Avoiding the Pitfalls of Competing on Lowest Price

Avoiding the Pitfalls of Competing on Lowest Price is our topic on The Core Business Show with Tim Jacquet. A mentor for SCORE in Atlanta, Jack Bernard has godfathered hundreds of small businesses over the past four years, and there's one question that owners invariably ask him: What's the best way to market their business?  There are essentially three variables: price, quality, and service," Bernard says. "Frankly, the worst way to market your business is almost always by price."  It seems counter-intuitive. After all, the aim of a business is to attract and retain paying customers. If your business offers a dramatically lower price than your competitor, it stands to reason that you'll snag more buyers, doesn't it?

 

Not necessarily.

 

Even in these tough economic times, low prices don't automatically translate into a healthy bottom line. In fact, rock-bottom pricing often works against some businesses and can even tarnish their image. What's more, counting on customers to recognize low prices often sets the expectations bar too high. As this "Mind Your Pricing Cues" story from the Harvard Business Review explains, many customers don't know the price of the things they buy and, even when they do, they often lack enough information about competitors' prices to make an informed decision.