By Melinda Collins
The corporate colossus; it brings to bear vast financial means and diversified holdings portfolios, can win any price war, establish new consumer territory at will and saturate a market with cheap, accessible products.
In comparison, you’re small and don’t stand a chance — right? Well, if you’re competing on price you won’t be able to.
As a small business, trying to play the low price game is a losing strategy, yet it is the exact strategy many small business owners attempt to launch off with.
Maximising profit margins and not succumbing to the temptation of price slashing might be a much better way to go.
You get what you pay for
‘You get what you pay for,’ is a commonly held truism and perception is reality when it comes to marketing your business’ products and services. A flourishing business focuses its strategy on quality and quality, by its very nature, has a high price tag. When people see high quality, they expect a high price. Likewise, when people see a high price, they associate it with quality.
When they see quality and a low price, they assume something is wrong. Likewise, if you proceed to tout the benefits of your product or service, your high quality and your superiority to your competitors then slap a low price on it, your customers will also assume something is wrong.
Contrast that with using a high price to differentiate yourself in a crowded marketplace, causing you to stand out and rather than people assuming something is wrong, have them assuming you are really good because you are expensive. But always make sure to have the quality to back up the price.
People do buy high priced goods. They even buy the highest priced goods. Other brands have successfully positioned themselves in the high end of the price spectrum — it’s not always a negative. To some, it’s a positive. This is not just a business to consumer phenomenon; plenty of companies that sell to other businesses have also taken this approach as a way to gain a market leadership position. All over the place smart players are positioning themselves as the premium player in the space and charging a premium price for the privilege.
Focus on value not price
The key is to find out what you can provide better than anyone else. Make your value worthy of a higher price and then find the right customers who will recognise the value they are getting and be willing to pay for it.
Rather than asking yourself how you can beat your competitors on price, ask how you can provide your customers more value. Combining other complimentary services as part of a bundle, adding in additional accessories, delivery and pickup can increase your perceived value.
There are plenty of people that will drive out of their way and stand in endless lines just to save a few bucks, but are these the people that you want as your customers? Do you really want the ones that are always complaining about price and trying to haggle you down and will switch to someone else as soon as they hold a sale?
Quality, service and experience
Low price and high quality are incompatible competitive advantages — quite simply, they clash. Quality costs money; hence the intuitive connection between quality and price. Most small businesses cannot invest in good quality and service and sustain a low price advantage.
So, rather than trying to compete on price, small businesses should compete on quality and service for a niche of customers seeking a level of quality or service the big guys are unable to provide. Focus sales and marketing strategies on finding that niche market, accentuate how you are different from your competitors and how worthwhile your value is for them.