Attempting to beat the competition by being "cheaper" isn't the best option
A great deal a new business owners (or aspiring business people) are under the mistaken impression that in order to beat the competition they need to have the lowest prices around. In truth, this is a very dangerous business myth. Trying to undercut the competition could lead to a price war and if one of your competitors is a large corporation they will have the benefit of economies of scale and will therefore easily be able to undercut you without risking much harm to their profit margins. Many businesses have been crushed over the years by large competitors carrying out such pricing tactics.
Getting the edge without the price war
Newer businesses with a less well established market and a smaller cash flow often find the price war impossible to compete in. Being cheaper is just not an option with higher costs and less money to throw around. More often than not, SMEs concentrate on other elements of their business that large businesses might scrimp on, such as high quality products or top-notch customer service. Anything that will lure potential customers away from the competition.
Cheaper in the future?
Once the business has grown and is a little more established a price drop might be on the cards to draw in more customers, but quite often a price cut goes hand in hand with a drop in quality (in order to maintain profit levels). Such business tactics need to be carefully thought out or risk pushing customers away. Not everyone wants “cheap” they might be coming to your business for the quality of your brand.
Getting started
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