Without thinking about it, most people think that low prices are always a good thing. Remember, as we said previously ´ Not everyone wants the lowest price – but everyone wants the best value.”
There are many elements that can increase the value in any transaction (for both parties). That is, everyone gets better value out of the deal. Low prices are seldom going to be able to provide much in the way of added value.
When a marketer offers a low price, the profit margin per item falls. Perhaps an increase in volume will compensate for this. However, the closer a price comes to breakeven (costs V income) the less value there will be for all concerned.
The seller is closer to going broke and cannot offer any increased value to the buyer. If in fact they do go broke, the buyer has to find another supplier.
A strategy that has an over-reliance on price-cutting is an overly simplistic strategy (You don’t need trained managers to cut prices – any monkey can do that!). It is the easiest strategy for a rival to copy and the hardest strategy to defend.
From Marketing Success in Black and White (Brian Monger) available in digital version – http://www.marketing.org.au