Are You a Price Chicken?
In a competitive marketplace, it is never the time to play “chicken” with your customers on price. Doing so leads to leap frogging your competition straight to the bottom of the profit margin ladder. Price is and will always be an issue for some customers, but not as many as you may think.
Smart Advantage, a firm of competitive advantage consulting experts, surveyed five research firms who confirmed that price is reflected in the bottom quartile of attributes when surveyed in a blind study across most industries. This data is great news for businesses unless, of course, you have already painted your business into commodity status – as much of the insurance industry has. Recall Geico’s message: “15 minutes could save you 15%.” Geico consistently touts price as a competitive advantage, when there are a number of other business strategies outside of engaging in a price war.
There is hope; you can get out of that commodity corner. Because of the recession we are “drinking the price kool-aid.” Beware. Your business can provide more value than you think; but most companies neglect to convey to customers just what value they provide above the competition. If you don’t value those attributes, your customers won’t either. If you provide consulting or training, for example, put a price tag on it. Do you buy the cheapest car in the market? Would you skimp on a pace maker? You must focus on what customers value most.
Smart Advantage finds scores and scores of value deliverables in our clients’ companies that their sales and marketing hasn’t focused on sufficiently. We all pay more when we fully understand that we are actually getting more, and too often, your customers are getting more than you acknowledge.
Once You Cut Prices, Can You Ever Go Back?
Serial entrepeurner Gary Shansby, CEO of San Francisco-based Partida Tequila, argues that for premium companies, discounting is a form of brand suicide. “Once you start discounting, or accepting deals, there’s no way of getting back up. In down times, there’s the impression that the simplest thing to do is discount. But when confidence returns, the consumer’s going to wonder why you want to charge $48 when just a few years back you’d sell for $30. You’re effectively telling people that your product was too expensive to begin with.”
It can be challenging to hold the line on price when your sales people are telling you “we can get this job if we lower our price.” However, the minute you lower prices to compete, you’ve repositioned your brand on a lower rung of the value ladder.
The antidote to a price war is to communicate all of the value you bring to the transaction.
Providing competitive advantage consulting to a variety of corporations, Smart Advantage links what you do best with what customers value most. If your organization is in need of a competitive consultant, Smart Advantage helps your company uncover and tout its competitive advantage, leading your organization to reach higher profit margins by means of competing and selling while not engaging in price wars. By creating competitive advantage, a business experiences improved sales close ratios and will see increased market share value.
What is competitive advantage? Competitive advantage is the means by which a firm manages to keep making money and sustain its position against its competitors.
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