Let's say you are selling the same product as 3 other people at the same price, but sometimes their price is lower. How do you outsell the competition?
Remember no one wins in a price war! You have to find ways to differentiate yourself by providing something valuable for your customers.
1 It is never about price; it's always about customer service, value and building a relationship with your customer. In my dealer experience background we could give consumers deals where we would lose money and they would still not purchase but when we follow the steps to a sale, offer world class service and providing a great experience they would pay more, we would sell more and our customers would be very satisfied. This is the hardest concept to grasp for salespeople because they always think the lowest price wins when it's the exact opposite. The people that paid the lowest; the company made no money, customer is still not satisfied because it's their only buying price, and your reputation gets impacted that you sell at such a low costs.
If can you explicit better service, convenience, personable experience, branding, building relationships, actively involved with public, than you will set yourself apart from the competition no matter what they sell.
2 You have to find ways to differentiate yourself by providing something valuable for your customers. Can be things like longer warranty, free shipping, etc. Maybe you have better customer support. You can also make a better job of present the value message for just your customers and focus on a particular segment of the market that value just those differentiators:
1. Research: In order to price right, companies has to do research into their marketplace. The research need to anonymous and it has to reach statistical significance.
2. Willingness to pay: Using advanced research technologies, it is possible to accurately measure what a marketplace is willing to pay for just your product or services and specifically for the unique benefits your products or service provide to customers.
3. Drivers: A driver is something about your product or service that influence your customers' willingness to buy and to pay. Decision drivers increase willingness to buy, value drivers increase willingness to pay. Drivers are not limited to product/service features/functions/benefits but they are also how you position the company, how you go to market, your marketing messages and how customer perceive your company and product/service compared to competition and alternatives.
4. Segmentation: Deep and detailed segmentation based on socioeconomics, value drivers, decision drivers and willingness to pay generates a treasure trove of hard data about your market.
5. Tying it all together: From this process you get:
- What market segment has the highest willingness to buy and to pay. What product features/benefits and marking messages resonate specifically well with this segment and where, and how, do they want to learn about your product or service.
- What specific price level will generate the highest market share, what specific price level will generate the highest revenue and profits.
- What specific pricing structure generates the highest market share and revenue.
- What marketing messages and positioning statement is most effective in driving conversion.
- How much will your pricing of one product/services cannibalize sales of competing product/services. How can you set your pricing to minimize cannibalization of your other products/service.
- In short, you get a recipe for how to price "right", how to market "right" and how to sell "right".
6. Some short case studies:
- Company selling exercise programs to gyms: Flat revenues for years. Four small price changes and the company stared to grow at 5% every month.
- Specialty music streaming: Had been in business for years. Never made a profit. Set the price structure "right" and it become profitable over night.
- Conference organizer: Three price changes added $7m to the bottom line
- Microfiber manufacturer: One price change added 20% revenue and doubled profit.
3 Price is not the only lever to pull. You can outsell by focusing on for example better customer service, better payment terms, better returns policy, more options for delivery, providing more online support content and so…
If you’re going to compete on price, you might like to check-out How to Price a Product in a Competitive Market. But a word of warning… Remember no one wins in a price war!
The important thing is not necessarily what makes you different but how you message it. You need to educate your client in both marketing messages and sales calls why this (support/reputation/terms) is important to them as well as plant that FUD regarding your competitors that are lacking it.
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