Q: Should I cut my prices to be more competitive in my market?
Jul 08 2010
Answered by: Marc Barber Ask a question
Starting a price-cutting war is an advantage to very few people: you do not want it, other small competing firms do not want it; in the long-run customers do not want it, if it means a reduced number of suppliers and less choice. It may only be in the long-term interest of a large company, if that is your main competitor. So, whatever you do, try to avoid triggering it off.
If one of your competitors cuts prices, what should you do? Try to avoid the instant reaction of following prices downwards. Instead, try to concentrate your customers’ minds on the non-price factors associated with your product, such as its unique selling points.
However, if you operate in a market that is very price-sensitive and does not differentiate between products, there is little choice but to match the price cuts. In this case, your survival will depend on savage reduction in your costs.
For more information on pricing issues see:
Our quick guide to setting prices, another Q & A on Setting prices and VAT with advice on how retailers calculate their retail prices, and some tips on pricing your products or services.
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