Why Wrong Pricing Will Kill Your Business

Creative Commons License

Yesterday, we discussed an easy approach to pricing your products and services in the wedding industry.  Today, I’m going to talk about the biggest pricing mistake: pricing too low.

The most common mistake new businesses make is competing on price.  LISTEN TO ME: this will only get you so far!  STOP the insanity.  You must find other ways to define your niche.

You DO NOT want to be known as the “low price wedding vendor”. This is not a niche. You WANT to be known as the “exquisite purveyor of wedding goodness that is the only one to offer the wide array of style and sass”.  This is THE thing on which to build your business.

By pricing your products below market value you are making the following huge mistakes:

• You are under-cutting yourself.  Over time you will come to realize that you spend much more time planning a wedding, photographing a wedding, designing wedding flowers.  You have not properly calculated your time and what your time is worth.  When you do the numbers, you’ll realize that you are only making $2-5/hour.  There is only so long that you can sustain your living on this sort of income (not to mention the burnout you’ll experience!)  Do not treat yourself like a sweatshop slave.
• You are thinking short-term.  This type of low pricing is called “penetration pricing“: pricing low in order to penetrate the market.  The problem is that in the wedding industry, people are generally out of business before they can start to raise their prices.  You are establishing a brand and a recognition on low pricing.  People will come to know you for this.  And, it’s hard to get out once you are known as the “low price wedding vendor”.
• It cheapens your brand. A few weeks ago we talked about how “Being World Famous Starts From Within.”  Most entrepreneurs have big dreams and visions for their brand.  Is this your dream and vision?  Is it your dream to be a “low price wedding vendor”?  What is your vision?  Work towards that vision.
• You are devaluing your profession.  You have experience and education to back up your professional ability.  You are part of an industry of professionals who are also experienced and educated.  By pricing your services below par, you are saying “I’m not worth a whole lot, and neither is the wedding industry.”

You ready for this?  I made this mistake in 2004 when I began my business. I did this in part because I didn’t understand all of my costs to produce an invitation.  I thought that if I could recoop my inventory costs then I’d be OK.  (HELLO – where did labor fall into all that?)  I also didn’t understand the wedding invitation market.  I truly thought that things were overpriced.  I thought, there HAS to be a way to provide these products at a lower cost.  And, so I did.  Well, at least I tried for the first couple years.  And, I soon learned that I was making a huge mistake.

So, what opened my eyes?  A few things that made me shift course:

• I had several people (clients) saying, “Wow, I can’t believe these are so inexpensive!”  Red flag: Michelle, you are priced too low.
• Later, I came to understand the market better.  And, I understood my place in the market.  I was better able to define my specialty and price accordingly.  I looked at things I offered and looked at things my competition offered.  How did my product stack up?
• I sat down and tried to think like the customer, “What would someone truly pay for this?”  You know what else I saw?  There were some products in my collection that I know should be priced VERY HIGH given the papers and all of the labor-intensive hand-work.  However, this pricepoint was not my niche and my customer did not come to me for this.  It was not my specialty.  And, it is not my market.  I removed these products because they were not a match.
• I also sat down and thought of all the things it takes to design and produce wedding invites and considered those costs in my pricing.  What was I truly worth?
• I knew that I was facing serious burnout and if things didn’t change I would be digging my grave – metaphorically and literally.

So, what’s a wedding biz to do? Educate yourself.  Take a hard look at what it is you do.  Calculate your time.  Know your numbers.  Define your niche.  Look at your place in the market.

What else???  I’d love to know what YOU think on this!  Please share.

Incidentally, if you are a photographer in the Seattle area, Michael Rosenberg is hosting a workshop on Pricing.  Contact him at 206-224-9828 or michael-at-michaelrosenberg-dot-com for more information.