Women: Are You Selling Yourself Short?
Pricing for a Healthy Business
by Anne Alexander
A few years ago, Vlasic Pickles teamed up with Walmart to sell a gallon of pickles
for the unheard of price of $2.97. They sold over 240,000 gallons of pickles a
week. Vlasic loved the sales numbers, only to discover that profits were shrinking
by 25% or more, since they only made a penny or two of profit on each jar. Vlasic
filed for bankruptcy in 2001.
This story (fully described in Fast Company December ’03 issue), highlights a
vital point. In general, we want to price with a goal of maximizing profits, not
sales volume. Too often, business owners look at gross revenues (sales), when
the net profit is what really matters. We could have sales of $250,000 a year, or
$1 million, and be losing money. More sales do not necessarily mean more profit.
Having sound accounting and analyzing financial reports regularly are essential.
It’s important to remember that profit is not a dirty word. A business must earn
a profit to stay in business. Whether a particular business’ profit is fair or is
excessive is another matter – that could be the subject of another article!
Why Women Underprice in Their Businesses
Underpricing is a common problem for women entrepreneurs, which happens for
several reasons, one of which may be that we don’t know how to properly set a
price that will yield a fair profit. Another reason is we often undervalue ourselves
and our product and/or service. Furthermore, many of us have concerns about
fair economic access to our products and services.
Pricing Basics
The first problem of understanding the best way to approach pricing one’s product
or service is solved by getting sound business advice, which is readily available
in Western North Carolina’s entrepreneurial environment (see sidebar).
There are many methods for pricing for service businesses, retail operations and
manufacturers. Going into many of them would be too extensive for this article.
However, the basic parameters are easily set. Costs determine our lowest price
and must include overhead expenses, marketing costs, R & D, etc. Demand and
competition determine our highest price.
Self-Worth
Another reason for underpricing is that we often undervalue ourselves. It’s only
in the past decade or two that women have been business owners in the large
numbers that currently exist. Most new business owners, whether male or
female, do not have extensive prior experience in running a business. Women
have the additional challenge of overcoming our internalized devaluation of
ourselves, especially in the business world. We may feel unqualified or under-
educated. Where men might have the tendency to understand and properly value
(or sometimes overvalue) their product or service, this is usually not the case
with women.
Related to this, we may also underprice so customers will think we’re reasonable
and nice. In charging full worth for our products or service, we value not only
ourselves but others, because we know that they will receive full value from what
they buy. Charging too little for our product or service ultimately devalues both the customer and us. Have you ever had someone charge you too little? You
may well have felt bad because you were getting away with something, or you
may have paid that person more because otherwise it wouldn’t have felt right.
I’ve done both. We must get the help we need to fully value ourselves.
To handle this, we need to get a more objective evaluation of the worth of our
product or service. First, we must come to terms with our own worth, through
our own inner work with or without the help of friends, therapists, etc. Then we
need to do market research. We must know what competitors are charging. This
doesn’t mean we charge what they charge, but we need to think through the
reasons to charge less, the same or more. Any of these may be effective and
profitable, depending on our business.
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