When you’re a manufacturer or a wholesaler, figuring out a sound pricing strategy can be tricky. Maybe you’ve heard that offering bargain-basement deals or simply calculating materials + overhead + time guarantees your sales will soar. In fact, competitive pricing takes more than just a mathematical formula or a deep discount. We asked three established wholesalers/manufacturers to bust four common myths about pricing—and to offer up a few reality checks of their own. Spoiler alert: Their insights may surprise you!
Meet our pricing myth busters:David M. Krysak owns H4Legs Brand Pet Products, a Minneapolis-based company that designs, patents, manufactures, and sells pet products including the best-selling medical wound dressing called H-Leggings. Kim Hawkins is president of Events Wholesale, a discount event- and wedding-supply company in Watkinsville, GA. Samuel Tang is the owner of Joy Creations, a custom jewelry boutique in Ottawa, Canada.
Pricing myth #1: You have to manufacture your products overseas if you want your company to succeed.Reality check: “Made in the U.S.A.” is a powerful strategy for driving competitive pricing—and strengthening brand identity.David M. Krysak is proud to say that H4Legs’ pet-related products are made entirely in the U.S.A. Yet Krysak, who is also a management consultant and owner of Krysak Industries, is realistic about the downside of this decision.“The elephant in the room for U.S. manufacturers is imports. We could make a lot more money if we manufactured and imported everything from somewhere else.”How does H4Leggings compete? By recognizing that customers in the pet industry are willing to pay more for U.S.-made products. Showcasing the words, “Made in the U.S.A.” helps H4Legs hold its own in a crowded and competitive marketplace. “Our customers recognize the value of a unique product, which allows us to stand out in a saturated sector,” says Krysak.Manufacturing stateside is a boon for brand loyalty, too. Customers feel good about paying a little more for a leash or a dog bed because they’re supporting the family-owned businesses across the country that make products for H4Legs.
Pricing myth #2: You’ll make more sales by offering the lowest prices.Reality check: Price your products too low and customers may question your commitment to quality.When Kim Hawkins first started selling budget-friendly wedding centerpieces, tablecloths, and event props on eBay back in 2006, she made a surprising discovery. “I realized that offering the very lowest price isn’t always the best idea,” she says. Some customers associate bargain pricing with low-quality products. Now, Hawkins aims to “balance competitive pricing with consistently high-quality offerings.”After five years in business, jewelry designer and gemologist Samuel Tang knows that low prices don’t guarantee a sale. “But,” says Tang, “I’ve learned that your time is worth a certain amount of money, and you should always stick to your standards. Clients who appreciate your workmanship will always come back.”
Pricing myth #3: mathematical formulas are the only way to price your products right.Reality check: Market research is the secret to a sound pricing strategy.When she launched Events Wholesale, Kim Hawkins assumed that keystone pricing (which means doubling the cost of wholesale) would be the formula for success. Instead, she found that market research was the secret to competitive pricing. “In the wholesale/discount world, sometimes it’s worth offering prices that are lower than keystone,” Hawkins says. “We’ll Google to see what our competitors are charging for specific products. If we need to charge 1.5 times wholesale or even less, we will. We’ll try to negotiate lower prices with our suppliers, too.”Samuel Tang agrees that checking out the competition is important. “Go see what others are offering,” he says. “If your product is unique, don’t hesitate to increase the price.”
Pricing myth #4: Changing your price is difficult and often not worth the effortReality check: Use automated tools to easily experiment with—and master—the art and science of pricing.Tang’s been experimenting with different price strategies for Joy Creations since day one. “I check the market daily to make sure our prices reflect the fluctuating value of precious metals and gemstones,” he explains. “I also adjust prices during certain seasons or months of the year when a particular color or style is more popular.”Another worthwhile experiment? Surprising customers with sales and discounts. “Since most of my clients compare prices,” says Tang, “I can usually find a way to adjust prices based on our conversations.” Automated tools like QuickBooks’ Advanced Pricing makes it easy to change and track prices based on specified conditions.Tang, Hawkins, and Krysak all make it clear that developing a sound strategy for competitive pricing takes time and effort (and patience). Also clear? Nothing’s more important for business owners than making sure the price is right.