Some contractors think that cutting prices will bring them more business. While that may be true, what they don’t realize is the damage that it often does to their business at the same time.
Here are 5 reasons you should never cut your prices:
1. You set the standard for future rates. People don’t remember specials, they remember what they paid and the amount they paid is what they tell their friends.
2. Existing customers may think that if you can lower your price now, you must have been over charging them before.
3. You have no room for error so when a mistake happens you have no buffer to cover it and can lose money
4. You have no room for the unexpected. When the unexpected occurs, like flat tires, accidents, traffic, customers that change their mind, or unexpected damage or surprises, you also have no buffer and lose money.
5. You start a price war with your competitors and there will always be some ignorant individual that would rather do it for nothing and go out of business than let someone else have the job.
Look at this clip from the Nashville business Journal:
“Cracker Barrel made $14.4 million in last quarter, up more than 20 percent from a year earlier. By comparison, Nashville-based O’Charley’s lost $4.3 million, blaming its troubles in part on its recession-inspired value menu. O’Charley’s CEO Jeff Warne resigned a few weeks later.”
The primary reason for their success? Not cutting prices!