Top 10 pricing mistakes most companies make.

• Author: Sjofors, Per
• Position: QUICK STUDY

In tough economic times, evaluating product pricing is a necessity for keeping customers motivated.

Considering this strategy? Take note of the 10 most common mistakes companies make when pricing their products suggested here by Per Sjofors, managing partner at Atenga Inc., a Newport Beach, Calif., strategic-pricing consulting company.

1 Basing prices on costs, not customers' perceptions of value. Pricing based on costs invariably lead to prices that are too high or too low.

2 Basing prices on "the marketplace." Management teams must find ways to differentiate their products or services to create additional value for specific market segments.

3 Attempting to achieve the same profit margin across different product lines. For any single product, profit is optimized when the price reflects the customer's willingness to pay.

4 Failing to segment customers. The value proposition for any product or service varies in different market segments, and pricing strategy should reflect that difference.

5 Holding prices at the same level for too long, ignoring changes in costs, competitive environment and customers' preferences. Most companies fear the uproar of a price change and put it off too long. Savvy companies acclimate their customers and their sales forces to frequent price changes.

6 Incentivizing salespeople on...