Feb
23

Competing On Price Is A Race To The Bottom

6 Comments

[For those who prefer text over video – or those with slow computers, the following post is a synopsis of the topic discussed in the above video, including some additional tips.]

In order to stand out in a competitive marketplace, you need to know how the offerings of your Small Business differ from those of your competition. To ensure maximum effectiveness, you also need to know WHY that Point Of Difference is important to your customers.

This difference is known as your Competitive Advantage, which means it needs to be truly compelling and meaningful enough to be touted in your Marketing Messages as a beneficial reason for your customers to patronize you instead of your competitors.

Many Small Business Owners make the mistake of competing on price. I call this the Walmart Mentality. Instead of defining and articulating a Unique and Meaningful Difference that truly sets them apart, these company’s jump right on the Low Price Bandwagon and try to appeal to their audience through their pocketbooks.

The problem is that Low Price Leader is not a sustainable strategy. Plus, low prices don’t attract loyal customers, they attract Price Shoppers. The minute these people find a lower price elsewhere, they’re gone.

Competing on price is a race to the bottom, and there is always another company that’s willing to go out of business faster than you.

Instead you need to dig deep and discover the unique advantages of your offerings that provide so much value to your customers that they are willing and happy to pay for it!

There’s a little burger joint in Yreka, California (where we filmed the above video), called Gold Rush Burgers and their slogan is, “Home of the Best Burgers in Town!” Now that’s a competitive advantage worth touting.

It’s a bold one, too, because there are plenty of other burger joints in town. But, by stating that Gold Rush Burgers offer the BEST, they are going to attract a burger-loving audience who is willing to pay for the best. I’m sure they’re more than happy to let the price shoppers go to McDonald’s.

So, while it’s important to know the strengths and weaknesses of your own company, it’s even moreso to be totally familiar with those of your competition. What do you do better, faster, or more conveniently? What did you do first? What do you offer more of? What niche is served only by you?

Once you are certain of your superiority in an area that your audience will value, market your company’s Point of Difference with confidence. Don’t get nervous when the Price Shoppers pass you by, because they’re simply making room for the loyal customers who will be eager to take full advantage of the unique benefits your company offers.

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If you need help discovering your company’s Competitive Advantage, contact BAM! Small Biz Consulting for your FREE Needs Assessment. Phone: Nikolas Allen (530) 859.5454 • Email: bamsbc@gmail.com

Ready To Go a Few More Rounds? Try These Posts:

  • Are You Sending Mixed Marketing Messages?
  • What Do You REALLY Do For a Living?
  • Why ‘Jack Of All Trades’ Is A Poor Branding Strategy
  • Getting Your Employees On the Brandwagon
  • The Motivational Value of Stiff Competition
  • Multiple Brand Personality Disorder

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Posted in Marketing Videos
6 Comments Posted by Nikolas Allen

6 Responses to "Competing On Price Is A Race To The Bottom"

  • Rakel says:
    March 3, 2011 at 4:10 pm
    Reply

    Get a mic for your video work!

    • Nikolas Allen says:
      March 4, 2011 at 4:28 am
      Reply

      >> Rakel - Guerrilla Marketers use the tools they have to get their message out. If online video was about stellar production value, YouTube wouldn't exist. If the only takeaway you got from this video was that I need more equipment, sadly, you missed the point entirely.

  • Michelle Quillin says:
    March 1, 2011 at 5:47 am
    Reply

    Well said, Nikolas!

    A caveat, though — I remember when we first started New England Multimedia, we had to get our foot in the door with clients who would be willing to give us a chance to prove ourselves when we didn't have a portfolio OR customer testimonials to point to. We'd offer bargain basement prices to new clients, but only to build our portfolio, and we told them so.

    Until we had several websites, videos, and on-hold marketing projects under our belt, we worked with clients who needed the low prices but who appreciated the high-end service and quality and would talk about us to their business colleagues. The new clients who came by way of referral were charged what we knew our services were worth, and if they couldn't afford it, we'd let them pass on by.

    Once we had a portfolio and some great testimonials to point to, saying "No" to new clients who had small budgets was scary at first. But if we hadn't made that decision, we'd never have broken through to the level we're at now, where we can pick and choose our clients by using several criteria (including low-budget projects we want to help with).

    The amount of time spent working for Bargain Basement clients will keep you from pursuing and then working hard for the clients who will pay you what you're worth, or for those projects you have a special heart for.

    Michelle Quillin for New England Multimedia

    Twitter: @NEMultimedia

    • Nikolas Allen says:
      March 1, 2011 at 7:07 am
      Reply

      >> Michelle - You bring up a good point: In the beginning of a business, it is often hard to charge what you believe you're worth. Like many upstarts, it sounds like New England Multimedia did what it had to do in order to build a portfolio and a list of satisfied clients.

      Sometimes, entering the market with a low price point can very well be the right move. But even then, you want to tout the value of your offering rather than its entry-level price. Then, as the company gets more established, it's imperative to move up the price ladder and market to an audience who values your offering and is willing (and able) to pay for it.

      Thanks for the comment, Michelle, always great to hear your point of view!

      To Your Success! ~ Nikolas

      • Kelly says:
        March 3, 2011 at 8:42 am
        Reply

        All great advice! The line in the video about having the lowest price is a race to the bottom is fantastic!

        I've picked up a great tip in the art business world for portfolio building stages. You set your prices for what your work is worth and what you expect to be paid once you're established, then offer a discount. It both shows what a customer is getting and keeps clients from being shocked when prices go up later.

        I've heard it's a good approach to price raising without having regular customers feel betrayed/upset/whatever. What do you think about that approach? When is it okay to up your prices and what's the best approach for keeping customers happy while you do it?

        • Nikolas Allen says:
          March 4, 2011 at 5:00 am
          Reply

          >> Kelly - Thank you for your input on the tricky subject of pricing. Unfortunately, customers are always a little upset when prices go up. When in the early, portfolio-building stages of business, YES, it's sometimes necessary to accept jobs for less than ideal payments. However, Small Business Owners should ALWAYS make their unique value clear from the beginning, as you state in your example, even if they do end up offering discounts.

          The best strategy I've learned is to offer various levels of value. If people can't pay for your 'high-value package,' you offer a less-expensive package with less features. For example: You are a photographer, perhaps your Platinum Package (which you try to sell first, of course) offers a photo shoot with three wardrobe changes and includes three 8×10's. Your Gold Package offers fewer wardrobe changes and fewer 8×10's and finally your Silver Package is a bare-bones photo shoot.

          This way, customers learn to equate high-prices with more value. If they can't afford to pay for that value, they can pay less – but they also GET less.

          Good luck! ~Nikolas

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