How Lowering Prices Can Skyrocket Your Business

[moonchild]

I've noticed a trend in new businesses when they first get into a competitive market the first thing they do to capture attention is lower their price, they'll make people to come to them and over time when they realise they have a foothold in the market they will then adjust their price to match other people's.

When a wholesaler orders product, he aims at a certain percentage as the profit margin, what ever happens he will make profit, if his main capital is not mixed with the profit margin, so it only makes sense if he sell more units with small margins than sell less units with higher margin.

The point here is if you have a product netting you 5 naira as a profit if you reduce your profit margin to 3 naira and you sell 300 units you'll have 300 naira in profits instead of ordering 300 units and selling just 100 with 5 naira margin.

Another angle to look at it also is, overtime you'll get to lose out customers to the person that has a lower price because customers are more likely to buy from him.

Also, you have to be careful of competing on price as it can be a dead end if your other competitors decide to indulge in it.

 

[Shaf]

This is a very controversial topic amongst traders and businessmen. There seems to be varying values for the ideal profits expected on a product.

Ideally, you do not want to be running at a loss, whereby your expenses outweigh the revenue you are generating. If you rely on this business as your source of income, you even need more profits to both expand and keep the business running while you cater for your own needs.

To ensure that you do this and you still have prices that are lower than that of the competition, is not easy. Indeed, the competition will not be willing to share their price list with you. You have to devise means of doing that, ethically.

You should then understand that they could be selling lower quality products, or they are sourcing from a cheaper source. It also depends on the type of clients you serve. You can't give the rich and classy the same category of goods and price you give to the lower class.

Some of them may feel it's not genuine and some will feel it's below their class.