SMB Pricing Problems
How Do I Know If My Prices Are Too High or Too Low?
Short answer
Compare each SKU's price to the midpoint of 3-5 competitor prices. If your position ratio is below 0.90x, you're priced at Value — potentially leaving margin on the table. Above 1.10x, you're at Premium — which is fine if intentional, but risky if your sales velocity is declining. The combination of position ratio and velocity tells you whether a price is working.
The full answer
Most founders suspect their prices might be off but don't have a systematic way to check. The result is paralysis: you leave prices unchanged because changing them feels risky without data. Here's a structured approach that takes 30 minutes, not 30 days.
Start with your position ratio. For each SKU, divide your current price by the midpoint of your competitors' prices. If you sell a 12oz bag of coffee for $14 and competitors' midpoint is $16, your ratio is 0.875 — you're in Value territory (below 0.90x). If your ratio is 1.15, you're Premium. Between 0.90 and 1.10 is Parity. This single number tells you where the market sees your price, regardless of where you think it should be.
A low ratio isn't automatically bad. If you're intentionally positioned as the affordable option and your velocity is strong, Value pricing is working. The problem is accidental Value pricing — when you launched at a price that felt right, competitors raised theirs, and now you're 15% below market without realizing it. That's money left on the table every single day.
A high ratio isn't automatically bad either. Premium pricing works when you have genuine differentiation — better ingredients, stronger brand, unique formulation. It fails when your premium position isn't backed by perceived value. The signal: declining velocity at a Premium price ratio. If units sold are dropping while your position ratio is above 1.10x, the market is telling you something.
The most actionable diagnostic combines position and velocity. High velocity + Value position = STAR (you're underpriced — raise carefully). Low velocity + Premium position = FIX or DELIST (you're overpriced or underdifferentiated). High velocity + Premium = CORE (pricing is working, protect it). Low velocity + Value = KEEP or MAINTAIN (price isn't the problem — look at distribution, marketing, or product-market fit).
If you don't have velocity data yet, position ratio alone still helps. Calculate it for your full catalog, sort by how far each SKU is from your intended position, and you'll immediately see which products need attention. The ones furthest from intent are your highest-priority price adjustments.
Related questions
What if I only have one or two competitors to benchmark against?
Two competitors is the minimum for a meaningful midpoint. If you truly only have one, use their price as the benchmark and calculate your ratio against it directly. The positioning classification still applies — you're just working with a less reliable midpoint.
Should I include Amazon prices in my competitive benchmarks?
Yes, if your customers compare you to Amazon sellers. The benchmark set should reflect what your actual customers see when they comparison shop. For DTC brands, that usually includes Amazon, 1-2 direct competitors, and any major retailers carrying similar products.
PricePilot calculates position ratios for every SKU, classifies them as Value/Parity/Premium, and tells you exactly which prices to adjust. Get your ranked report for $39.