As a small business, it is almost impossible to be the low price leader for your particular product or in your industry, at least for very long, as your larger competition has the resources to undercut you and put you out of business, or else there will be some other small guy that comes along and is willing to work for less than you are and undercuts your prices.
Because of that, it is actually best not to even try to be the low price leader, and instead come up with a more positive and sustainable differentiator in your business. Something that you can hang your hat on for years to come that has nothing to do with price, but it must be something specific and measurable, not just “we are the best” or “we have the nicest sales staff”.
A few good examples from huge companies with a solid differentiator that has nothing to do with price are FedEx with their “When it absolutely positively has to be there over night” and Domino’s Pizza with “Delivered hot and fresh in 30 minutes or it’s free”. Those were great differentiators for those companies at the time and when they were smaller and the competition wasn’t all doing the same thing yet. Each of those differentiators helped to separate them from the pack and grow them into the ubiquitous brands that they are today.
I found an interesting post by Paul at spinlessplates.com on exactly that topic. He says:
If you compete on price, you’ll always be at a disadvantage.
That’s because, unless you genuinely are the cheapest (by a long way), someone will always undercut you.
So if price is your USP you’re going to be consistently under pressure to:
* Stay cheap
* Be efficient
* Cut costs
Because if you don’t, you’ll quickly lose any competitive edge that you gained.
What’s more, if you’re competing at the budget end of the market, you’re likely to have a lot less time (and money) to be able to invest in your marketing.
It’s not a good situation to find yourself in.
In fact, if you are not competing on price and find a better, more supportive differentiator for your products and services, then instead of being the low price leader, you can charge significantly more by adding more value and attracting higher paying clients.
Your marketing will determine the type of customer that you attract. So take a look at how you are currently positioning your business and your brand. Is your advertising, testimonials, focus all about price? If so, how could you make it about something else? How could you twist and hone your message so it more tightly appeals to a sector of your niche who are willing to pay a premium for the added value that you offer.
You can earn significantly more money from a high paying client as you do from a low price seeker, all while putting in the same amount of time, energy and effort.
Now doesn’t that sound less stressful and more enjoyable and at the same time a significantly more sustainable business model?
You can check out the full post here from spinlessplates.com.
So what are your thoughts on differentiating you business based upon price? I’d love to hear in the comments below, and please post to Twitter and Like on Facebook so your friends can stop competing on price too.
Have A Prosperous Day!