Slashing prices could allow you to sell more cabinets (or furniture, or whatever your shop produces), and though your profit margins fall, volume could make up some of the ground lost during the recession.

That’s a strategy companies are using throughout the country to weather the worsening downturn but an article on CFO.com by Josh Hyatt titled “And in This Corner, the Price-Fighter” raises questions about the damage a price-cutting strategy can do to your brand. If your target market is homeowners willing to spend about $10,000 on kitchen cabinets, and you cut prices to $7,000, you might be telling your customers that the product you make isn’t as valuable. It can also be tough to pull prices back up, so this short-term solution could create long-term damage.

Hyatt’s article suggests an alternative – creating a lower cost version of your flagship product, and giving the new offering a separate brand name. According to the article these “Fighter Brands” have been used by a variety of large companies, including Sony’s brand Aiwa and at Mars’ brand Kal Kan cat food.

For the truly custom shop, this approach probably doesn’t hold much water, but for medium or larger-sized companies with a more standardized product it seems like an option worth checking out. Businesses with flagship brands currently serving higher-end markets could easily strip down their products by taking away high-end hardware and customizable finishes. They could then offer a quality product without the usual frills under a different name and reach bargain-hunting customers.

Has your company had to slash prices due to the slow economy? Have you looked into creating your own “Fighter Brand” or do you have any other solutions to deal with shop slowdowns?

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