Be Different or be dead

January 10, 2010

Why cutting prices should never take priority over adding value

Source: Pexels

Why cutting prices should never take priority over adding 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?

1. Reduce your price

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.

2. Add more value to your product

Your second choice is to add more benefits or value to your product or service in order to more than fill the $3.25 price gap.

This is the 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.

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
Check out my BE DiFFERENT or be dead Book Series

• Posted 1.10.10 at 12:02 pm by Roy Osing
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