Newsletter
September 2019 Newsletter
Why dropping your prices can be a recipe for disaster
Selecting your business growth strategy is important for every small business owner. Very often, business owners will revert to dropping prices instantly. The short-term impact can sometimes be exciting but can also hide the real reason your product or service isn’t selling. You may get the wheels spinning with plenty of activity, but generally with little or no profits. History tells us, if it’s not what makes you different, like JB Hi-Fi for example, splashing prices isn’t a sustainable business model.
One of the most common short-sighted strategies is to offer new customers, instead of old customers, great deals. Why are your new customers getting better deals than your loyal customers? This tactic might be great to acquire new customers but what about retaining and converting them to loyal customers?
Seasonal sales can also be a detriment to business. As customers start to learn when a business is going to have a sale, they will stop paying full price. The recommended retail prices are now nothing but just decorative figures. Think about this, when did Apple launched a storewide sale? The business is built on providing premium products and great customer experience.
Instead of dropping prices, what could be done? The answer is ‘add value’. Or find a way to be different to the competition. Don’t just join the price war, protect your margin and think of better ways to add value and differentiate. With great customer experience comes great loyalty. What can be done to improve the customer experience with your business?
If discounting and sales are at the core of your business or something you feel you need to turn to in times of need, be sure to understand your numbers inside out. Is your business sustainable with a lower margin? Speak with your accountants before going ahead with the plan.
Source: https://insidesmallbusiness.com.au/featured/why-dropping-your-prices-is-a-recipe-for-disaster