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Old 18th March 2010, 09:18 AM   #1

Join Date: Feb 2010
Location: Northamptonshire
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Default Don't Waste Time Competing On Price

So far today, I've had 3 of my clients assert with great confidence that the only way they'll get new business is to undercut their competition.

"Our customers are only interested in price", they say.

"Hmmm". I reply.

If people only buy on price, then we'd all be wearing the cheapest clothes we could find... driving the cheapest car... eating the cheapest food.

Would you want open heart surgery performed by the cheapest surgeon? How about doing a parachute jump from the cheapest airoplane, and with the cheapest parachute?

Sure, for some people (and some products) it's all about price. If I need to buy paper clips, I want cheap paper clips.

But for the vast majority of buyers, it's about benefit versus cost. "What's in it for me?".

My advice? Let your competitors scrap it out for the price-shoppers, and watch their profits take a kicking. Find a way to educate your prospects and customers to the benefit of what you do, and they'll be much happier to pay your price.

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Old 18th March 2010, 10:36 AM   #2
Biz Optimizer
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Default Price isn't everything, but it matters - a lot

I worked for a software company selling half-million dollar software packages when Bill Gates started selling operating systems for $75. The owner of my company said it would be a fad - can't make a profit doing that. It didn't take long (weeks) for my companies sales and profit to be dwarfed. The value company still struggles to be 150 million dollar company 25 years later - Gates climbed to the billions.

Likewise, Sam Walton knocked off the retail giants with sophisticated pricing. While there are those that have made it big selling value - those that have made it SUPER big seem to be on price.

There is nothing wrong with figuring out how you can deliver your product cheaper than your competition - but to compete on price if you haven't adjusted your cost is insane and deadly.

I watched as the pet shop owners thought that their superior knowledge/service/"value" would out last the big box retailers pricing - they are mostly out of business now. The 5&dime stores, the local hardware stores, the old computer stores - all chose value over price and fell to people who figured out how to get their price lower and still profit.

As in most things in life - balance is good. While there probably isn't a global answer for all - their is a right answer for every situation.

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Old 23rd March 2010, 06:45 PM   #3
sequoia payroll
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In my opinion, price is huge, but not everything. If Wal-mart could find a way to sell macy's name brands at a much lower price, how long do you think that macy's would be around? People will pay lower prices for nearly identical products every time. A company can charge a little more, if they have something that the cheaper competitors don't have. However if the cheaper company begins to offer the same products, the more expensive company better lower their prices to compete.

All that being said, I will take value over cheap any day.

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Old 23rd March 2010, 08:57 PM   #4
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One of the biggest mistakes small business can make is competing on price. Who wants to be branded as the low price leader?

When I was consulting with small business owners, 90% of the time my first advice to them was to raise their prices. They normally looked at me in horror, but when they followed through it was the best thing they did for their business.

I don't consult anymore, but I still tell people to raise their prices all the time. All you have to do is compute the ROI and it should convince you.

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Old 24th March 2010, 09:42 PM   #5
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You have to use caution if you want to compete on price. I agree that in a lot of cases, raising prices typically helps small business. But if you're in a market where price is really a factor, consider this:

1- Your USP. That's your Unique Selling Proposition. Make a strong case for all the reasons people should purchase from you. Remember, make it UNIQUE. That means it is nothing like your competition.

I have an acide test for USP's. Write down what you think makes you or your company/product unique. Then put your competitor's name at the top of the list. Could you say the same things about them? If so, you still do not have a USP. It's not unique.

2- Sell in bundles or upsell; depends on what you're selling. Bundles are great. Create a Bronze, Silver and Gold version. Of course, the Bronze package if based on price. Show increased servive or quality with each package as you move up. In so many cases, people want 'the best'. You automatically get more because you EDUCATE your customer. It works. I know because we do it all the time. We are a price leader... for the low end. We offer additional services that cost more. If you're serious, you will spend the money.

Hope this helps! Good luck!

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Old 25th March 2010, 06:54 AM   #6
David Morson

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Price war has alway been disastrous for the competitors so its better to not indulge yourself in such a competition cuz it causes too much loss and consumer is always at an edge due to such competitions.

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