One of the most common errors new foodservice operators experience is pricing their food too low, thinking that they can undercut competitors. Explain why this is a poor strategy for success. Explain your position using 3-5 substantial sentences.

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14-08-2022
Mathematics

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One of the most common errors new foodservice operators experience is pricing their food too low, thinking that they can undercut competitors. Explain why this is a poor strategy for success. Explain your position using 3-5 substantial sentences.

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Answer:

Pricing a product too low may cause the producer of the product to be unable to produce it further along, as in reality they must not only hit even with the cost of the raw materials used but also make enough profit to live off of. In this way, trying to undercut competitors may cause a foodservice operator to lose money and go out of business. There is also a high possibility that consumers will see the low prices and assume the product is low quality. This makes it difficult to build a consumer base of loyal customers.