3 Situations When You Shouldn’t Lower Your Price
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Price is often the go-to tactic small business owners use to get ahead. Everyone knows a big “Sale Going On Now” sign attracts consumers. But lowering prices at the wrong time could turn into a Going Out of Business Sale. So it’s important for owners to know when not to use lower prices to differentiate your small business from the competition.
Here are a few situations when small businesses may want to reconsider a decision to lower prices:
- When Demand Exceeds Supply – Your econ professor was right. When your supply (and your competitor’s) can’t keep up with demand, customers are willing to pay more for most products. Think about the most popular holiday toy. It’s more important for you to have the product than to have it at the lowest price
- When Big-Box Competitors Move In – Big-box stores are national, retail chain stores that have well-honed relationships with suppliers. They can bargain for significant price reductions based on volume. Businesses with smaller volumes can find it difficult to price match and still make a profit.
- When It’s Not Sustainable – The trouble with lowering your price is that your competitors will race to lower theirs too. Now, this lower price is the new norm. Unless you are able to sustain the lower price (and still make a profit), you may have just priced yourself out of the market.
So What Else is There?
Smart business owners know that price is only one tool in their marketing toolbox. Here are a few alternatives that should be considered as part of your strategy:
- Promote Service – Small businesses are known for their personalized service. Sure, customers can get it cheaper elsewhere, but they may not be able to find someone who will answer their question and show them how to use it. Consumers like to shop where someone remembers their name each time they visit.
- Product innovation – New products and services often have their roots in small business. Remember, the innovative founder of Apple started in his parents’ garage. Consumers are attracted to new ways to solve their everyday problems. Offering a unique product/service can be an important way to stand out.
Price is one way to stand out in your marketplace. But knowing when you shouldn’t lower it is priceless. Consider all the alternatives when formulating your marketing plan.