Who do you think is the low-price leader in retailing?
Once, the quick answer would have been Wal-Mart. But here's a cautionary tale of what can happen when you compete on price: A new study from retail consulting firm WSL/Strategic Retail shows 86 percent of customers no longer believe Walmart has the lowest prices.
That's gotta smart, given how much time and money the retail behemoth has spent on pitching its "always low prices" slogan. It's also likely painful for Wal-Mart's vendors who've often strained to get their costs down to fit into Wal-Mart's super-low price narrative.
Where do customers think prices are cheaper? The Internet, as well as other discount retailers and grocery stores.
Given this changing perception, competing on price is even less attractive. So how can you avoid it? Here are seven tips from the Small Business Administration, as well as a few of my own:
1. Find new markets. If competition is stiff, consider whether a neighboring city -- or country -- might offer a better opportunity to sell at a higher price.
2. Benchmark. Find out where you stand on pricing compared to other companies in your industry. It's possible competitors have raised prices while you've stuck to the bottom rung.
3. Develop unique products. It's best to offer products and services that are unique to your company. The reason is, when competitors hold sales, you won't be similarly forced to cut prices becuase your offerings can't be price-compared.
4. Bundle your product with services. Take a look at how Jonathan Fields has bundled his new book, Uncertainty, with his consulting. No discounts here. Bet they're selling like hotcakes.
5. Repackage and upgrade. Fresh packaging might give you a chance to combine your products in new ways -- ways the competition hasn't thought of yet. Or update products to add new features.
6. Build your reputation. When you're known as the best in your industry, price isn't a problem. Clients expect to pay you a premium. Get video testimonials, or at least ones where you can use customers' pictures next to their endorsement -- they're highly impactful in helping clients envision themselves using your product.
7. Create scarcity. If you've had a product or service on the market a while and sales have slumped, put out the word your offering will end soon. This works particularly well if you're about to introduce something new. Get a sales spike before you retire an older item. Or create scarcity by only offering a limited number of a particular item, promoting that only X number will be sold.
Do you compete on price, or sell on value? Leave a comment and tell us your strategy.
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Comments:
i feel like i compete against my company because my product can be ordered online. Although we are the only company that sells our version of the product because we have the patent for it that doesnt mean people dont go home and feel more secure about buying online after seeing it in my store. However i have come with this slogan after speaking to a customer thats not buying that day. "Find your best price online, bring it to me, and i'll match it or beat it". I am tid of online competition even within my own company
Another great article, Carol. Just need to add that in my view, on top of all you said, the most important factor is the relationship you have with your current customers. Well done, this practice will bring your company solid business for ages to come. Without slashing prices, and profits.
Despite consumer perceptions the simple truth is that Walmart is the number one retailer in the world. Knowing that Walmart once was competing with small town Ma and Pa's easily beating them on price, until today they have reached a saturation point and are now making inroads into metro markets one can understand the dilemma that they face. Walmart does indeed leverage manufacturers, but now so do other retailers. Target has maintained more of an upscale discounter image throughout this battle -- although Walmart remains on the top of the heap.
I am dirt cheap and proud of it. When people as me "how do we cram the most revenue out of this?" I simply reply "glory is eternal, money is not". Greed is the root of all evil.
good article....I have personally used tips 1, 4, 5, and 6 successfully for many years. I like your idea of benchmarking to make sure you aren't giving things away when you don't need to be. That is always the most difficult part about pricing; knowing the price to sell to win the business but not leave a bunch of money on the table.
Additional tip: Go the extra mile. You cannot put a price on that extra mile service provided to the client. Even if your price is more expensive, a client would go with you because you deliver beyond expectations.
actually clever clogs, smart in this context doesn't mean clever. It means it must hurt, like a sharp slap. So not only is your English incorrect, you have missed the point the writer was trying to make...
@Joelpollock13- "that's gotta smart" is colloqial English for "that must hurt". Is English your second language, or are you so young you have never heard that phrase?
its "thats gotta be smart" or "thats go to be smart" not "thats gotta smart"
Swagg
I agree 100% with you.
