Thoughtful Thursdays – The penalty for dropping price
There are instances when dropping price is part of a plan for a product or service. You see this a lot in consumer electronics as a product matures and reaches the end of its life cycle. It is an acceptable way to extend the brand as competition ramps up and the product becomes more of a commodity.
Today’s sales thought is about the penalty for dropping price when it is not part of a product strategy.
One of the easiest ways to make a sale is to drop price. It is also one of the quickest ways to subject to your business to a price drop penalty.
Here are a few ways that dropping price at one customer can penalize your business:
- Continued price erosion at all customers
- Resulting price erosion for all products and services
- Waking up the low cost supplier causing a price war
- Decrease in company profitability
- Decrease in customer’s lifetime value
Before dropping price, think of the long term consequences versus the short term gain of an order.
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