I read an article in the Wall Street Journal which said that stock market plunge, S&P downgrade and economic turmoil would hurt small business more than big businesses. There contention was that big businesses can take losses because they have reserves, where as small businesses don’t, and must cut their prices. But with consumers feeling like they need to hold onto their cash, small businesses might have to reduce prices in order to compete and stay in business.
I would argue against slashing your prices, but rather increase the value you provide your customers. While your competitors are cutting prices and maybe even providing an inferior product due to cost reduction, you can take the opportunity to offer a better product, better value and better customer service. While your competitors are fighting it out for who can be the cheapest, you will stand out and your customers will gain confidence that your product or service is better, and they’ll feel better about spending their money.