Often, a natural response to cutbacks by your customers is to drop your prices, advertise more for less, and give great deals. Companies across the board are dialing up the more-for-your-money messaging in an effort to entice cash-strapped customers into opening their wallets. Price cuts and promotions are creating a domino effect as companies chase the best-deal status. The assumption that lowering prices will motivate people to buy may miss the mark and hurt brand equity in the process. 

While management intuition suggests that most buyers and business-to-business decision makers are price sensitive, marketing research has shown that price is the primary consideration for only 15 to 35 percent of buyers in most product and service categories, even during a recession or stalled economy. Price may become a more important consideration as household and corporate budgets get tighter, but it is not necessarily – or even customarily – the most important consideration. The majority of buyers are simply not as obsessed with price as many companies seem to be. What’s more, price cuts can cause serious problems if they reset buyer expectations about prices or go against a brand’s image. The halls of marketing history are littered with brands that dropped their pants to make a sale in a recession only to find they couldn’t pull them back up again once it was over. 

One great example is McDonalds. In the mid to late 1990s they offered the Big Mac sandwich for only $.99. When McDonalds decided to raise the Big Mac back to the standard price, they had issues with their customers and Big Mac sales declined; they had to continue the price for some time until a steady increase was accepted and other marketing combinations could be offered.