There is one thing that all businesses which fail have in common. Their last official act before they go out of business is to cut their prices and have a big sale. When you consider cutting your price for any reason, consider some of the consequences. Cutting the price means that you must make many more sales in order to maintain your gross profit margin. Another drawback is that people who expect high quality do not usually look at a low price as a major consideration in a buying decision. In fact, low price may turn off the person who is seeking a high quality service. There is no quicker way to alienate an existing customer than to advertise a lower price than they just paid to you for service. A service cannot be built in advance, stored in a warehouse and then put on sale. Services must be constructed one at a time and after the order is taken. Service cannot be mass produced or purchased in quantities that can result in volume or lower prices. A cut in price may lead to a cut in quality, and this approach will drive away long-term customers. Cutting prices opens the door to a reputation as a price merchant. In the service industry, there is a market for that level of product, but a company cannot compete in both the low price and the high quality markets. It must be one or the other. A true cut in the price of a service means that there must be corollary cuts in overhead, quality, service or all three. So, if you intend to cut prices then do it by reducing overhead. Cutting quality or service is a recipe for disaster and subsequent failure. Related Articles and Information:
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Friday, October 13, 2023
CUT YOUR PRICE?
