Price wars cost more than profit losses

Here’s another great article from OpenForum about how taking part in price wars with your competitors may not always be the most sensible option.  Read it on the OpenForum website by clicking here, or scroll down…


Before you decide to lower your prices, think about the message you are conveying to your customers and clients.  First, reducing your prices makes you look in desperate need of business.  And when you look desperate, your customers will lose confidence in you and your business.  People want to do business with successful companies – ones they will be being around next week.   Walk down the street of any retail area and you are bound to see “going out of business” signage posted on at least a few businesses.  Start cutting your prices and your customers may think you are on the verge of calling it quits too.

Secondly, slashing your prices may alienate some of your long-term customers.  To them, it may appear as though you’ve been price gouging them in the past.  None of us appreciates being taken advantage of so instead of increasing sales, you’re strategy can easily backfire.

Keep in mind, the current economic situation isn’t going to last forever. In fact, some economists are saying there are signs that things are starting to pick up again.  However, the steps you take today will leave a lasting impression with your customers long after the recession is yesterday’s news.

Emphasize the value proposition you bring to the market and use that to justify your price.  Most people don’t mind paying for quality.  However, if there’s been a significant reduction in demand for your product or service because of the economy, think creatively.   Repackage items in smaller quantities which in turn cost less.  For example, a spa may offer an express massage instead of a full-hour service for half the price.  It’s the same service, just a smaller version for less money which may be more palatable to a customer strapped for cash.

Keep in mind it’s much easier to cut your prices than it is to raise them.  If you lower them now, it’s going to be difficult to increase them once the economy takes off again.

Finally, regardless of economic conditions, never under-value your product or service.  If you aren’t willing to charge what you are worth, then how can you expect your customers to place much value on your product or service either?

What do you think? Has reducing your prices brought you more custom, or has it been a false economy? Tell us here!

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