Don't Race for the Bottom: The Folly of Cutting Prices

My grandfather once told me a story about a local car dealership that advertised: "We lose a little on each sale, but we make it up in volume." The ad was a joke, but the reality is that this is the end point of a price cutting strategy. 

I've heard countless business owners say that they need more customers, more sales, more revenue. The next argument is that the fastest way to get more people in your store or buying your products or servies is to cut prices. "If we just charge less than the competition we'll get more business". 

This might work in the very short run, but what happens when your competition lowers their prices even more? That's simple you might reason, "we just need to cut our prices even lower!" If you race for the bottom at what point do you cut prices so low that you no longer make a profit? 

There is a better way. 

The way to make more profits is not to sell for less, but to offer more. Cutting prices makes whatever you sell a commodity. Do you really want potential customers to judge you only on price? Instead of racing for the bottom, why not race for the top. Differentiate what you sell by making it better than the competition. Make potential customers want what you sell because it's better than what they can get elsewhere. Create a unique selling proposition (click here for more on USP's) and guarantee so that your ideal customers fell compelled to do business with you instead of your competitors because you are better than them. 

What makes you better: a life time guarantee? Follow up service? Training? Expert staff? Sell what makes you better instead of what makes you cheaper. Your bottom line will thank you.

Buffie Blesi is the President and Founder of KnowledgeSphere, Inc. which owns and operates several AdviCoach Business Coaching franchises in Minnesota. She has a strong passion for her clients and their success. As a business owner herself, she understands the traps and unique challenges all owners face and has a coach of her own to keep her on track. 

With 20 years proven success increasing efficiencies, reducing costs and creating strong effective teams, Buffie has a history of growing companies of all sizes– from Fortune 500 to small businesses – to growth and profitability. Over her career, she was fortunate to be a key player in several successful start-up operations including a discount brokerage firm for a large regional bank and creator of a strategic assessments and regulatory practice are for a local consulting firm, holding executive level leadership positions in both including Senior Vice President of Operations, Director and Chief Financial Officer, respectively. 

Her experience is far reaching, with strong knowledge of marketing and sales, operations, accounting and finance, customer service and strategic planning. She has a keen ability to identify areas for improvement and has had a number of successes.

Buffie BlesiAdviCoach Business Coaching
651-815-8398