A business owner must see his business as a daily battle to create differences between his bakery and Billy’s bakery across the street. A victory in this battle means that customers will pay your price for quality, convenience or selection. Defeat means that your customers will reduce everything to the simplest comparable state – apples to apples, loaves to loaves – and dollars per unit. This is how customers will make a buying decision, by boiling choices down to the simplest common denominator- a situation what will certainly occur if you do not strive to offer value and which will result in you dropping your prices to compete.
Commodities like flour, pork bellies and water are traded on the world market on price alone. A successful business should be striving on the other hand to steer away from stark YES or NO decision and present itself as that highly desirable, nutritious, refreshing, sexy and distinctive water that will have the neighbours “oohing” and “aahing”. That is how you get your price.
In some instances, price is an indication of quality. Selling cheap means a substandard product in some customer’s eyes. Don’t sell me clothes. Make me attractive, stylish and self-confident!
Consider champagne, which is only fizzy white wine after all, but with typically higher prices. But the makers have kept improving sales in a market for alcohol that is uniformly declining across the developed world by positioning champagne as the special occasion drink. Could you imagine celebrating your 10th wedding anniversary with a bottle of Pepsi? I can imagine the divorce lawyers having a giggle over that one.
In the 1970’s when Ford was having huge quality problems in its Lincoln models, the company brass instructed the sales people to phone and ask customers about the performance of their new cars. This created a torrent of warranty claims from all dealerships across the country – except for one. At that dealership the sales staff did not ask if there was anything wrong with their purchase – implying something negative. Rather, they tapped into the reason that people bought a flashy expensive car in the first place. They phoned to ask how the neighbours liked the new car. This time the response was totally upbeat.
If your business wants to be successful, then don’t marry the ugly sister by putting price on the table before you have offered value. In your store or sales presentation, value should be offered first and price last. You alone can prevent the customer from taking the easy route and making a comparison on price alone. If you introduce price in the first breath, you have just told the customer that their choice must be on price alone and your efforts to add value after that are wasted
So where is the value? What makes your product especially good and a benefit to all who buy it? Is it healthful? Will it save time and money? Is it the best fit and best looking blouse on the racks today?
If you are selling something wherein everyone knows the price, like crude copper, say; what is the value proposition in dealing with your company? Is it the payment terms? Free delivery? Just in Time delivery? The sexiest sales staff? Do you have acres of parking? What value is buried in the price that you can bring into the sunshine for your customers to say “ooh” and “aah”?
Nevertheless, if you truly believe that your business can only compete on price, consider this. There is a product made from two commodities – water and flour – which are sold worldwide on price alone. In turn, this mixture should be the perfect commodity product. Right?
But, this dried paste of flour and water has over one thousand different market niches. And it has created all these niches and price points not by changing the use of this food product or even its flavour. The Italians have altered only one variable for this product – the shape of the food!!?? It’s brilliant! It’s pasta.