Why Slashing Prices Might Not Be A Good Idea At All.
Recently, a new client came to Melvin, CEO of Bizsquare, for advice as his business was not doing well during this pandemic.
He is a carpentry contractor, and he was convinced that the only way to get new projects and drive sales was through slashing his prices and handing out discounts. However, as soon as he managed to seal a deal through his discounted carpentry services, he was faced with a sudden price hike in the costs of his carpentry materials. Furthermore, he also had to make numerous return trips for minor rectifications at the cost of his time and energy.
Unfortunately, the revenue gained from his projects was unable to cover his expenses and his business was quickly plagued with cash flow issues.
Now, think about it from a consumer’s perspective.
Have you ever engaged a service provider just because they are the cheapest in the market? If you are constantly evaluating your choices solely based on prices, do you realize that your service provider almost always becomes uncontactable after a few months when you wish to look for them again, or worse still, their company closed down just after a few years?
This whole process is a vicious cycle. Consumers need to gradually change their perspectives and we as business owners, should not be giving in to the temptation of slashing our prices and handing out discounts just to drive further sales and close more deals.
What can you do instead?
Go against the grain, differentiate yourself and stand out amongst your competitors. Accurately identify the needs of your customers and justify your prices. Don’t fight to provide the lowest price; strive to be above average.
What you can do is thus, increase your brand equity and its customer perceived value – resulting in your clients willingly paying a price premium for your brand’s products and/or services. Be firm in your business and seek to reduce the number of times you give discounts.
If Melvin’s story of the carpentry contractor is all too familiar for you, you might want to consider telling your consumers who are receiving unnecessary discounts this: “Would you want to build a long-lasting business relationship with me? If so, I am afraid I would not be able to offer you any more discounts but what we can promise you is our efforts and dedication in consistently delivering quality products and/or services to you.”
We hope it all goes well for your business!
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