help you obtain new business, but what does it really say to the outside world about your company? The way you price your products or services creates a perception for your customers. Having the lowest prices may cause your customers to question your product/service and wonder if it is substandard.
    This doesn’t mean prices can’t be reasonable, but you shouldn’t radically undersell your product or service. The customer should be sold on the value received, and value doesn’t need to mean bargain.

  3. Only focusing on cost. As mentioned above, reviewing your costs and how they impact your pricing model is important. But cost should not be the only point of emphasis in pricing. Value created should be evaluated and determined.
    I once had a conversation with a client about their high margins. When I asked how they were able to achieve such strong margins their response was, “In one particular case, during a presentation to a customer, we asked how important our $1,200 part was to keeping their $10 million piece of machinery running. When we framed it in those terms, the cost of our product seemed completely justified.”
    The moral of this story is that customers are willing to pay for value, and your product’s or service’s demonstrated value provides the ability to increase prices.

  5. Making pricing decisions that don’t align with business goals. A lot of times pricing decisions are made without much analysis, research, or strategy. That type of decision-making often doesn’t align pricing strategy with overall business goals. Pricing decisions should line up with your marketing and sales goals. Quantitative and qualitative factors need to be considered. What effect does this pricing change have on sales/profit and what is the effect on customer satisfaction?

  7. Pricing all markets the same. Many businesses make the mistake of seeing all their market segments the same way. However, various customer segments may assess value differently than others. Your product or service may be a pivotal key to a particular customer’s business.
    One strategy that works well in understanding how the various markets you serve perceive value is by ascertaining satisfaction from customers. These meetings can go a long way in assessing your market segments and value created. Strategically planning and understanding what is important to your customers within each market segment allows for you to adjust prices accordingly in those where particularly high value is provided.

Your pricing strategy is an extremely important aspect of your business. Taking the time to revisit it in detail and avoiding the pitfalls listed above will prove to be beneficial to your company.

Thomas Yankanich is a director with Kreischer Miller and a specialist for the Center for Private Company Excellence. Contact him at Email or 215.441.4600.    



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Thomas C. Yankanich, CPA

Thomas C. Yankanich, CPA

Director, Audit & Accounting, Leader - Government Contracting, Professional Services, and Architecture & Engineering Industry Groups

Government Contracting Specialist, Architecture & Engineering Specialist, Professional Services Specialist, ESOPs Specialist, Owner Operated Private Companies Specialist, Private Equity-Backed Companies Specialist

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