Long Term Impact of Cutting Prices

I wrote a post on Fast Company a while back on the long term impact of cutting prices. I have pasted an excerpt of the post below but the whole article can be read here.

“Anytime sales are low, it is the entrepreneur’s natural instinct to find creative ways to boost sales. When all else fails, small business owners are often faced with the choice of bearing the cost of decreased sales until consumer shopping picks up again, or cut prices to incentivize sales.

Anytime sales are low, it is the entrepreneur’s natural instinct to find creative ways to boost sales. When all else fails, small business owners are often faced with the choice of bearing the cost of decreased sales until consumer shopping picks up again, or cut prices to incentivize sales.

While cutting prices may seem attractive in the short-run as the decrease in profit margins can be offset by the increase in the amount of sales made, one must carefully consider the long term impacts of decreasing prices.

There are many cost-cutting consequences which can be analyzed, but there are two in particular which I would like to discuss in this post: readjusting prices and the implications lower prices may have on the perceived quality of the products that you sell. The ideas are simple enough; however, it is vital that they are carefully incorporated into the analysis of your company’s financial future, using your company’s specific financial information, industry reports, and sales figures, when considering a reduction in prices.”