Just the opposite ~ when I see made in China etc. I think low quality & cheap. Made in the USA is quality workmanship wrapped in pride.
The best way I see to avoid competing over price is to have product quality, uniqueness, and value. The United States is known for shoddy workmanship and poor quality. A return to quality is a key to success. People except workmanship to be high-quality, and they get what they except.
We market and manufacture a quality power wheelchair in a niche market for active users and have steered clear of 'dumbing down' to Medicare pricing. If price is the main focus quality suffers. I've bought items at Wal-Mart and they don't last. If I'm looking for DVDs or the like then Wal-Mart is a good place to shop - if I'm looking for equipment I'll go elsewhere. At first folks may purchase el cheapo but down the line people who have any means will prefer quality. Niche marketing has made our sales job more efficient since we can identify those without means easily and not waste our time on leads that will not turn to orders...
Walmart has always been comparing their prices to other stores. The problem is that a product that weighs 16 oz in a competitor for $2.99; Walmart will advertise their lower price for $2.79 the problem is that their package might only weigh 12 oz. They practice unfair advertising as their products are not compared by apples to apples; but apples to oranges.
In the world of business price has been an ongoing war ever since the Egyptian days where bartering was currency. In today's world not much has changed and with that being said its best you find an optimum price range and stay within and promote quality, value, and personal(customer) service as those three things always separate the best from the good, the bad, and the ugly.
Find niche market as stated on first one. For example, if Germany is too crowded and competitive market, go try Norway. It can be country, city or anything else. Just try finding targets that no one knows.
I've always competed on service, not price. It's not likely to go out of style.
This is particularly a problem with luxury goods, premium brands or services which is why I wrote How to Sell Luxury Products Without A Discount http://www.retaildoc.com/blog/sales-tip-selling-luxury-brands-without-a-discount/ . One of the important things to look at is who you allow to sell your products to begin with. If they think it is overpriced, they may tell you they can sell it but watch the numbers - a dead giveaway.
This is good stuff. I agree and look forward to implementing in my business.
A vast majority of businesses that I deal with think that this is the only way to attract customers. What they find when they do this is that they generally get the customers that have the lowest total spend. They therefore loose efficiency because they need to work harder for every dollar. Depending on the business, the market, and the level of competition I generally utilise Porters model to highlight possible strategies and choose a mixture of strategies aimed at being effective in gaining and retaining customers, and, efficient in maximizing the amount of revenue for the amount of work done. Every situation and business is different, and they should be treated that way. Great article! Jason Purton
My advice: If possible, find a niche market, within the market you're in. Otherwise we tend to duplicate exactly what the competition is doing, with a little 'window dressing' in the hopes of making it different.. If it's a bricks and mortar business you're competing with, I would take a walk through as a customer; identify areas you think they are weak in; product offerings, service, or overall buyer experience etc, and improve upon it. What about the overall 'feel' of your store; is it a pleasant place to be? Do people want to stay? WalMart to me, is a depressing place to shop, the lighting and general ambience are horrible. I think this is an overlooked area in B&M retail. Coffee shops have been around for a hundred years, yet it took Starbucks to make them a pleasant place to visit.. Most online businesses in my view, are weak in customer service and simplified website navigation...If a customer can't easily find and buy what you have to offer, because you decided that fancy graphics heavy website looked cool; your going to lose money.....Also, don't forget to offer coupons to your repeat customers. Nothing says 'thanks' better than "15% off your next purchase"...
Thanks for adding another resource!
Hi Carol, great article! Competing on price is the lowest form of value you can offer your customer - yet, it's amazing how many entrepreneurs are stuck on the idea they need to compete on price in order to win over the hearts of their customers.Here's another article entitled the "3 Ways to Avoid the Deadly Price Wars" that I think is a good complement to you point.http://www.predictableprofits.com/311/3-ways-to-avoid-deadly-price-wars/
Everything you do - the price you sell things at, the speed to market, the service etc, can be duplicated. The only thing that you have that no one else has and cannot be duplicated is the relationship you have with existing customers. Focus on retention not acquisition.