We all have fears to some degree or another.
When I was a kid, I was afraid of the monster under my bed (I used to jump off the bed so he couldn’t grab me as I stepped down – he was sneaky like that).
Now as a marketer, I’m afraid of the “Low Price Monster”.
You see, when everything else is equal, the defining consumer buying decision will be price.
So the solution then is to not let everything else be equal.
Because you never want your businesses primary competitive advantage to be price.
You see, when you compete on price alone a funny thing happens.
It’s a race to the bottom.
And whoever gets there first, loses.
Can You Afford To Be That Cheap?
You can’t out-Walmart, Walmart.
And you can’t out-Amazon, Amazon.
I mean I guess you could try, but why would you want to?
There are so many more easier, more profitable, and faster roads to business success.
The hardest part of competing to be the lowest price is that you also tend to have the lowest margins.
This means you need to do double, tripe, quadruple, or even more volume than your competitors, just to break even.
In many cases it’s a lot easier to sell one $1000 item, than it is to sell a thousand $1 items.
“Low price” is also the world’s worst competitive “advantage”.
Because in todays global economy there’s almost always someone out there willing to do it cheaper.
The Downward Spiral Of Low Prices
Here’s how it normally goes.
You lower your prices in an attempt to win more market share.
Your competition sees what you’re doing and quickly lowers their prices as well.
You see that the competitions prices are now lower, so you inch yours down another few dollars.
The competition sees this, and so they take their pricing down a few dollars more.
And lower, and lower, and lower it goes.
Destroying profits, eating away at your margins, and forcing you to cut costs in other important areas like customer service, after sales support, marketing, and business development.
Until eventually someone goes out of business (a principle known as predatory pricing)
Or someone smartens up and decides to start competing on something other than price alone.
As Mark Stiving writes, the best way to win the price war is to avoid it.
There Is A Better Way
Fortunately, when looking for a way to stand out from the competition the opportunities are nearly endless.
Can your business be:
1) Better 2) Faster 3) Nicer 4) Cooler 5) Cleaner 6) Smarter 7) Prettier 8) Tastier 9) Easier 10) Cheaper (just kidding… don’t be cheaper)
Where To Start
When you look for a competitive advantage to capitalize on the first step is to take stock of your businesses strengths.
Don’t be afraid to write down anything and everything that comes to mind.
Ask yourself questions like:
1) What is it about your business that’s unique?
2) What makes your business better?
3) Why would a customer choose to do business with you, rather than someone else?
Once you’ve got these down take a look at your competitors weaknesses, and write them down as well.
Once these are all tallied up, take a look at your customers and what they value most, because it’s absolutely pointless to do something better than your competitors, that your customers don’t even care about.
Low Price Perceptions
Pricing just like every other element in your businesses marketing also tells a story to your customers.
Without knowing any other details, would you believe that a $100,000 car was nicer than a $10,000 car?
In fact, pretty much everybody (unless they’re being contrarian) is gonna say the $100,000 car is nicer than the $10,000 car.
This is because higher pricing sends a message of higher quality.
Now, you obviously need to back this up, but in many cases (and depending on the industry you’re in) customers can be turned off by the lowest price option.
After all, do you really want to hire lowest price surgeon? The lowest price pilot? The lowest price dentist? The lowest price lawyer? The lowest price (insert profession here ____________ )
Rather than low price, pick another competitive advantage and run with it.
Rather than a scary monster and a race to the bottom, you’ll be able to use the additional revenue to improve your service, quality, product, and overall value.
Your business will do better, you’ll do better, and your customers will thank you.