If You Are Competing On price Alone You Are Doing It All Wrong

When it comes to sales and marketing few would argue that having a Unique Selling Proposition (USP) is the most powerful thing in your arsenal for successful promotion of your product or service.  The problem however is that few companies actually have a USP.  Yes they may have a product which is niche but in a world with 7bn people the likelihood of having something unique is pretty small.

So what do you do if you if the only differentiator is price ?.  Do you set yourself apart from the competition by offering your product cheaper ?.  The answer to these two questions is an emphatic ‘NO’ and here’s why…

The problem with price differentiation (when it’s the only differentiator) is that it leads to a spiral of price reduction.  You reduce your prices by 10%, your competitors follow suit and reduce prices by 15%.  You counter that and reduce a further 5%.  Before you know it, you will be selling your product at cost or worse it becomes a loss leader.

Of course some consumers will always search for the cheapest product.  The various price comparison sites are specifically targeted at these customers whether it be comparison of a dish washer to insurance and financial services.  Such consumers see your product as simply a commodity.

The majority of your customers take account a combination of factors.  They look for the whole package before making a purchase decision.

  • Quality – Is your product likely to be reliable ?
  • Service – Do you provide excellent pre-and post sales service to your customers (do you look after them) ?
  • Price – Is it of a similar price point to the competition ?
  • Brand – What does your brand stand for and just as important, can they trust you ?

Price will always be a consideration for the consumer, but for the majority, it’s part of the overall package and not the single decision point, unless of course your price is so radically different to the competition which, in the majority of cases it is not.

Don’t let your Sales and Marketing teams convince you that you need to reduce costs.  Such advice is typically driven by the short term need to make more sales but ignores the longer term effects on the company.

Never undervalue your product, if you do you will fall into the price spiral and as we all know, that simply leads to a company that struggles to stay afloat.




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