How to Tell if Your Prices are Too Low

Typically, business owners will quickly correct their prices in the beginning when they realize their product or service really is worth more, and people are willing to pay for it. This can, however, be a problem that you encounter later in the life of your business for a variety of reasons, such as the release of new products.

Undervaluing your product can be detrimental, and it’s important to examine the following to make sure you’re not giving it away, which could kill your business.


Customers are frequently and consistently surprised at your low cost.

This is one of the first indicators that you’ll notice when you’re not charging enough. If you receive comments from customers on a regular basis that sound something like, “Really? That’s all it costs?”, then once you get over your regret and self-loathing for not foreseeing this, it’s time to reevaluate the cost of your product.


Your instincts tell you so.

First of all, using a flat rate for multiple features or products can be tricky and tough to put a price on. For example, if you offer a package that includes multiple features and the price seems low for everything they are getting—then it probably is.

Given that you truly have a good product, your customers will be grateful that they have found a reputable business who has what they are looking for, and will be happy to pay for it.


A few customer complaints are a good indicator that the price is correct.

If customers never leave or don’t buy due to your pricing being too high, then you are not charging enough.

It is erroneous to assume that if your prices are just where they should be, no one will ever complain about them. There will always be a few customers who want it for less, even when they know the price is appropriate.


You are barely making a profit.

It’s true, although you have to trust your entrepreneurial instincts, there’s no need to rely solely on gut-feeling; look at the numbers.

Analyze and carefully consider your margin of cost to revenue, which especially if you’re trying to raise your new startup to life, you’re probably already watching this with a magnifying glass.

There are many motivators to keeping your prices low, some of them reasonable, but if you have plenty of customers and are barely making a profit, then you’re either in the wrong business, or you need to start charging more for what you’ve got.


The fallacy of cheap prices.

This fallacy has entrapped just about every business owner on the planet, especially in the beginning. Here are a couple of reasons we all do this:

Reason #1:
As business owners, we always undervalue our product because we see everything that is wrong, broken, or missing from it.

Reason #2:
You, yourself, don’t think your product is worth that much. You figure, we’re new to this and nobody knows about us yet, so they wouldn’t possibly pay a significant price for our product.

Reason #3:
You want to attract new customers by offering the lowest price around for a given product or service.

But this usually backfires because the problem is that in each of these cases, you are undervaluing your product.

So what happens is that since you are basically saying that this is all your product is worth, your customers either take the cue from you and agree, or you miss out because they would’ve paid more for it. Little did you know that it was actually worth more to them.

talkroute business owner

What to do if you sense that you’re charging too little.

You’ve got to do some research to find out what your competitors are charging and use this as a guide to set your own prices.

If you are new to a market, then your competitor’s product or service most likely offers more features than yours; so, it’s natural to charge less, but not necessary to charge 40-50% less.

talkroute business idea

You cannot just set it and forget it.

Whatever your business is selling, it has probably gone through many versions and you are continuously fine tuning it. The same should be done with pricing.

Most business owners set a price and never revisit it, but that is the wrong example to follow because you should always be testing price and new ways of presenting it to the customer.

Instead of cutting down your pricing because you’re afraid to alienate customers, it’s far better to charge what you know through research, as well as intuitively, is the appropriate cost for what you are selling.

There may be a few complaints, which is just what happens when people have their free lunch taken away. You can always dial it back down if necessary, but chances are what you believe to be the true right price, is the right price.


Stephanie is the Marketing Director at Talkroute and has been featured in Forbes, Inc, and Entrepreneur as a leading authority on business and telecommunications.

Stephanie is also the chief editor and contributing author for the Talkroute blog helping more than 100k entrepreneurs to start, run, and grow their businesses.

StephanieHow to Tell if Your Prices are Too Low