January 10, 2010

Don’t Reduce Price, Increase VALUE

So, here’s the situation: your price is $26.25 and our competitor’s price for the same product is $23.00. What options do you have to compete?

Your first choice is to reduce your price; this is the most common reaction. The problem is that unless you can reduce your costs of supplying the product all you do is reduce your margins. And, you have to prepare for another potential round of price reductions if your competitor decides to further reduce their prices.

I am not a fan of competing on price. It can be easily copied by your competition and it generally eats into your profits. It is NOT a BE DiFFERENT approach.

Your second choice is to add value to more than fill the $3.25 price gap. This is the BE DiFFERENT Practice that will not only set you apart from your competitors but will also give you the opportunity to enhance your margins. In addition, it makes it more difficult for your competition to copy your move. VALUE differences are tough to copy; price is easy.

Here’s a personal example of how this works. Lets say you are an author and your on-line book price is $3.25 higher than your competition. Matching the competition is really not an option as your cost structure is too high. You don’t have scale and scope advantages like the big on-line book sellers. To compete, the only choice you have is to add value to your on-line offering that they can’t match.

So you might decide to add two value components to differentiate your Offer:
- sign every copy of the book sold
- offer a 30 minute conversation with anyone who buys your book on any topic that interests the purchaser

Hard to copy. Adding real value. DiFFERENT.

Force yourself to look at adding value whenever you are confronted with a price difference. Resist the temptation to take the easy way out and drop your drawers on price. It generally doesn’t work and gives the illusion of an effective response.

Ask ‘What real value can I add to fill the price gap?’

Cheers, Roy Osing
Remember to follow me on Twitter
Take the BE DiFFERENT Quiz

Related blogs
Think Value Additive
Marketing is in the VALUE CREATION Business
Premium Price Value Offers
Create Holistic Offers
Customerize your Marketing
Customer Learning
Customer Secrets

Marketing | Permalink
Posted 1.10.10 at 07:02 am by Roy Osing | Read Comments (0) | Leave a Comment