How are things going in your market place at the moment? How are your competitors doing? Have some of them started to drop their prices? If so, how are you going to respond?
The first thing I would advise my clients is not to follow the crowd, fighting for business by dropping prices. Unless you are in a position where you can provide serious volume sales, and can therefore survive the “pile it high, sell ‘em cheap” philosophy, then keep well away from that strategy. If you drop your prices, and then fail to bring in the necessary extra volume you will end up with considerably lower profit margins and run the risk of ending up in the terrifying negative cycle, where you feel you need to drop prices yet further to get the business, and the result is lots of work for little to no profit, and ultimately going bust.
So what can you do to fight off the cheap competition? Don’t panic, and hold your nerve. Analyse what you are selling, ensure it is better and/or different in some ways to the competition, and then see what else you can do to add value. Perhaps the answer is to diversify. I was recently talking with someone, who told me about a window cleaner who was only just keeping his head above water (in every sense!), because he has what is apparently a service which anyone can copy, and therefore price is the only weapon to work with. In reality, however, perhaps he should be looking to diversify, and find other things he could do to make him different – how about gutter clearance for the winter, or a full roof “service”. I also know a fancy dress shop who has recently started renting out ball gowns as a side-line (and successfully too).
So instead of working out how you can save money and reduce your prices, start to think creatively, and see what else you can do to improve your service, and possibly even raise your prices.