Tuesday, March 19, 2013

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

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.

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