Microbusiness Marketing: Are you losing business because your price is too low?

by Ed Martin

In tough economic times people are looking for the lowest cost when they buy, so common sense says the best way to compete and get market share is to give people what they want–lower prices. The lower you go the more you will sell. But is that the best thing for your small or home business?

Probably not.

The biggest problem with trying to have the lowest price for something is that nothing prevents somebody else coming along with an even lower price. Then what have you got? You are seen in the market as a low price vendor, and low price often is associated with low quality. Only now instead of being the one with the lowest prices you are just one of many low price sellers so you’ve lost that advantage.

But wait, there is more. Since you don’t have the lowest price all your customers who buy from you for that very reason will leave. There is no loyalty in customers who buy based only on price. They will chase the lowest price over to the next guy.

If you respond by cutting your price, then you just end up making less on each sale than you did before. That’s not a sustainable business model. It’s the old con pitch where you lose a little on each sale but you make up for it on volume.

Maybe if you are a Walmart you can just cut prices lower and lower because you’ve got a lot of volume. You can squeeze suppliers and you can be patient because you’ve got a lot of variables to play with. Us little guys don’t have those luxuries, so we need a different strategy

What to do?
Getting customers to buy from you the first time is expensive. Way more expensive than getting them to buy a second and third time, so you don’t want to lose any customers you do get. Since we know price-sensitive customers aren’t loyal, lets look for some other types of customer, those who are looking for value and a product or service that solves a problem for them. Price isn’t what motivates them.

To keep these customers loyal you’ve got to give them value and answer their needs by knowing what they really want.  If you do that, you are free to set a higher price and customers will be happy to pay it because they perceive a higher value in what you are selling.

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You can always contact me at MicroBizMadeSimple.

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