How many of your customers fall into Oscar Wilde’s definition of a cynic? “A man who knows the price of everything, and the value of nothing”. When purchasing decisions are made based on cost only, how do you cope when there’s always someone cheaper than you? Do you match your competitor and reduce profit, or do you take a different approach?
Today, price consciousness is not regarded as cynicism. It’s admired - a rediscovered purchasing strategy. We proudly announce how we shopped around, secured discounts and saved ourselves a packet. However, as consumers we may not always understand the true cost of these ‘bargains’. I may save on my car insurance, but discover (too late) that I no longer have roadside assist. It’s a false economy coming back to bite me. The same behaviours and feelings apply to organisations. They sometimes look at top-line savings, ignore small print, disregard customer service and fail to spot that while headline items are cheaper, others are more expensive. They may sacrifice long term benefits for short term perceived gains.
This trend of cost-based purchasing has a big impact. We may feel helpless, believe we have no control over the situation, and keep our heads down. We can be defensive, moan about “the race to the bottom”, and blame everyone else. Have we the confidence or the courage to set a base price below which we will not accept business? If you’re the business owner, you are probably the last person to get paid. Should you accept a deal that pays everyone else and leaves you working for nothing? What opportunities do you miss because you are occupied by profitless work instead of looking for your bullseye client?
Unless you truly are the lowest cost provider, there will always be someone to undercut your price. Therefore, you must understand the unique value you offer your customers, and clearly communicate it to them. Here’s one approach to help you work it out.
Identifying my business value
- What do we believe about our clients, competitors, our ability to sell, and our product or service?
- List the reasons our customers come back to us. Group them into meaningful headings, e.g. expertise, quality, after-sales service, innovation, special features, etc. These are our Unique Selling Points. They differentiate us from competitors.
- List the reasons we think we’ve lost business to competitors in the last six months. Is their competitive advantage real or perceived?
- What changes have we made to our product range and service over the last two years? Do our existing customers know all the things we can provide? Do our lapsed customers know?
Communicate my business value
- Ask customers about their issues to match your solution to their problem. Don’t just submit a repeat order or duplicate a proposal from a previous occasion.
- Provide context for your price. Otherwise, customers may feel it is unfair. For example, use a comparison against the market or a standard price. Emphasise the value you defined earlier, e.g. premium quality, additional services included, bundling products, offering ‘free stuff’, or payment plans.
Some people always purchase based on lowest cost. If I get their order today, I may lose it next time. I can always be beaten on price, but I place a value on myself and the quality of the work I deliver to my clients. I’ve had clients who went elsewhere, but came back to me later. If your competitors offer prices that seem too good to be true, they probably are. Reducing your price to their level may damage your business in the long term. So, why not recognise the value you bring to your customers? Your repeat clients come back for a reason. Place your faith in their convictions, and tell others about the value you bring to their business.