When you’re starting a new business or wanting to offer new products or services, it’s easy to think that pricing your products or services low will help you attract customers. The strategy of lowering your prices to attract more customers or clients is called penetration pricing, and it’s frequently used by small business owners to get their first customers or to break into the market with their product or service. But you don’t want to start with low prices just to get more customers. Here are three key reasons why.

1. Increased rates may lead to irate customers

While it’s tempting to lower your prices to attract customers, don’t do it. One of the main reasons you want to steer clear of this strategy is that there will come a time when you need to increase your rates. When you start too low, you can end up dissatisfying existing customers when you need to raise prices to cover expenses. Increased prices shouldn’t come as a “sticker shock” to your current clients. Otherwise, it can drive them away from you and toward your competitors. Instead, focus on pricing your product or service correctly from the start. Cover your expenses, but don’t discount the value you bring. Also,?consider developing your brand name in your industry to create a market position that’s sustainable.

2. A change in pricing could confuse referred customers

Not only can low prices attract customers, they can get customers spreading the word fast. You may get referrals, but what if by the time the referred customer finally decides to purchase your product or service they find a different or higher price? When they’re coming to buy low-cost services, they see high-priced rates. That can leave them confused about your price point or position in your market. Instead, provide your target audience with the correct expectations from the start, and price according to value. Moreover, you want to qualify the customers that you receive because your product or service isn’t right for every customer. Instead, use pricing as a way to qualify your customers by charging the right amount.

3. Low pricing can lead to a low-quality image

That’s because most people associate lower prices with lower quality. In addition, pricing your products or services too low could help undermine pricing in your industry as a whole. Instead, assess your values and learn how much your time and skills are worth before pricing for services. When pricing for products, make sure you do your research and benchmark against your competitors and industry.

Charge What You Are Worth

Pricing your products or services too low could help you run into more problems than you may realize. When you undercut yourself in that way, you miss opportunities and risk losing out on higher profits. That’s why it’s important to have a strategy that sets you up from the start. Getting your pricing down pat will help you keep away from the pitfalls of pricing your product or service too low when you’re just starting a business or launching a new service or product line.

Set the right expectations from the start by charging what you are worth. Research your competitors, consider your costs, determine how responsive the customer demand is for your service or product, and think about the ceiling price. By knowing your worth and charging for it, you can set your business up for success.