Why Lower Prices Don't Always Win

4.5-minute read | Jul 31, 2023

Businesses providing home improvement services often struggle with the issue of finding the balance between offering attractive rates to clients and increasing their profits.

Although charging reduced prices may seem a successful strategy to acquire an edge over rivals, it is vital to be aware of the potential long- and short-term repercussions of being the low-price leader in your market. To shed some light on this, we put together nine key points that illustrate why lower prices don’t always mean you win. Read on to find out.

Desk with clipboard and phone: Why Lower Prices Don’t Always Win

Lower prices are associated with lower-quality work. Customers often associate lower-priced services with a lower quality of work. This association is based on the belief that businesses offering lower prices may cut corners, use cheaper materials, or employ less experienced or skilled workers. Consequently, customers may hesitate to choose a service solely based on its lower price, as they prioritize the quality of work or product.

Lower prices reduce profit margins. By offering lower prices, your profit margins will be lowered as well. This occurs because the revenue generated from each sale is reduced, while the costs associated with delivering the product or service remain relatively constant. Lower profit margins can negatively impact a business’s ability to invest in market growth, provide quality work, or pay competitive salaries to employees.

Lower prices require more projects to increase overall revenue. When prices are lower, businesses need to secure more projects or sales to achieve their desired revenue goals. This increased volume of projects can strain resources, such as personnel, equipment, and time. Additionally, managing a larger workload may result in potential inefficiencies, decreased customer satisfaction, or compromised quality of work delivered.

Lower prices don’t equate to competitive pricing. Competitive pricing involves strategically determining the price of a service in relation to other offerings in the market. While lower prices can make a business more attractive to price-conscious customers, competitive pricing requires a comprehensive analysis of market dynamics, competitors’ pricing strategies, and customer preferences. Simply setting prices lower without considering these factors may result in a failure to effectively position the service in the market, limiting its competitiveness and ability to grow market share.

Lower prices don’t necessarily mean value in the consumer’s eyes. Consumers often associate value with factors beyond just the price. While a lower price may initially attract attention, consumers consider various elements such as quality, durability, customer support, brand reputation, and overall experience when assessing the value of a service. Therefore, a business that solely focuses on offering lower prices may struggle to create a perception of value in the eyes of consumers who prioritize these additional factors.

Lower prices reduce the margin for error/overages. When operating with lower prices, businesses have less flexibility to accommodate unexpected costs, errors, or project overages. The reduced profit margins may limit the ability to absorb additional expenses or provide compensation for mistakes. Consequently, businesses operating with lower prices must carefully manage their resources, minimize errors, and accurately estimate costs to maintain profitability.

Lower prices won’t encourage customer loyalty. Price alone is not enough to foster customer loyalty. While lower prices may attract new customers or prompt occasional purchases, customer loyalty is built on consistent quality, exceptional service, positive experiences, and a strong brand reputation. Customers who solely base their purchasing decisions on price are likelier to switch to competitors offering lower prices. Therefore, businesses must create a comprehensive customer experience and build strong relationships to encourage long-term loyalty.

Lower prices are not the only determinant in the purchase decision. Customers consider various factors when purchasing, including quality, convenience, reputation, brand perception, customer service, and overall value proposition. While pricing plays a role, it is just one element among many. Businesses relying solely on lower prices to attract customers may neglect other critical aspects influencing purchase decisions, potentially losing customers to competitors who excel in these areas.

Lower prices still demand quality work. Despite offering lower prices, businesses must maintain a high standard of quality in their work or products. To deliver value and retain customers, companies need to ensure that even at lower prices, the work or products meet or exceed customer expectations. Quality remains essential to customer satisfaction and loyalty, regardless of the price point.

Becoming the low-price leader in a crowded home improvement services market can be tempting, but this can cost you and your customers in the long run. Instead, focus on offering quality services at a reasonable cost. Partnering with Salal Dealer Direct to provide affordable home improvement project financing is one effective way to remain competitive and grow your business.

Partner Forward with Salal Dealer Direct

We team up with contractors nationwide to provide their customers with affordable financing for various solar and home improvement projects.

We can offer some of the most competitive rates and dealer fees because we’re part of a member-owned credit union. That means our profits return to our members—and business partners—through lower rates and fewer fees.

Our Dealer Direct Financing programs feature:

  • An online loan application with fast credit decisions and a high approval rate.
  • Terms and loan amounts are available to fit various budgets and project sizes.
  • Partners pay ZERO dealer fees on our standard program.

How to Start Offering Salal Dealer Financing to Customers

We’re serious about helping your business grow with fast funding times and personalized support from a dedicated and experienced team of lending specialists. To get started, our dealer application process requires these documents:

  • Completed dealer questionnaire
  • Current income statement and balance sheet
  • Copy of business license and/or contractor’s license


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