While underpricing can offer several advantages, it also comes with risks:
1. Profit Margin Reduction: Lower prices can significantly reduce profit margins, affecting the company's overall profitability. 2. Brand Perception: Continually offering products at low prices can harm the brand's perceived value and quality. 3. Customer Expectations: Customers may come to expect low prices, making it difficult to raise prices later. 4. Competitive Response: Competitors might engage in a price war, which can erode profits for all parties involved.