Price is often the primary consideration when customers make a purchase, but cutting prices isn’t the best way to stand out from your competition.
In a recent blog post, we talked about getting stuck into a price trap cycle.
This is when businesses slash prices and offer discounts and deals in an effort to stand out from the competition.
It seems like a simple solution but the reality is it creates a damaging cycle of discounts and sales that keeps businesses stuck with slim margins. It’s unsustainable; and eventually, everyone in the supply chain suffers; you fail to meet your budgets and you’re out business; your staff lose; your customers lose, and in the end, no one wins.
No one goes into business to fail, so what is the solution?
You need to stand behind the value of your products.
If you were looking for a new pen to purchase and I offered you a choice between two, pen #1 is $1 and pen #2 is $3, which pen would you choose? You’d certainly choose pen #1, of course, it’s cheaper, a pen is a pen right?
But what if I said pen #1 would only last three months before it dried up, whereas pen #2 was guaranteed to last one year even if you accidentally left the lid off, which pen would you choose now? You’d certainly choose pen #2.
The difference is that you had not considered pen #2 until I let you know it’s value and how it was better quality than the cheaper pen #1. The price then became irrelevant.
You cannot hope that people see the value, you need to tell them.
Apple is a great example of standing behind the value of their products. You won’t find Apple slashing prices at the EOFY, Black Friday or in the lead up to Christmas. In fact, you’ll almost certainly pay more – sometimes a lot more than you would for a competitor’s version of the same product.
Apple understands its customer’s needs and tells you the value and quality of their product, how it works and how it will fit into and enhance your lifestyle. They do this by speaking your language, leaving out the technical jargon and presenting the information you need to know. You will take your new purchase home, and with a few clicks you are set up and ready to go. It’s very clever and it works.
Customers can only make decisions based on what they know, if you’re not giving them information about the product, then they can only make a decision on price alone.
What information are you giving your customers?