It's a familiar scenario in competitive markets: reducing prices to secure a project. While it may seem like a smart move in the short term, deeper analysis reveals several serious risks.
1. Acting on Impulse
Lowering prices out of excitement or eagerness is a common mistake. To avoid rash decisions, assign a dedicated sales representative and set clear minimum pricing boundaries in advance — especially important during intense negotiations.
2. Expecting Future Opportunities
Some believe that offering a lower price initially will lead to future lucrative contracts. In reality, clients often expect the same discounted rate later. Raising your price later could cause friction, or worse — trigger another competitive bidding process.
3. Chasing Prestige
Winning a high-profile client at a discount might seem valuable for reputation, but these clients often exploit this advantage. Strict agreements might prevent you from showcasing the work publicly, making the project less beneficial than anticipated.
4. Filling Idle Time
If you aim to keep your team busy by taking low-margin projects, consider alternatives like outsourcing team members temporarily. This maintains flexibility without locking resources into demanding, underpaid work.
In Conclusion
Reducing prices to win projects can backfire, hurting profitability, limiting flexibility, and damaging long-term client relationships. Thoughtful pricing and strategic planning remain essential for sustainable growth.
Finance
1 April 2025