5 Signs Your Business Needs Price Optimization

When you start a business or run it for years, you have to think about many factors. The first thing is to offer the highest quality product or service to customers, depending on what your company’s niche is. After that, you are giving your best to hire skilled workers, invest in a marketing campaign to increase brand awareness, outsource various tasks that you cannot do on your own and so on. But the importance of pricing is often forgotten. Precisely because you have so many different tasks that you think are more important, you neglect pricing which can be crucial to the long-term success of a business.

You must never neglect that and put it in the background because that is one of the primary things for the profitability of your entire business. And it’s also not at all easy how it might seem to you. You have to invest a lot of time and effort to determine the right price. And even if you did it the right way at the beginning, that doesn’t mean you can forget about pricing. It is a never-ending task, because it must always be analyzed in order to know when is the right time for a change. We will help you with this by telling you what are the signs that your business needs price optimization.

Source: datacrops.com

1. You do not always cover all costs

This is definitely a major red flag that you need price optimization and this mistake in calculations usually happens at the beginning when you are not yet sure of all costs that await you. A business has so many different costs that you will probably forget something in the initial calculation, so you will have a real insight after a few months.

If you then notice that you are not covering all the costs, it is time for optimization, because in the long run it is unsustainable to have a negative cash flaw. Remember that your goal is not to break even either, because why would you invest effort and spend time without making a profit. So you have to calculate what price is necessary to make a profit.

Source: DigiAnalysys

2. You have unrealistically more orders than the closest competition

You may be wondering why this is a sign that you are not doing something well because at first glance it seems like great things, but think again. You are probably making a profit in this case, but it is almost certain that you can make an even bigger profit. Because if you know that your competition, for example, also has a good product, and you have information that you have 10 times more orders than them, it probably means that you are too cheap. In other words, you are underselling yourself and you need to increase prices.

You definitely have to be very careful when doing this because it can be tricky. It is difficult to be sure by how much percentage you need to increase the price. Ideally, after increasing it, the volume of sales will remain the same. Then you will make huge money. But even if the volume of sales decreases a bit, and the calculation shows that you definitely earning more than before, that is also positive. Only thing that is wrong is that your sales volume drops dramatically. Then it means you are too expensive now.

Source: Medium

3. Selling goes bad for you when you don’t offer a discount

Sales and discounts are an integral part of any business and it is definitely something you need to offer your customers from time to time. This is usually the period around the big holidays and a few more times a year. Very often then, despite the reduced prices, a large profit is made. And sometimes the goal is just to reward your loyal customers by giving them discount codes and the like.

But if your sales volume is very low during the period when prices are regular, and then jumps very much as soon as the discount starts, it means you have a problem. Most likely your products are too expensive and people don’t have the money for them or just think they aren’t worth that much. And then as soon as you lower the price, to the figure that should probably be the regular price, people rush to buy. There are also those companies that take advantage of the fact that people like sales, so they have sales 365 days a year, which is not really reduced prices, but it just looks like that. But we do not advise you to do that, but to make a clear difference between the prices when the discount is in progress and when it is not.

Source: PROS

4. You don’t remember the last time you considered prices

If you don’t remember the last time you considered prices on your own and with the help of your co-workers, it’s definitely time to optimize. It is a big mistake to do this once a year or less often because the situation is constantly changing. For example, currencies fluctuate, leading to differences in labor costs, material values, and so on. So consider optimizing at least once a month, and then you will see the impact of your previous decisions and be able to change them as needed.

Today, you certainly don’t have an excuse to analyze data so rarely, because you no longer have to do everything yourself, but there are various software and AI to help you. Read more about how AI can help you at Intelligencenode.com and take advantage of it.

Source: Money Crashers

5. You earned significantly less than last year

Prices may not be the only reason why you earned less than last year, but they certainly need to be among the primary potential reasons you will analyze. There is a possibility that someone has made a better product than you, that there is a financial crisis going on and that people do not have the same amount of money to spend as before and much more. But it can happen that you simply did not optimize in time, and during that time your costs increased. So if you see that you are very far from your revenue target, it is time for a change.


As you can see, in order to properly control pricing you need to find balance. You shouldn’t be too expensive, but you should also not rely solely on discounts and bargain hunters.

About Giuseppe Krehbiel

Check Also

7 Benefits of Using Office VoIP Phone Systems For Your Business

Voice over Internet Protocol (VoIP) is a technology that was once mistakenly thought of as …