What does underpricing mean?
Underpricing means setting a price below what is generally considered fair, adequate, or typical for a product or service. The term is common in business and economic discussions, where it can describe either a pricing mistake or a calculated marketing strategy. A company may underprice deliberately to attract customers, increase sales, discourage competitors, or create the impression of exceptional value. Such a decision can be effective in the short term, but persistent underpricing may reduce profits, signal lower quality, or provoke a price war. The word is also used when a product is accidentally offered for less than intended. It is more specific than simply saying that something is cheap: underpricing implies that the price is too low relative to its value, cost, or market position. For sellers, it can mean leaving money on the table; for buyers, it may represent an unusually favorable opportunity.
nounUnderpricing is the practice or result of setting a price below what is considered fair, adequate, or prevailing market value. It may be an accidental pricing error or a deliberate strategy to increase sales, attract customers, or compete with lower-priced alternatives.
- The practice or result of pricing a product or service below its fair, adequate, or market value.
- The deliberate use of unusually low prices to attract customers, increase sales, or undercut competitors.
"The retailer was accused of underpricing its products in order to draw customers away from its competitors."
"A mistaken exchange rate led to the underpricing of several online products."
"Their strategy of underpricing the entry subscription helped them gain a foothold in the market."
Rare in ordinary usage, because underpricing is usually treated as an uncountable noun.
"The audit identified several underpricings in the regional sales catalogue."
Underpricing may win customers, but it can also tell the world that the price was never meant to be the final price.
Reviewed by Deb Chak, Editor. AI-assisted content curated by RJS Tech Solutions LLP.
Etymology of underpricing
Underpricing is formed from the prefix under-, meaning “below” or “less than,” and the noun pricing, which derives from price. Price comes through Middle English from Old French pris, ultimately from Latin pretium, meaning “price” or “payment.” Related English words such as prize, precious, and appraise also trace back to this Latin root, with underpricing expressing the setting of a price below an expected level.
Related word forms
How underpricing is actually used
Underpricing is chiefly used in business, economics, retail, and pricing discussions. It is normally treated as an uncountable noun, though plural forms occur. It can describe either an unintended pricing mistake or a deliberate commercial tactic.
Easily confused with underpricing
Overpricing means setting a price higher than is fair or justified, whereas underpricing means setting it too low.
Mispricing refers broadly to pricing something incorrectly, while underpricing specifically identifies the error or practice of setting a price that is too low.