Why Lowering Your Price is a Terrible Business Move
If you’re in business, there have probably been a time or two (or possibly more than you can count) times where someone has complained about your price and asked if you’d be willing to lower your price. Lowering your price is a terrible business move, in my opinion.
In this article, we are going to dive deeper into the trap you fall into when lowering your price and how you can handle the situation when it arises.
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Here’s a “Lowering Your Price” Call That I Went Through Recently
I had a guy call me the other day. He was interested in my services but wanted to discuss my rates. He mentioned that he could get content produced at a lower price than my rate, and he wanted to know what my best price was if we moved forward with working together.
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Truth be told, I laughed out loud on the phone, which clearly got his attention. I asked him, “Why would you ask me to lower my worth and value for my services? I’d love to buy your supplements, but I can buy the same products from somewhere else for less. Are you interested in lowering your price for me?”
He paused for a moment and asked why he should lower his prices and that he doesn’t do that. I responded back with, “If you aren’t lowering your prices when I ask you, why would you expect me to? Do you go to the grocery store and ask the butcher to lower the price of meat because you can get it cheaper somewhere else? Or do you contact Amazon and ask them to lower their price on an item you can get cheaper on a different website?”
At this point, I could tell he was offended — and quite frankly, I didn’t care. I replied back with, “I don’t think we can do business and work this out. If our first conversation, you’re already demanding that I lower my price, I can only imagine what it would be like to work with you on projects. You can’t call me up and expect me to lower my prices but then get offended when I ask if you’re lowering your price — it doesn’t work that way.”
I politely thanked him for the call and wished him the best before we hung up the phone. Funny enough, he called me back a few days later to apologize and say he was just trying to get the best deal but understood my position and the value I bring based on my 20+ years of experience in the industry.
He then told me he’d like to move forward with my writing services at my standard rate, and he’d like one article per week for the year (52 articles in total) on any topic I find relevant that would help his business and bring traffic to his website. He even offered to pay for everything upfront as an apology for our previous conversation. I declined the upfront payment and told him I’d invoice him monthly so that he wasn’t out the full amount up front. He appreciated that, and from that point forward, we’ve been off to the races, and he’s enjoyed the entire process.
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So, where am I going with this and the phone conversation I had about lowering your price?
Selling Based on Lowering Your Price is a Terrible Idea
Selling based on price alone can be a terrible idea because it can devalue the product or service being sold and make it appear less valuable to the customer.
Additionally, it can lead to a race to the bottom in terms of pricing, which can be detrimental to the profitability of a business. Also, it can lead to a commoditization of the product or service, which can make it harder for the business to differentiate itself from competitors.
Instead, businesses should focus on highlighting the value and benefits of their products or services to customers rather than simply trying to undercut competitors on price. Lowering your price is not the answer to getting more customers or clients.
In fact, if you have the lowest price out there, what do you think people will assume of your product or brand? Probably that it’s low quality or inferior, right?
There’s a great book that I highly suggest you pick up from Grant Cardone called Sell or Be Sold. Tons of great information in there that can help you with all of this.
Why Your Business Should Never Consider Lowering Your Price to Compete
Lowering your price to compete with competitors can be detrimental to a business for several reasons. Here are four reasons you should understand:
1. Decreased profit margins
Lowering your price can decrease the profit margins of your business, which can make it harder for the business to sustain itself in the long term.
2. Devalue the product
Lowering your price can make customers perceive the product or service as less valuable, which can decrease customer loyalty and make it harder to charge higher prices in the future.
3. Commoditization
Lowering your price can make the product or service appear more like a commodity, which can make it harder for the business to differentiate itself from competitors.
4. Cost-cutting
Lowering your price can force your business to cut costs, which can negatively impact the quality of the products or services you offer.
Instead of lowering your price, focus on differentiating yourself through better products or services, superior customer service, or other unique value propositions. This will help your business attract and retain customers while maintaining profitability.
What Should You Tell Someone Who Wants You to Lower Your Price?
When someone asks you to lower your price, it’s important to communicate the value of your product or service and explain why your current pricing is fair and reasonable. Essentially, lowering your price is not an option.
Here are some things you can say if the question comes up:
- “I understand that price is important to you, but I want to make sure you understand the value of what you’re getting. Our product/service is made with high-quality materials/uses the latest technology/is backed by excellent customer service.”
- “I appreciate your interest in our product/service, but our prices reflect the costs of producing and delivering a high-quality product/service. Lowering our prices would mean cutting corners, and we’re committed to providing our customers with the best possible experience.”
- “I understand that you have a budget to work within, but I want you to know that our prices are competitive with others in our industry. We offer a premium product/service at a fair price.”
- “I’m happy to discuss with you any special payment options that may be available, but I can assure you that our current price is fair and competitive, and I can also provide you with additional information on the product or service’s features and benefits.”
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It’s also important to listen to the customer’s concerns and try to understand their perspective. Once you understand their needs, you may be able to offer a solution that works for both of you without lowering your price.
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