Offering Lower Rates During Café Opening

Ask any current Internet café owner what is his greatest worry when a new computer shop will open in his vicinity and chances are he will reply about the possibility of the new shop offering lower than prevailing rates in the locality. Aside from losing some customers to the new shop, the greater worry of the owners of existing cafés is that they would be forced to also lower their current rates which are barely making money for them.

Why is offering lower rates during the opening of an internet café getting to be the standard practice of new entrants in the business? Is there no other way to entice customers to try their new service? Let me share the little knowledge and experience that I have on this topic. Off hand, let me say that this practice of offering lower rates during café opening is one factor that is killing the industry so it is best if would-be café owners who will have the chance to read this blog consider other gimmick during their opening salvo.

Unlike merchandising business where the businessman knows the cost of the product he is selling, a new entrant in the Internet café business does  not yet how much he will spend to run his shop. In order to make money, a businessman must put his profit on top of the cost of his merchandise so he already have a benchmark as to how low he can go on his selling price.

In the case of an Internet café, it is not only that the new entrants to the business do not know yet what would be their operating costs, they also believe that the business is still lucrative; hence, the current rates still have much margin that they can play on. This is the main reason why it is so easy for new café owners to offer lower rates during the opening of their shops. They also bank on the option that they could raise their rates later if needed. What they do not know is that doing so will be very hard to do especially if the other cafés nearby had already lowered their rates.

Instead of offering lower rates, what the new entrants to café business must do is to offer the same rates prevailing in the area. After all, those prevailing rates are already acceptable to the customers in the locality. If only to entice customers to try them, they may offer free snacks and give-away items which they can easily discontinue when clients keep coming regularly to their shops.