It sounded like a great idea at the time, but it could be the worst decision you’ve ever made!
Prices can either make us or break us. If we choose to lower them in an effort to draw in more customers, we are succumbing to our desire for instant gratification.
Let me preface my rant by explaining that if you are lowering your prices in conjunction with a seasonal, holiday or inventory liquidation sale, then I am all for it. What I want to share with you in this post is how a lowered price alters the image of your product or service as a “need.”
If your business is well established, and you have a gang of repeat customers, make it your focus to provide them with the best product or service possible! They have already agreed to pay the higher cost for the quality you offer. By lowering the price, you reveal two possible scenarios. Either your product is no longer worth the original asking price, or you are willing to sacrifice your existing profits in order to appeal to a broader demographic. Each has the ability to scare away those that have already committed to your brand.
Here’s the problem with the first scenario. Customers who have been paying full price for the last six months to a year plus, may appreciate the savings, but subconsciously they’ll feel a little cheated. There was an agreed trade of money for goods, and they were happy to make the exchange. Now you are telling them what they paid for in the past, is no longer worth the investment. The quality you offer will needlessly come into question.
Moving on to scenario number two, after lowering your prices, you were able to attract a few dozen more customers. They came in, bought some stuff, signed up for a month of your service, and everything seemed perfect. But then you attempt to return the price back to the original amount. Oh no! All of the sudden, your deal isn’t so sweet, and again, the customer’s investment is questioned.
Does this sound like the last time you signed up for that cable television package deal?
How did you feel the day you received that bill in the mail which reflected the “new” total amount due?
My guess is that your new sports package might not have been a great idea after all. Instead of being excited about your savings, you begin to think about what you can sacrifice in order to pay for the extra channel line-up. And once we are forced to sacrifice one service for another, the comparison tends to lean on the side of the service we want most. iPhone 5 or the Golf Channel?
Prices fluctuate. That’s part of doing business. There are approximately 136.5 reasons why you would lower the cost of goods sold, but simple psychology would prove that doing so too frequently will result in a less than desirable effect.
The next time you make the decision to adjust some numbers, be sure to reflect on the long-term consequences, and not solely on the short-lived boost in new customer traffic. Invest in those who act as your advocates. Your current customers are your most valuable resource.
Treat them well, and they’ll make sure you stay in business!
P.S. Be sure to slap your name and email address into the two boxes on the top right hand corner of this screen. Doing so will ensure you never miss a single post, and you become part of an exclusive club of passionate business owner who are looking to crank their venture into overdrive! ~Andy