The price trap and why you should avoid it
Have you ever heard of the price trap? It’s a dilemma that most business owners have to grapple with as they try to stand out in the marketplace. And who can blame us? Most economists spell doom for our economy; buyer confidence is low; layoffs are commonplace. It’s not difficult to understand why many businesses would naturally seek to stop the bleeding by undercutting the competition in price. This is called the price trap. The problem with this strategy over time is that it cannibalises your profits; it’s unsustainable; and eventually everyone in the supply chain suffers; you fail to meet your budgets and you’re out out business; your staff lose; your customers lose, and in the end no one wins. Just think about the price war going on with Coles and Woolworths. That is a very expensive game to be playing, and it places unnecessary stresses and resentment with suppliers. It’s a zero sum game; for me to win, another person has to lose. Not fun.
So before you start slashing your pricing we would urge you to consider a maxim from Marshall Thurber:
Don’t discount; add more value
If you add more value, you make the competition irrelevant, and you keep more profit. Based on the customer research and case studies conducted by The Loyalty Zone, here are 10 sure-fire ways of adding more value to your customers.
This sounds trite but the power of a smile is far outweighs its simplicity. There is power in a smile which communicates far more than your words. In EVERY single customer research project conducted with our clients, friendliness comes up as a critical success factor for customer loyalty. For this to be effective, you must be:
2. Ask open questions
One easy way to stand out is to ask better, open-ended questions. It helps you in a number of ways. Firstly, customers will feel like you’re being honest and helpful; secondly, you will be able to find out more information in a faster time-frame; finally, your staff will actually come up with new ideas for growing your business by spending just a little bit of extra time with customers.
3. Show people that you understand
It’s not enough to think that we understand what a customer needs. You need to show people that you understand. The moment you show someone that you understand their needs, it builds an instant rapport and trust, which improves your conversion rate, and word of mouth recommendations. So before you start recommending solutions, stop and show the customer you understand their needs, and see the results.
4. Answer the phone within 3 rings
No one likes to wait. Get off on the right foot with all your potential and return customers by making a solid rule with your staff about answering the phone. Although it may not always be possible, and it can be challenging during periods, we suggest answering the phone within 3 rings. Any more than that, and customers start to have the thought they are having to wait. Whatever your circumstances and office layout, agree on the rule with the staff, and answer the phone promptly. It will make you stand out.
5. Give your team power to handle special requests
This is by far the easiest way to stand out from the competition. Customers appreciate the small allowances and assistance provided by your business. However, you can’t expect your staff to take this initiative on their own; you must empower staff at all levels to deliver extra value. This might mean allowing staff a certain level of authority to make decisions, or providing your team with instructions on what to do in the most common situations to solve problems without you physically being there. Not only will your customers love the personalised service, but your staff will feel more confident and happy at work. This leads into the next way to add more value
6. Handle customer complaints the right way
Most staff want to do a good job but sometimes things will go wrong, and customers are going to be upset. The thing that most staff struggle with is knowing how to resolve customer complaints. The research tells us that if you can successfully resolve a complaint, it will often lead to even greater customer loyalty. Conduct a training session with staff on how to deal with complaints, with an emphasis on:
7. Acknowledge new and existing customers
This is an easy way to stand out. Acknowledging returning customers produces a positive feeling and rapport. It’s as easy as remembering their name, or recalling a previous visit or conversation. For new customers, you may simply add, “welcome”, or where appropriate, ask customers if would like a quick tour of the facilities. Acknowledgement is powerful. Use it to your advantage.
8. Conduct a customer survey
Knowing what your customers are actually saying is essential for sales growth. We can’t assume what your customers think; you need to ask them. We strongly recommend the Net Promoter Score (NPS) method for customer research. It’s based on the ultimate question created by Frederick Reicheld, “How likely would you recommend (enter your business name) to a friend of colleague?” Whether you follow this method or another form, the main thing is that you’re asking the question. It shows customers that you care enough about their experience to make the effort. Keep your surveys short. Ask good open questions. Respect customer privacy and thank them for taking part.
9. Tell people about your specials
If you do have a special offer, let ALL your customers know about it. You’ll be amazed that this act alone will make you stand out, and improve average dollar sale. When staff are trained and coached on when and how to talk about your special offers, customers will love the extra attention. When done properly, customers actually say in the research that they find it helpful when staff talk about the specials that they otherwise wouldn’t have known about, and no one ever complains.
10. Perform a follow up call
A follow up call with a customer is the ultimate way to add the proverbial cherry on top of a great customer experience. Making a quick call to find out how everything went yields amazing results. Customers will remember your genuine effort to serve, and tell their friends about it. This follow up call also provides you with a way to discover any problems and fix them in the moment. It’s better that your customers tell you about complaints than their friends, plus it encourages repeat business in the future, so get on it!
These are 10 low-cost, guaranteed methods for standing out in a price-driven marketplace. Tell us about your experiences in applying these tips, we’d love to hear from you.
So what have you done today to make your business stand out?