Think twice before you lower your price
Cutting prices is usually the first thing you want to do when sales dip. But competing for customers with lower prices as your only incentive can nuke your business.
Lower prices typically attract bargain hunters. You can’t build a sustainable business on these customers. Soon as they find someone cheaper, they’re gone. Now what?
Now you lower prices AGAIN (and reduce your margins) to lure them back. And they come. Until your competitors lower their prices. Then your “customers” bail again.
Now you’re in a dogfight against your competitors. You’re spending more to gain customers that bring in less revenue. An unprofitable business model.
Your competitors are doing the same. It’s a mad sprint to the bottom. Except, in this race, there’s no prize for whomever crosses the finish line first. In fact, nothing awaits the winner except closing shop. For good.
Unless you’re a vast conglomerate with ridiculous economies of scale, you’ll struggle to effectively compete on price. But what else can you do?
Instead of going nuclear, why not:
- Up the value of your offering.
- Improve the product and pursue a market that’s not about getting it cheaper at XYZ generic product.
Is there more work involved in both these strategies? Yes, but the work has a much better payoff than endless discounts.
