The Danger of Price Promotions

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Filed in Marketing , Small Business Tips 1 comments

Does this scenario sound familiar?  The economy is down, and sales are slow.  You’ve got to come up with something to boost your business sales, and you’ve got to do it quickly!  Immediately the light bulb goes off in your head, “I’ll just cut prices on some of my items.  Customers are always looking for a good deal, and my products/services can be that good deal.”  You start to promote your new price-based marketing strategy and customers pour in…for awhile.  After a few months, you notice that only your lowest priced items are selling and that the increased sales volume is not equal in profit.  Even worse, a competitor has slashed prices lower than yours, and you are no longer the low-priced provider.  This is the danger of price promotions.

While I believe you should always charge what you’re worth, it can tempting to lower prices to bring in new customers.  It’s okay to use this as part of a larger marketing plan, but when you make it your ONLY marketing plan, the following negative consequences can result.

1. You train your customers to shop on deal. If you lower various product prices throughout the month, then your customers will pick up on the behavior.  They will come to know that if they wait long enough, one of their favorite products will go on sale.  There’s no need to pay full price because the price will come down eventually.

2. You leave room for competition to undercut your prices. While a competitor may not be able to copy your marketing efforts and other brand-based promotions, they will easily be able to match your prices.  In many markets, competitive businesses follow each other closely.  Even if you have a micro-business, know that some other entrepreneur is watching you.  Don’t be surprised if you cut your prices on a Friday, and by the next Friday, another business has done the same.

3. There is no equity in your brand. If you build your whole marketing strategy around cutting prices, you’re not sharing the other great qualities of your business with customers.  They won’t know that you’ve been in your industry for 20 years or won certain awards for customer service or even that you’re the only provider offering this special set of products.  Customers will only know you have a low price, and when that low price goes away, there will be nothing else memorable about your business.

This video, from SmallBusinessNewz, illustrates why small business owners need to be careful with price promotions:

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Dequiana Brooks Jackson

Dequiana Brooks Jackson, CEO of Inspired Marketing, Inc. specializes in teaching women entrepreneurs the marketing fundamentals they need to grow their businesses. This author, speaker and business coach is the creator of the SPARK Marketing System™, an exclusive program that shows entrepreneurs how to shatter negative mindsets, take control of their marketing and make more money. Ready to get the spark back in your small business? Schedule your free consultation today!

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Posted by Dequiana Brooks Jackson   @   17 May 2011 1 comments
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1 Comments

  • http://www.thewritedesignco.com/ BillionDollarBlogger

    You cannot build a business on  price cuts. The purpose of going into business is to make a profit, and if your prices are not helping to achieve that goal, it should be removed as an option. I would encourage this if you are profiting from one service and you’re looking to boost a new service. But as you said, this should not be the only part of your marketing plan.

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