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Selling the product at low price is considered as one of the most commonly used strategy for attaining the Competitive Advantage / Superior Edge. In Marketing, This strategy is also known as LOW COST LEADERSHIP.
Being a marketing professional i believe that its a good strategy but company should also keep the Manufacturing Cost as another important priority.
It may work in some few cases
1- product bundle pricing as in this case we care about the profit came from the bundle so we could decrease the price of one product and increase the profit of others just to compensate the loss
2- captive product pricing : profit from the integrative service not from the original product
otherwise this strategy is not recommended
It is unacceptable to quote lesser than the cost price. why should you do that and what if you stick on to your normal price? it is purely the sense of insecurity that makes a person to do so. we run businesses for making profit and not for charity. i am even against under quoting to convince a customer. I will only try to convince the customer by stating the benefits of my product and the services offered by my company.
It is OK for one time deal and to secure a new client, but not preferred for a network of clients / continuous production as you will end up at loss at year end
Once you set that loss making trend then you will be compelled to continue that. Then the question arises that why do business and for what?
Selling products lower than cost price is a strategy for winding up or once in a while for liquidating old dead stocks.
Fishing:
How it is and how good it is? (for a negative motive) It is to be discussed.
To attract customers some do similar business to have advantage over other products. Some may do similar business to get advantage of the credit period on the product and invest in stock of other products with fair/upper margin-a swap deal. Some may do similar business with a negative motive.....
Anyway it is a general practice followed in the area and is an unavoidable circumstance for the business, there is no mistake in selling so to withstand and stand along. In certain cases profit margin may be negligible and a turnover commission is more attractive on the product...there is a possibility. In case of perishable goods once the advantage is reaped to clear off the remaining portion you may sell at a lower price than the purchase price. similar situation arise in case of outdated products and a new substitute is on the anvil. How to explain further dear brother....Better explanation provided here by the experts.........
Selling below the Cost in order to get competitive advantage is of course s Marketing Strategy which is used at the last resort when other strategies fail. We can use better Service, better product value and better promotional activities in order to get competitive advantage.
Usually selling the product at a lower cost is done in cases when the company or the organization wants to penetrate the market quickly, or is looking to increase its own Market Share.
Also many of the well established organizations follow this course of action to fend off any new competitor they may have to face, as new business find it hard to match the competencies of an already existing one, owing to the superior market knowledge and production life cycle of the established organizations.
But in the long run, it may have an adverse effect as it would become difficult to maintain the price at the same level.
This strategy is usually used by supermarkets and retail shops. They lower the price of some products to lock customers, and it is proven that it is a successful strategy as most customers will buy other products when visiting the shop.
Yes, you can sell it below the total cost but not below the marginal cost, for some time, to gain a competitive edge.
WHO IS THERE IN TODAYS BUSINESS TO LOOSE ??? D,NT BE BOOKISH IN PURE PROFIT ORIENTED GROUND, SIR...........
