Price and Promotion, two of the 4 Ps in your traditional marketing textbooks, is making marketers believing that the lower the price of their products, the more the demand from the customers. However, still believing in this theory of cutting prices to get more customers, will make your company lose more money, for sure in this realistic world.
Here are the reasons why.
Imagine what will happen when one day, luxury boutique brands such as Louis Vuitton or Hermes, announces that there will be a 80% discount promotion? Yes. People will rush to buy their apparels like crazy Everything will be gone. They will be making quicker profits but at the same time, they will lose their market positioning and market share in the long run, and definitely, their brands will be killed as a result.
Price Wars are Stupid
In wars, there will be no winners, only losers. Soldiers get killed at war and parents grieved for their children, properties destroyed, unemployment and such. Likewise, if companies trying to cut their prices to compete with one another, they are in fact cutting away their market share which leading them to the downfall of their brands in time to come.
Price wars are therefore, stupid. Instead of engaging in price wars, brands should think of creative ways to enhance their product value, their innovation and package plus many ways of how they can otherwise win more of their market share.
People Will See Your Brand as Cheap
Unless you are positioning yourself as a low cost products and service provider, you can cut your prices lower than others. If not, you need to stay firm with your pricing. As the title of this article suggests that cutting prices lower than your market pricing will make your Cheap.
Yes, let me repeat again. Your brand will be cheapen, your company will be perceived as a commodity provider who sells cheap products and services. Cheap, cheap and Cheap!
Some marketers do not understand this, the number one enemy that will kill your branding efforts, is cutting down of prices. Yeah, you might have quick business profits in the short run but people will begin to suspect your product quality, asking themselves why this company is cutting their prices below the market? Is it something wrong? Your brand will no longer be a brand that everyone wants to have; it will soon become a boring commodity in the market.
Price Cuts Make You Tired
By trying to win more customers with your price cuts will make you more tired. You may need to sell twice as hard as your competitors who do not cut their prices. When others can make more profit just from one customer, you may need to make a little profit from the 2 or more customers.
If you are in the service sector, such as spa parlor. If you market your price 2 times cheaper than the norm, you will waste your time and energy earning from 2 customers whereas your competitors only do one sale to earn the same amount of money as you. If you are in the courier business, you will waste more trips and fuel than your competitors making you more tired and make less profits.
If your products or services genre requires support after sales, especially if you provide warranty for your stuffs, price cutting will make you even more tired. Because you may risk of making a loss if your customers keep coming back to you for servicing. Your competitors who maintain their pricing and an aftersales support system will not experience this as you.
Hence therefore, try not to or even think about it on cutting your prices below the market pricing. You may think that this will help you win your competitors; but in fact, you are ‘surrendering’ to your competition by letting them defeat you totally without fighting you in a price wars.
So, dump that theoretical four Ps of marketing in order to market your brand for real in the real world.