With both consumers and companies cutting back on spending, some of your company’s competitors may be cutting their prices to get the business. So what should you do? Many small business owners are wondering, “Is it time to cut my prices too?”
The answer is simply “No”. Do not cut your prices to match a competitors without reducing the level of service or amount of product the customer receives. Reducing your price without making service/product adjustments can send the wrong messages to your customer base.
Lowering your price makes you look in desperate need of business. People want to do business with successful companies, not one that may be on the verge of closing its doors. So the result you hoped for of obtaining more business by cutting your price could easily back-fire and cause customers to go elsewhere. Additionally, if you suddenly lower your prices customers may get the impression that you’ve been gouging them all along. No one appreciates being taken advantage of – particularly a loyal, long-term client.
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 the economy is significantly reducing the demand for your existing products, such as it is for many discretionary items, then scale back and repackage what you are currently selling and offer it for a lower price. Another option is to create a loyalty or referral program which offers a one-time discount to your customers. It’s a way to lower your price without making it a permanent change.
Remember, it’s much more difficult to go up in price than it is to lower it. Regardless of economic conditions, you should never under-value your product or service. If you aren’t willing to charge what you are worth, then you shouldn’t expect your customers to place much value on your business.
Finally, when the economy turns around, and you are ready to increase your prices to take advantage of the rebound, customers won’t happily accept a price hike. So you’ll be stuck with the lower pricing for a while when you could have been back in the growth mode and on your way to success.