Many businesses make the mistake of leading with price. In other words, when selling their product or service, the first thing they promote is the price and if they want to increase sales they reduce the price.
The problem is this has you competing solely based on price with big chain stores or businesses that can buy at a lower price than you can, and usually sell at a lower price than you can.
So your margins are squeezed. You feel as if you are working longer and harder for less and less money.
This is called commoditization – where all the emphasis is on price and the lowest price wins.
Here is the real challenge. It used to be enough to have a business, open the doors and have customers find you. Most businesses were based on their local area.
However with the Internet you are now operating in a global marketplace and the rules to be successful have changed.
It is Critical for you to clearly communicate the value your business provides to your customers.
If you customers don’t understand how they benefit from doing business with your company, they default to choosing the lowest perceived price.
And this brings us back to the emphasis on price and being commoditized! Does it feel as if you are going in circles?
The way out is to clearly communicate the value you provide.
Now this will take some thought and some work from you and your team. You have to shine the light on what you are subject experts on, how do you help your customers, and what do your customers appreciate most about your company.
What problems do you solve for your customers?
It’s not that price isn’t important – it is. It’s part of the value package.
But you have to communicate how what your company provides will either save them more money or make them more money than what you will charge them.
In other words, what results will your customers get out of choosing your company?
For example a spa could be promoting age defying facials. Their facials may cost more than other spas in town but the results in reducing the look of aging and having customers’ look and feel their best are outstanding.
There are many people who are willing to pay more for facials creating that kind of
result – but they want to know that is what they are getting out of their investment (and see and feel the difference).
You MUST communicate the results customers receive from doing business with your company – why choose you.
Sometimes an important part of the value your business provides is helping your customers make the best buying decision for them.
You and your team know how to guide a customer through making an effective buying decision – what’s involved, what are their circumstances and what they should consider.
This in turns provides great confidence in your customers that they have made a good decision.
How much money could your customers save just because you helped them make the best decision for them?
I certainly have wasted more money than I care to count on items that were not best suited to what I really wanted.
This is part of the value your business provides!
So once you have clearly communicated the value you provide – now you can include the price.
Now the price is compared to the value, rather than to the price of a similar product or service from a different company.
For example a carpet cleaning company that employs textile specialists to clean carpets and upholstery and uses the latest equipment and safe cleaning products will create a very different result from someone who has rented a machine from the local grocery store.
And yet if the carpet cleaning company is not clearly communicating that they will extend the life of the carpets and furniture, create a healthy home environment and respect the home, they could be competing on price with the rented machine.
Tip: Never underestimate the value of making it easy for your customers! How do you protect their time as well as create great value?
Have you ever used a coupon to ethically bribe a customer into your store or business
I think it’s a great idea to send a welcome letter or package to a new customer and include a coupon to encourage them to come back in.
However don’t expect the coupon to work unless you first clearly communicate why choose you, what value your business provides and the different ways you can take care of their needs.
Ensure you clearly communicate the value first, and then include the coupon as reinforcement.
If you use price as the motivator, you will always be commoditized or squeezed on price.
Often businesses lead with their pricing, and use discounts and sales as an inducement to buy.
Price is important but it should be the tail end rather than the interest generator.