So the pricing undercutters have entered your market. They’re probably newer businesses and are just getting started, so they think that charging a lower price will get them some customers, then they’ll be able to raise their prices later.
(Well, I guess that nobody has told them, but it won’t be that easy. Pricing your product too low to get attention will get you customers, but when you raise those prices you’re going to get a lot of resistance unless you do it very gradually. Doing it gradually will probably keep you at the very lowest income bracket in your area, though, because every business has to raise prices periodically. If you start too low you’ll never catch up.)
That aside, what can you, as a business owner that has actually taken the time to price your product at a realistic price point, do to prevent business from being lost to the undercutters?
You have to tell your customers why you will make their experience better by hiring you.
What makes your product worth what you’re charging? Is it the years of experience that you have in the business? Is it special ingredients that you use to give your product a better quality than your competition’s product? Do you provide more personal customer service than your competition? Are you full time in this business as opposed to the competition doing this after their “real” job is over? Do you do a limited number of cakes per week so that you can give personal attention to each one?
Regardless of what sets you apart from your competition, and regardless of how much your competition is charging, you need to promote yourself to show what you can do for the client.
I’m not saying that you should stick your head in the sand and ignore what everyone in your area is doing price-wise. I’m saying that it isn’t the end-all of how you get clients. If everyone was just after the lowest price, WalMart would be doing every wedding cake in the world.
Some people are just after the lowest price, but those aren’t your clients. Those are WalMart’s clients. YOUR clients are the people who want what you’re selling, whether that’s a scratch cake, something that’s designed just for them, a specific technique that you know how to do, or just the ability to have someone work with them personally.
Undercutters can be frustrating, but there will always be people who charge less than you do. There will also always be people who charge more than you do. The best way to handle pricing is to work out on your own how much you need to charge to make a profit that you're happy with. Once that's done, concentrate on why the clients should buy from you and know that your pricing is where it needs to be.