Focus on Value, Not Price
Have you ever considered lowering your prices in order to increase sales or remain competitive?
We deal with this question with our customers on a daily basis, and work to ensure that our clients don’t fall into a ‘commodity’. Alternatively we see clients putting pricing up and losing business that they cannot afford to lose. The trouble is that the answer isn’t always black and white.
Lets deal with the issues surrounding cutting or reducing prices
1.It lowers the perceived value of your brand and product
First a discount or price reduction immediately prompts the question – why can you do it for a discount? It implies that the normal price for your product or service is over priced.
2.Once you cut prices it’s hard to put them up again
Once you’ve reduced or discounted your price, it’s very hard to justify adjusting those prices up again.
3.It attracts customers who only care about price points
A business’s unique value very rarely hinges on price; it’s usually a combination of price, product, reputation, and value that it brings to the market it serves.
4.Destroys your hard fought reputation and perceived value
By changing your market strategy to focus on cutting prices you are essentially undermining all the good work you’ve done to build your brand, and there’s no going back – you’ll find yourself having to cut prices on every job or service you offer.
5.It’s a war you can’t win
Cutting prices across the board is never a good idea because when you cut, the competition cuts, until the business willing to tolerate the lowest margins prevails and it’s usually the lower quality competitor. There are no winners here.
Focus on Value Instead
With all this talk about price it’s easily forgotten that most small businesses build their brand and their success on the value they deliver. Value is so much more than price, it embodies the product, your team, your leadership, and customer service – and it can help differentiate you in a crowded and competitive market.
Consider the residential painting industry; for example, there are literally dozens of companies competing for the same dollar at varying price points. But value rarely comes down to price. For example, a local painting company with a host of positive testimonials to its name and a reputation for doing owner-supervised quality work may not be the cheapest in town – but for many customers the company’s reputation speaks volumes and they are willing to pay that little bit extra for good work.
Selling on this value instead of price will consistently differentiate you for the long term despite the temptation to fall into a price war with the competition.
How do you do this? Know your target market, your competition, your product and your advantage.
Remember price is a reflection of your value.