Low Price don’t make you rich, make your business die faster (Price War)

Low Price don't make you rich, make your business die faster (Price War)

During bad economy time, everyone face a lot of difficulty in business, especially to seal the deal, or to continue keep the client. To create a proper quotation which fulfil customer requirement, and same time much include the profit margin. A proper quotation always look nice, look complete, but most of the time it do not secure the job, because there is another quotation from competitor with > 50% lower than your price. You will be shock, “What the heck?“. This is so called Price War.

Price War, Commercial competition by repeatedly cutting down the price in order to make it lower than other competitors & market price. It is widely happens in business world now, and most of the “Low Price” business person think they have the advantage in getting business where they’d managed to grab some business from competitor due to extremely low price.

The main reasons that price wars occur are:

Product differentiation:
Service & Product is too little to choose between brands or provider, price is only the main competing factor.

Penetration pricing:
If a merchant is trying to enter an established market, it may offer lower prices than existing competitor.

Oligopoly:
If the industry structure is oligopolistic (that is, has few major competitors), the players will closely monitor each other’s prices and be prepared to respond to any price cuts.

Process optimization:
Merchants may practice new processes may make it cheaper to make the same product, with the same output.

Bankruptcy:
Companies near bankruptcy may be forced to reduce their prices to increase sales volume and thereby provide enough liquidity to survive.

Predatory pricing:
A merchant with a healthy bank balance may deliberately price new or existing products in an attempt to topple existing merchants in that market.

Competitors:
A competitor might target a product and attempt to gain market share by selling its alternative at a lower price. Some argue that it is better to introduce a new rival brand instead of trying to match the prices of those already in the market.

(Taken from wikipedia)

When you know your competitor got the job due to their offer 1/3 of your price, you’ll feel so sad.

You might ask why quoted such a low price?

Why take my job away?

Why price war?

But your competitor will answer as per…

“There’s nothing wrong, I got the job by giving my best price” (act blur that they’re targeting your price to offer lower price)

“If you’re better, for sure you’ll get the job, not due to the price”

Those who offer low price to get job, for sure getting more job, but it do not mean earn more, grab more profit. If they don’t earn more money, why they do not earn big money still offer such low price, what is the theory behind?

Competitor think …

1. Low price for first job, later can raise the price.
(Who will pay you more when they can pay you less?)

2. Customer no budget now, we help them, later when they have bigger budget, they will pay better.
(If current budget sufficient, why need to raise budget later?)

3. If I charge higher, sure no one offer jobs to me.
(when your price is low, it will be forever low.)

4. Even my price is low, but I got more job, the total end meet is still high.
(More jobs means more time, you’re exchange time for money.)

All these is a WRONG WRONG concept and thought. Please do not have such thinking at all.

For the Next Post will teach how to make a better quotation that easier to close deal.

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