Underpricing Meaning: Definition, Examples, and Translations

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underpricing

[ˌʌndərˈpraɪsɪŋ ]

Definitions

^{Context #1 | Noun}

business strategy

The act of selling a product or service at a price lower than its actual value in order to gain a competitive advantage or attract more customers.

Synonyms

discounting, underselling, undershooting.

Which Synonym Should You Choose?

Word	Description / Examples
underpricing	This word is used in financial contexts when a product is being sold at a lower price than its actual market value, often unintentionally or due to a miscalculation. The company is facing losses due to underpricing its new product. Investors were concerned about the underpricing of the initial public offering.
underselling	This word is often used in competitive business environments where one company sells goods or services at a lower price than their competitors, potentially implying a strategic move. To gain market share, the new player is underselling its more established competitors. They managed to dominate the market by consistently underselling other brands.
discounting	This term is commonly used in retail and sales to describe the intentional reduction of prices to attract more customers or to clear out inventory. The store is discounting all winter clothes by 50%. They are offering steep discounting during the holiday season.
undershooting	This term is generally used to indicate falling short of a target, goal, or expectation, often applied in performance or projections. Sales figures are undershooting this quarter's targets. The project timeline is undershooting our initial estimates.

Examples of usage

The company's underpricing of their new smartphone led to a surge in sales.
Underpricing can sometimes result in a loss of profit for the business.

^{Context #2 | Verb}

business context

To set a price for a product or service that is below its market value or competitors' prices.

Synonyms

lowball, undercut, undervalue.

Which Synonym Should You Choose?

Word	Description / Examples
underpricing	Used in financial and business contexts to describe a situation where an asset is priced lower than its market value or potential. The company was criticized for underpricing its IPO, which led to lower initial returns. Underpricing can attract more investors but might also mean leaving money on the table.
undervalue	Used when something or someone is given less value or worth than they deserve, often highlighting a lack of recognition or appreciation. The artist felt that the gallery constantly undervalued her work. Employees often feel demotivated if they believe their efforts are being undervalued.
undercut	Commonly used in competitive scenarios to describe offering a lower price than a competitor, with the intention to gain market advantage. The new store tried to undercut its competitors by offering lower prices on all products. She managed to undercut the competition by reducing their operational costs.
lowball	Typically used in negotiations to describe making an offer significantly lower than what is fair or expected, often as a starting point. They tried to lowball the seller with an extremely low offer for the house. The initial lowball bid was just a strategy to start the negotiation.

Examples of usage

The company decided to underprice their new software to gain market share quickly.
Underpricing can be a risky strategy if not done strategically.

Translations

To see the translation, please select a language from the options available.

Interesting Facts

Economics

Underpricing can stimulate market entry for new businesses looking to attract customers quickly.
It can lead to short-term gains in sales during promotions but may damage brand perception in the long-term.
The practice is sometimes seen in IPOs (Initial Public Offerings), where shares are priced lower to ensure a successful launch.

Marketing

Underpricing is a common strategy used to penetrate highly competitive markets.
This strategy can create brand loyalty, as customers perceive good deals and may return for further purchases.
However, consistently low prices may lead to expectations that can be hard to adjust without losing clientele.

Psychology

Consumers often associate lower prices with lower quality, which can impact brand trust.
People are more willing to make impulse purchases when they see an item they like at a discounted rate.
The 'anchoring effect' may occur when customers see the original price and compare it to the lower price, making them feel they are saving.

Case Studies

Notable companies have used underpricing during launches to gain traction and boost brand awareness, including tech startups in the Silicon Valley.
In the fast-food industry, promotions are often centered around underpricing popular menu items to draw in crowds.
Successful underpricing strategies can reposition a brand within its market, transforming it from a budget option to a competitive contender.

Origin of 'underpricing'

Main points about word origin

The term combines 'under', meaning beneath or lower than, with 'pricing', referring to setting a price.
The concept has roots in economic discussions dating back to the industrial revolution, where competition drove prices down.
Usage of the word gained popularity in the business world as markets expanded and business strategies evolved.

The term 'underpricing' originated in the field of economics and business. It is often used to describe the practice of intentionally setting prices below market value to achieve specific goals. This strategy can be seen in various industries, such as retail, technology, and services. Underpricing can have both positive and negative implications for businesses, depending on the context and execution.