The Cost of Poor Pricing

The Cost of Poor Pricing

We rarely think of poor pricing as a business cost, but charging too little absolutely hurts profitability. Most businesses offer the best prices to their biggest customers. But think about the expense of returned items, small deliveries to remote jobsites, or chasing down late payments. When cost to serve is factored in, the biggest accounts may not be the most profitable ones. Offering the lowest prices to unprofitable customers means losing money on every order. That’s why businesses must take the time to create better pricing strategies.

Creating a pricing strategy may seem daunting, but there are ways to evaluate customer profitability and simplify your pricing process. These methods allow you to rank criteria based on your business model. Once these values are run through a trusted evaluation tool, all sorts of valuable insights are revealed.

To learn more, read our article “Defining Your Pricing Strategy” in Building Products Digest.

Andrew Ryba is a project manager for DMSi Software.