To clarify my last comment; "Lowering prices are almost always a sign of a downward market."

Well, duh, and no duh, right?

Still, I think there is a tendency to think that all you need to do to sell more product is to lower the price. Taking away that you are working harder to make the same or less profit, it usually doesn't work.

Lowering prices is the first crack in the dam. Customers figure it out pretty quickly, and they will think to themselves, "If you are offering this for a lower price, I bet someone else is offering it for even less!"

And they would usually be right. Because if the market is starting to go down, someone out there is hurting for cash and is willing to sell it for less, at first; at a break-even price later on; and at a loss even later. And as that seller falls away, the next guy in line is there to take his place.

A downward market doesn't have to start with a collapse, just a little tipping over is all it takes. And then, as most producers are in denial, the whole dam starts to break. You don't want to be a ninny and respond to every downturn, so you wait for a pattern to emerge. Or, there is a dead cat bounce of some kind and you are fooled into waiting longer. The point being, that almost everyone waits too long.

It is only the guy who started hedging his bets on the upward side; that is, was willing to make a little less money on the short term in order to lower his risk in the long term, who will come out of this alive, and even he will be hurt.

Who is that guy? The guy who went through the whole thing the last cycle, and who is still around, and believe me that aren't too many of those guys still walking around.

But even in a healthy market, lowering prices isn't the panacea that the average consumer thinks. I can give you a couple of examples.

I have been carrying cardboard cutouts for a number of years. Life-sized standups of Johny Depp as the Pirate, or Darth Vader, or John Wayne.
The suggested retail is 30.00, but I always tried to sell them for 25.00 because there was such price resistance. I'd get an apolgetic tone in my voice and say, "Well, they are kind of expensive, but....."

Finally, I decided that, the damn things were costly to ship, hard to display, sold slowly, and that I was losing money at 25.00. I decided that I'd get 35.00 for them, or drop them completely. I dropped the apologetic tone, and said simply, "They are 35.00." And sales, if anything, increased. It turns out that if a person is willing to pay 25.00, they are willing to pay 35.00. But if they balk at 25.00, 35.00 isn't a lost sale. Not to mention, you really can't get it cheaper even on the web once shipping costs are included.

Another example; someone expresses an mild interest in a product, and in order to encourage the sale, I offer him a lower price. He puts it back immediately, as if to say, "Well, if you want to get rid of it THAT badly...."

I think until I read that article in the paper about the builders lowering their price, there was still some question in my mind whether we were in a true downturn or just a lull. This nails it.