What is the myth around pricing low to attract more customers, and why is it dangerous for businesses?
A prevailing myth in business is that lower prices will always attract more customers and boost revenue. While discounts or competitive pricing can work in certain contexts, consistently pricing low can harm brand perception, margins, and long-term growth. This myth encourages a “race to the bottom” where businesses focus on being the cheapest rather than the best.
Dangers of underpricing:
It devalues your brand
Customers often associate low prices with low quality.
Premium segments may avoid your product altogether.
Brands like Apple, Rolex, and Tesla thrive on value perception, not cost-cutting.
Attracts price-sensitive customers
These customers are less loyal and often switch to another provider for even a small discount.
You end up building a customer base that isn’t profitable in the long run.
Support costs can rise if bargain-hunters require more hand-holding.
Reduces profitability and scalability
Thin margins make it harder to invest in R&D, marketing, or hiring.
Businesses often struggle with cash flow due to low per-customer value.
Makes future price increases difficult
Once customers are used to low prices, it’s very hard to raise them.
Price hikes can lead to backlash, churn, or reputational damage.
Real-world examples:
J.C. Penney attempted to rebrand with everyday low prices instead of discounts. The move alienated its loyal bargain-seeking customer base and caused a steep decline in sales.
Airlines often use ultra-low pricing to lure customers but end up charging for every additional service—resulting in customer frustration and damaged trust.
Tesla never priced itself as a budget option but built loyalty through technology, experience, and innovation.
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