Not a day goes by that we don't hear about a business owner who is complaining about a competitor lowering their prices and causing them customers. It is always tempting to follow suit and match the lower prices. However recent business history has clearly shown that reacting by meeting or lowering your prices to match your competitor does not always work.
In the end most businesses can't sustain their operations using this tactic. Lowering prices too much will eventually affect gross margins and the overall profitability of the organization. So how can a small business deal with a market place where it appears that competitors are dropping their prices daily and undercutting margins?
Remember the old Cola wars?
The only people who benefited from those price wars were the consumers. Research done during the time showed that consumers were buying whatever brand was on sale that week, and there was NO loyalty to either brand.
Anyone that has been successful on the Internet knows this situation only too well. It is not uncommon that within a few weeks to a month; someone, somewhere, will be copying your strategy and trying to sell the same product(s) at a lower price. Brad Fallon (of Stompernet fame) shared a story of this happening to him with the sale of dartboards and dartboard accessories. As soon as he was doing well other sites began popping up offering the exact same equipment for $10 less than his asking price.
So what did Brad do?
Instead of lowering his price he increased the value of what he was offering. Brad knew that he would not be able to differentiate himself simply by price alone. Instead what he did was offer complimentary information to all purchasers and increased the experience for each visitor and especially each purchaser. When you bought at Brad's site you felt special and got a lot more than just the product. Of course, Brad did not get all the sales and I am sure that there were some people who did go to the competition because all they were interested in was price. However, years later, Brad is still selling on the web while a lot of those competitors are long gone.
Dealing with price objections and formulating a sustainable strategy is one of the many issues that are covered in the meetings of Bay Area Mastermind. Call our office for a free no obligation consultation to see if your business can benefit from our meetings.
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