A significant proportion of SMEs are resorting to price cutting in order to win new business

A significant proportion of SMEs are resorting to price cutting in order to win new business.
In a poll conducted by the website SmallBusiness.co.uk, nearly one in four respondents said they are opting for this tactic, with one in ten considering cutting prices.

Matt Hardman, owner of the Bacon Factory, has been using special offers to attract more customers. He says, ‘We’ve been managing the balance okay, but these are worrying times. Similar businesses in our sector have been cutting prices too much just to increase their market share. By being a busy fool you can undermine the strength of the business.’

Simon Corbett, who owns public relations company Jargon PR, has cut his prices by
15 per cent in a response to a drop in demand. He says, ‘We’ve attracted more clients and as a result haven’t had to make any redundancies. The drawback is that cost and quality do go hand-in-hand, and you never want to compete on price alone.’

Emmanouil Schizas, SME adviser at the Association of Chartered Certified Accountants, agrees. He says, ‘It is important to understand how demand is likely to respond to price cuts as it might not necessarily make a difference. Other methods, such as extending credit for example, might be more appreciated by customers.’

Of the 256 SMEs polled, 24 per cent said that in the long run price cutting was a bad idea, with 19 per cent opting for increases instead.