The correct price

agosto 21, 2011

I am IT manager for a retail company and now we are crossing a crisis period it is very important not to lose your market piece. Many smb’s maintain their products prices at same level and every day their are loosing a small piece of the market because competitors made a price reduction days before. What to do if you are loosing customers? Of course you must do something to avoid that!

A very common phrase “the first strike twice” can be accomplished to that situation when you notice your quota of market is going down. At crisis time the first one that notice what we are crossing in would be the first to go out. At crisis time customers reaction is to save money and to not spense anything that is not really necesary. The question is to maintain your customers not loosing anyone. Competitors down price of products and your customers notice that then you loose market quota. You do not have choice: you must down prices aswell.

What is the correct margin you must apply to reduce your products prices? Everyone knows that you would all stock of PC if they have a 0€ price. Even is the price is 50€ you can still do that. If the price is going up you loose a little of market but you would be the first if price PC is under 250€. If you can sale a big lot of PC you can still maintain your benefits as they were when you had PC at 600€. Then you can notice that applying a correct price to PC you can still doing good sales and benefits.

An marketing operation like the one described before is a business risk because you must publicy your offer to customers in a very wide range and that costs money. Only a little of PC resallers can accomplish that to rest quota market to their competitors and finally win the crisis race.

What happens if someone put a new product into market and that is a very adjusted price wich has a very little margin that competitors can not copy the product? That is the story of iPad and Apple. A tablet with an IPS touch screen, made of aluminum, with an app store at 479€ price is good that Apple’s competitors are still looking how to copy the product at that price and still earning money.

Returning to retail industry now we can say that a correct price applied to a 2 person dinner in a fashion and romantic restaurant would turn sales to levels prior to crisis time because you steal quota market to your competitors.

There are no time to cry because our sales are going down. We only have time to look at what competitors are doing, think about improvements to our business, apply a correct price to our products and make a wide range marketing promotion. Customers like fishes will came in. Sure.

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