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7 compelling reason to not compete to be the lowest price, always

Written by: Jane Francis

Article Overview: For some businesses, aggressive pricing is the number one marketing strategy; it's what attracts customers in, and the reason they buy. These customers are attracted to the billboards and advertisements that scream LOWEST PRICES and WE WON'T BE BEATEN ON PRICE. If you are tempted to try this price strategy you may find it pulls the customers but here are seven other things you may also want to consider.

7 compelling reason to not compete to be the lowest price, always

Kind of like shorthand, in the space of a few numbers after a dollar sign, price can encapsulate a product or business's credibility in the eyes of the customer.

If the price is too high we may react by dismissing it, feeling insulted or laughing incredulously. If the price seems too low we may be spurred into action and pursue it, or we may react suspiciously and need other questions answering, or we may reject the offer dismissing it as incorrect or 'too good to be true'. But in some way, we do react.

Price is a call to action. It says to us: If you have got the money, you can have it -- do you want it or not?

But price is also about relationship.

For some businesses, aggressive pricing is the number one marketing strategy; it's what attracts customers in, and the reason they buy. These customers are attracted to the billboards and advertisements that scream LOWEST PRICES and WE WON'T BE BEATEN ON PRICE.

If you are tempted to try this price strategy you may find it pulls the customers but here are seven other things you may also want to consider:

1) Do you want a whole lot of bargain hunters as customers? Are they your target audience? If they are, is there a big enough population of them to support you as the margins are going to be slim.

2) This tactic rewards customers for placing the highest value on price as if price is all that matters. If you have no issues with mass consumerism, that's fine. If you have no plans to offer more in terms of quality, service, ambience, creativity, and you wish to disregard the environmental impact, and community aspects, of shopping then go with the 'We won't be undersold' tactic. Otherwise avoid it.

3) You giveaway your power to your competitors and suppliers; you run the risk of being manipulated.

4) Don't you want to retain ultimate control over your margins?

5) Can you be bothered dealing with the 'paperwork' and time and transaction costs of refunding money on a done deal?

6) Does screaming low prices at your customers give you the sort of customer, and the type of relationship, you want?

7) What do most businesses do before they go out of business? Answer: Drop their price. What message do you think your low prices imply?

Before committing to being the lowest price provider, ask yourself why you are doing this, and make sure you have a good strategic reason for doing so.

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  All Customers Care About Is Price?
  Salesperson Wimp-Out: Cutting the Price
  The Difference Between Selling to Negotiators and Selling to Price Shoppers
  Competition in Tough Times
  Do you mind being beaten on price?

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Non Disclosure - I'm asked to sign non disclosure and non compete agreements by most of my clients. I've also had people sign non compete agreements for me. If the person is being above board with you, then I don't see a reason not to sign. Any subcontractor that I ever asked to sign and they refused, ended up trying to cheat the company at some point. Shri
Re: Are You Selling Globally? - I'm from Indonesia and I sell crafts and furniture items to Australia and United States. The idea of importing products from US is interesting, considering the lower USD rates which will affects in better price here (the lowest in 7 years) high tech items like Ipod, Ipad, Blackberry would sells REALLY well here. My parents have a whirlpool washing machines, and it never broken for 20 years!
Increase the value of the building - Yes that is a good point - it would increase the value of your building by a significant amount. I would consider offering something, which does not compete with Wal-Mart, potentially a gas station, or even a financial services business. Anything that does not compete with Wal-Mart, but can take advantage of their customers.
Re: Matching competitors prices - beware - [quote="BuzzAroundBooks":3ga2u10u]While I agree that getting into a price war should be avoided if possible... on rare occasions, it's not a bad idea to match someone's price (or even beat it) if you're doing it "one time" to land a new customer. For instance, I was recently looking for the best price on a [u:3ga2u10u]specific[/u:3ga2u10u] flight to NY and a customer service rep from Flight Centre ended up taking zero commission to help me book my flight. In fact, she even beat the price by $5 in the hopes of creating brand loyalty for the future.[/quote:3ga2u10u] Matching prices that are close is one thing - but there are times when an inferior competitor can do a job much cheaper - because they are doing a lesser job. There have been times when I'm more expensive, but I'll take the time to explain the reason for the difference. If the person wants a lesser job - then it does not work in my favor to drop my price and take a loss. Customer expectation can make a difference in when this should be done. There is a company who offers work that is somewhat similar to mine, but its just not the same value service and they can undercut my price because they cut a lot of corners. I'm not willing to cut that many corners and that makes a big difference in the amount that we charge. For a person who business who recognizes the difference and some who want to send me business, I'll work with them on the prices or pay them a finder's fee. Lots of possibilities - but I've found it better to evaluate the situation and see if it makes good business sense. Shri
Re: Need some information on freelance jobs! - oDesk is the same as Elance where you can bid on projects/jobs that are posted. When I was working in oDesk the main problem I experienced was the difficulty in getting my first job because of competition. There are already other service providers who already have a lot of completed jobs and good ratings with good feedback. So what I did was to bid on simple jobs - I bid a very low price so that I could just get a job and hopefully when I done it right or done it well I can have a good rating and feedback. That's how I began. I slowly build my reputation by completing simple jobs and eventually I can then compete with others and can bid high already.


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