Plenty of businesses are admitting to undercutting competitors in a bid to win contracts, according to a new survey, some by as much as 30 per cent.
Services marketplace ServiceSeeking found that 42 per cent of SME owners have slashed their margins to keep new customers coming in.
“All businesses will experience leaner times when they have less work on and during these periods they may need to decrease profit margins to win work. This is obviously great news for the customer,” said ServiceSeeking CEO Jeremy Levitt.
“But as in any supply and demand industry, when the leads increase, so may well the pricing, and businesses can recoup some of their previous losses.”
Despite this, ServiceSeeking found that most tradespeople could easily afford to cut margins to win work.
Analysing 52,000 quotes made through its platform in the December quarter of 2017, it found that Australian tradies earn an average of $67.16 an hour – more than triple the current minimum wage of $18.29 set by the Fair Work Commission.
Not all businesses are willing to compete on price, however.
Mr Levitt said that a quarter of surveyed business owners don’t compare their prices with competitors at all, while a similar proportion said current strong demand meant they could charge a superior price without fear of losing customers.
“This is a sign of a confident business which has established itself in its field. They probably have a good return client base with a healthy number of positive reviews to attract new customers, so they don’t feel the need to lower pricing to be viable,” he said.
“It’s a common part of small business that many overlook – customer satisfaction and reviews are vitally important. There are many people who are willing to pay above average for a premium customer service; in fact, I’m one of them!”
Adam Zuchetti is the editor of My Business, and has steered the publication’s editorial direction since early 2016.