Don’t Undersell…Discount!

discountMany start-up businesses have the intention to offer prices lower than their competition to gain a foothold in the marketplace. But is this a road you should really be going down?

Unless you have a significant cost advantage, most of the time I would recommend avoid severely undercutting the competition. Here’s why:

  •  ‘You get what you pay for’

This view is still as relevant as ever. People believe that if you’re the cheapest then either a) you’re no good, or b) there’s a catch.

  • Once you set a price it’s really hard to raise it significantly.

Once people have paid one price they will struggle to see why they should pay significantly more for the same service in the future. Alternatively, if one customer receives a low price, then another customer might complain if they don’t get the same deal.

  • You don’t want to start a bidding war with your competitors.

Unless you’re in a privileged position, it is likely that your competition will have more resources to draw from. They will then be more likely to outlast you in the bidding war.

  • You shouldn’t be charging less than what you’re worth

In the long term, you will never be happy if you don’t think you are getting paid what you think you’re worth. This is quite a danger as it can lead to poor service and a tarnished reputation.

If you still feel that you need to be cheaper to attract initial custom, don’t worry, there is a solution……

Trial Price

One way around staring with a low price but avoiding the above problems is to offer a trial price with a clearly stated deadline. The advantages of this are:

  • Attract custom without your potential customers thinking you are rubbish because you’re cheap.
  • Customers will also expect the price to rise after a certain date.
  • And, importantly, they are more likely to buy from you in the first place if they think they are getting a good deal that they would miss out on if they didn’t act quickly.

MT

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