Do you think dropping prices are a bad idea?Long term it can be a really bad idea.
I was at a tag sale the other day and asked the woman if she considered $1.00 for a $3.00 Christmas tree. “
“ I paid $50.00 for that wreath; she yelled; $3.00 is highway robbery. I can’t give it to you for a $1.00!” There are lots of things wrong with this scenario, the first thing is if you think your price is too low to start with why would you price it so cheap? And if you price it cheap, why would you be offended when someone tries to ask for a bigger discount?”
How’s this one; another friend told me she was selling at really low prices so she could get known in the business world. Hmn, known for what?
The biggest problem with this transaction is she doesn’t have any idea how to mark her merchandise or how to sell it. Does this happen to you?
It’s likely that none of my readers are working at a tag sale, but this is a good way to start a conversation about dropping prices.
If you don’t think your product is worth your price you will have a problem selling it.
- The most obvious problem is that dropping prices give you less profit. If you continue to drop prices, you will start to believe that your products aren’t worth your ‘asking price.’ The more you believe it’s true, the less likely you are to get your asking price. Giving something away doesn’t take much skill, working hard to get your price makes you a true salesperson.
- Dropping prices gets you bad referrals. Cheap customers are easy to get; what’s not easy is to get a customer who will pay your price and send you a great referral. It’s worth it to understand your products and their value.
- Self-esteem is hard to get in life. According to Psychology Today by Neal Burton, self-confidence essentially means to trust and have faith in oneself. It is our certainty as to our judgement, ability, and so on—in short, our certainty as to our aptitude to engage with the world. Why would you take this away from yourself? For more on self-esteem, check out this article in Psychology Today.
- How will you stay in business by haphazardly dropping prices? I say ‘haphazardly’ because most businesses don’t have a system for dropping prices. In other words, they don’t have their merchandise marked up enough so that dropping prices won’t hurt their margins. They drop prices because they need the money.
- Dropping prices can bring in customers, give you cash flow and build traffic short term. Long term, you’re creating a very slippery slope. The customer takes her lead from you. Unless he/she has recently bought the same product, it’s doubtful they understand pricing in general.
Remember just because the customer says the price is high it doesn’t mean they won’t buy your product. It’s likely they are testing you to see if you understand your own pricing!
Why drop your prices when you don’t need to? Need more help on on getting your prices? How about a webinar on pricing for your company? Call Lisbeth at 518.495.5380.