I was at a cocktail party the other night and struck up conversation with J. O., a young guy who had so much energy he was bouncing off the walls. At first I thought it might be the wine, but as we got talking it became apparent that he was just enthusiastic. Enthusiastic about his business, about his life and enthusiastic about his family.
He excitedly told us about the quick printing business he had been running for the last 4 years. One of the people in the conversation asked him if he felt threatened by the price competition and the eroding margins.
With only a brief hesitation he responded; "Whenever my competitors cut their prices, my team and I look at our business and ask; 'How can we add more value?' "
Nothing more, no sleepless nights, just finding ways to add more value.This simple strategy is definitely working. He seldom cuts prices, his margins are increasing and his business is growing rapidly.
So the next time you find out a competitor is cutting prices and you don't want to follow suit, just stop and ask your self or your team how you can add more value. Your team will surprise you by offering suggestions you would never have considered. What's more if the developed the idea, they own it. You'll have much more success with implementing the solutions.
By adding value you take the focus off price and you further differentiate yourself from the competition.
Cutting prices is one of the easiest strategies you can use to attract customers, however it's probably the dumbest strategy unless you know your cost structure is lower than anyone else in the business. If it's not, it's unsustainable and you are hurting yourself.
We forget that in most cases your buyer has more offering than simply your price, but price is easiest to talk about.
I recently say an unforgettable sign on a mobile auto repair truck that read:
"We do three kinds of work - cheap, quick and good.
You can have any two. A cheap quick job, that isn't good.
A good quick job that isn't cheap. Or you can have a good
cheap job that isn't quick."
Cutting price always means cutting something else, most often its your own throat.
What to Do When Your Competitors Cut Prices - To learn more about this author, visit Michael Hepworth's Website.
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