A mistake I see a lot of internet business owners making, myself included, is to implement a business strategy based on price competition. In this soft economy, we think the best way to get people to notice us and buy our stuff is to make sure that we have the lowest prices around.

We figure people are moving toward frugal lifestyles that involve cutting out the fluff; things that are nice to have but, since they are not necessary for survival, can be sacrificed for the sake of a healthy budget.

Faced with dwindling profits, we take a hatchet to our internet businesses and slash prices hoping the deep discounts will entice customers to our websites to buy. While this may seem like a good idea on paper it’s actually counterproductive to building a successful internet business.

First and foremost, not everyone has cut their spending. Shockingly enough, there are people out there who have money and are willing to spend it on the things they want. I don’t know any of these people personally but, believe me, they are out there.

The thing is, though, that these “people who can still afford stuff” aren’t spending their money on just anything. They are buying products and signing up for services they think are worth the price. And, oddly enough, the price of the item contributes to its perceived value.

There are many people who equate price with quality. If your price is too low, you’ll end up chasing these customers away from your internet business because they’ll think what you’re selling is cheap; both in cost and quality.

I can already hear some of you saying, “My internet business is not targeting high end buyers. Bring on the bargain shoppers!” All that means is, you have to be extra careful when trying to compete on price otherwise you’ll run into double the trouble.

If you are constantly changing the price of your products and services in an effort to find that magic number that will attract buyers, you will instead train your customers to hold out until you lower the cost again. Thus, the pricing strategy for your internet business becomes a self-defeating cycle that encourages your customers to wait rather than buy when you need them to. And if there’s one thing that bargain shoppers have in abundance, it is patience. They’ll wait until you put up that ‘going out of business’ sign before they will click over to your online store to buy something.

Lastly, let’s go ahead and acknowledge a fact that you might be trying to avoid thinking about. There will always be someone who can beat your price. In this global economy there will always be someone who can get supplies at a lower price that you, who will work for less money than you and who will sell their products cheaper than you. And they have internet businesses too.

Basing your internet business strategy around price is a lot like trying to walk five miles through six feet of snow in a bathing suit. It’s not a good idea in the first place and you’ll only get so far before you freeze to death. Or, in this case, your price based business strategy will end up hindering your progress in the long term.

Peace and Prosperity

(photo credit: CaseyHelbling)

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