Time and time again, my clients ask me whether they should drop the price of their product or service to match their competitors’ prices.
I’m biting my tongue.
Think about it. When you reduce your price, what do you actually achieve? At best you might make a few more sales. At worst you’ll cause yourself a lot of business headaches, not to mention financial damage.
Here’s what happens if you drop your prices: You enter a price war in which there are no winners. You drop your price. Your competitor drops hers.
You drop your price again.
And she drops her price in response.
And on it goes.
It’s a downward spiral with no end in sight.
And at the end of it, when you’re regained your senses and want to reinstate your original pricing structure you’ll find that your customers are quite happy with the lower price, thank-you-very much.
Getting back to your pre-price-war price won’t necessarily be easy.
Limit Orders at Lower Prices
If you want to encourage a rush of orders in the short term, you can offer a special discount price – but make sure your customers know it’s for a limited time only.
Even better, instead of lowering your price, offer a bonus or a 2 for 1 deal. And let your customers know that there’s a reason for the lower pricing e.g. new stock coming in, or a new program for which you want testimonials etc.
The only time you should consider slashing your prices is if you need cash fast – and if that’s the case, you’re on shaky ground to begin with, so be careful.
If that’s not your situation, figure out another way to get your name out there.