Many businesses make the mistake of focusing on price. In other words, when selling their products or services, the first thing they promote is the price. If they want to increase sales, they reduce the price.
That puts you in a position of competing solely based on price with big chain stores or businesses that usually buy and 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 – all the emphasis is on price and the lowest price wins.
Here is the real challenge. When starting a business, it used to be enough to 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 of success have changed.
Instead of primary focus on the price, it is Critical for you to clearly communicate the value your business provides to your customers.
If your customers don’t understand how doing business with your company is beneficial to them, they default to choosing the lowest perceived price.
And this brings us back to the emphasis on price and being commoditized! Does it feel like you are running in circles?
You’ll find the way out by clearly communicating the value you provide.
Now this will take some thought and work from you. You and your team have to show what you are subject experts on, how do you help your customers, and what do your customers appreciate 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.
What needs to be clearly communicated to your customers is that what your company provides will in the final lead into them saving or making more money than you charge.
In other words, what results will your customers get out of choosing your company? What’s is the added value?
For example, a spa could be promoting age defying facials. Their facials may cost more compared to other spas in town but the results in reducing the signs of aging are outstanding.
There are many people 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.
You and your team need to know how to guide a customer through making an effective buying decision – consider what’s involved, what are their circumstances, etc..
This in turns builds 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?
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.
The price is now 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 employing textile specialists to clean carpets 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, respect the home and create a healthy home environment, they could be struggling competing on price with the rented machine.
Tip: Never underestimate the value of making it easy for your customers! Make sure you know the answer to how 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.
However, don’t expect the coupon to work unless you first clearly communicate why they should choose you, what value your business provides and the different ways you can take care of their needs.
Make sure 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.
Remember: Price is important but it should be the tail end rather than the interest generator.
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