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The Dangers of reducing price just "to win the business"

· Bookkeeping,Costs,Small business

Imagine this situation - a potential client calls you and asks for a quotation. They call back later claiming they have discovered a competitor who can do the job for 10% less. They have indicated they want to do business with you but would rather have you do the work at a lower cost? What should you do?

If you are leaning towards taking the task at a discount, continue reading

It can appear appealing to beat the competition on price. It is money in the bank, food on the table and besides, the 10% seems a little amount to slice off the end cost.

But, a reduction of 10% can cause bigger problems for a humble business.

Competing on price should be a cause for concern.

By competing on price, you are racing your competition to the bottom. In the long run, something has got to give, whether it's work quality or staff turnover (and much more you can pick from).

In simple terms, customers will find a way to pay more if they believe that they get some value in return.

Value comes in different forms like speed, quality, convenience, being nice to deal with, and providing peace of mind.

The purpose of any savvy small business owner is to find a value proposition that fulfils a need for the client.

Unless you happen to be a large corporate or your company is well-funded, if your strategy is to undercut the competition, you're operating risky business strategy which has brought many companies to their knees.

Offering that reduction may appear tempting when it means winning a job, but please bear in mind, if you take it you are just selling your company short and potentially damaging your brand in the long term by not being able to deliver on expectations.

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