Can it be said that improper pricing has destroyed countless businesses?

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pohnpei397's profile pic

pohnpei397 | College Teacher | (Level 3) Distinguished Educator

Posted on

Improper pricing can destroy businesses, but I would argue that more businesses are destroyed by improper strategic decisions such as what to sell, when to enter a market, and where to locate that are destroyed by improper pricing.

The prices a firm charges can have a huge impact on their sales and on their revenues.  A firm that charges too much may lose market share, for example.  However, I do not believe that the majority of businesses that fail do so for this reason.  It is relatively easy to change the price points of a firm's various products.  When the firm sees that it is struggling to sell products, it can easily change the prices of the products and become healthy again.

It is, by contrast, much harder to fix other mistakes.  When a business bets on the wrong product, it often cannot turn to a new line of products very easily.  If it enters the wrong market (for example, if someone opens a restaurant in a saturated market) there is little that can be done to fix the problem.  I would argue that more businesses fail for these hard to fix reasons than for reasons of price.

litteacher8's profile pic

litteacher8 | High School Teacher | (Level 3) Distinguished Educator

Posted on

I do agree that improper pricing can damage a business.  If a business charges less for a product than the product costs, for example, then the company will go out of business if the loss is not offset somehow.  The old adage is: we lose money on every sale but we make it up in volume.  If you lose money with each sale, you cannot make it up!  You'll just lose more.

Overpricing a product can be just as dangerous.  If a company prices a product too high, then buyers will not buy as many.  Buyers have a certain price range they are comfortable with for most goods.  Consumers are also much savvier these days, and can compare prices.  Charging too much can lead customers to stay away, and no sales will kill a business.


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