Competing on Price is Always a Bad Idea
By Joe Ferry on Jan 7, 2010 in Featured, Public Relations
The temptation for many small businesses owners is to entice customers with “the lowest prices.” After all, everyone is looking for a bargain, right?
Competing on price might result in some short-term success, but it ignores the categories in which you can distinguish yourself long-term: value, quality, knowledge, customer service, training, and the ability to solve problems, to name just a few. Competing on price alone causes customers to see you – and your competition – as offering identical products and/or services.
Sure, offering the lowest price can help you close a sale, but does it gain you a loyal customer, one who will return time and again to buy from you? In reality, all you’ve done is complete a cold, calculated transaction, another line on the balance sheet. There’s a huge difference between completing a transaction and building a relationship with your customers.
Maybe that “customer” will return if you continue to offer the lowest price. And if the competitor down the street lowers his price? Well, goodbye customer. Are you going to lower your price to woo that customer back? Will they ever feel comfortable paying full price again?
Here’s a suggestion…don’t focus on price. Instead, listen to your customers, learn what they need, how you can make their lives easier and more satisfying. Price should be the last thing you talk about. If you can solve a problem or fulfill a need, price is almost irrelevant.
Your job as the business owner is to find out what the customer wants and needs. Ask lots of questions, then use the benefits of your product or service to show how you can save the customer time and money, or make their life easier and better.
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On Jan 7, 2010, Cookie Biggs said:
Good points, Joe.
Lowering my price to get a client’s project almost guarantees I’ll end up with a client who values my work only for its price. And that’s a client I don’t want.
Two options I’ve used (I’m sure there are more): Offer a selection of added services that make sense to me while greatly increasing the value to my client. Or, I might give that nonprofit, friend, start-up or beleaguered enterprise a discounted rate, but I tell them so up front and mark it clearly on my invoice. While neither of these means I’m getting paid my full rate, both are relationship builders and both preserve my professional integrity.