The recession has created a huge amount of fear in the business community and, the knee-jerk reaction to that fear is often to reduce prices; assuming customers will keep buying.  But that action is usually a false economy.

Here are our top three reasons NOT to reduce your prices:

  • Cutting prices sends a message to your customers that you’re struggling
  • The only result from cutting prices is a reduction in net profit, as your production costs usually do not change
  • Customers don’t buy on price – they buy on value

Instead, why not consider increasing your prices?  Let’s say you have a product valued at £100 and you make £30 profit.  If you reduce your price to £90, you cut your profit to £20.  If you increase your prices instead, to £110, you make £40 profit – and you only need one of these customers to every two of the ‘cut-price’ customers.  So, you can give a better service too; which is likely to result in more customers.

Depending what’s happening in your industry, you may not be able to increase your prices,  but definitely think twice about cutting them.  And, if you do want to put them up, get some advice on how best to do it.



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