There are many questions small business owners continue to revisit throughout the course of their tenure as “Chief Decision Maker.” We question when to hire a new staff person — or our first — and whether to aggressively pursue our market or hold back and protect the status quo. We question how much we should do ourselves, wrestle with decisions about what’s working and what demands on our time (or budget) are safe to lose, and struggle (mightily) with issues of price.
Will we be “reassuringly expensive” or try to compete on price? Pricing is far more of an issue than we give it credit for being… and — typically — it is timidity, hesitation and fear governing our pricing strategy rather than sound business and marketing strategy.
The biggest mistake business owners make with regards to price is degrading what we do or sell by trying to compete on PRICE. With all of the talk about the economy, we make the mistake of thinking we have to be the cheapest — or at least a cheap — option. Of course we don’t. (And when we do, our business and our income loses big time.)
In fact, if you are struggling with this, consider the following facts that you may not have considered, but already know to be true:
1.) There will always be a competitor who will be willing to slash their own profit in order to undercut your prices. Even if they lose in the end, there will always be someone willing to be CHEAPEST.
2.) There is absolutely NO marketable value in being “second cheapest”.
Most people reject this idea, and are quick to assume that I’m either out of touch with current economic realities (I’m not.) or that I’m simply ignorant about THEIR reality. (I’m not.)
So, in an effort to drill this point home, let’s take a look at a short, glaringly obvious example: Starbucks. Original, right?
Still, consider it for just a minute. Coffee is a commodity. There’s no denying that. And, we’d all agree that there are places to get (much) cheaper and even better tasting coffee. No arguing that point, either. Yet, we still — regularly — pay more than four dollars a cup at Starbucks.
Why? Because Starbucks decided they COULD charge THAT MUCH… and DE-commoditized coffee by building an “experience” around it. There are other “commodities” that you’re aware of doing the same. Similar vacation homes on the same street charging vastly different weekly rental rates. Hair stylists charging $85 for a partial “foil” in the same neighborhood as salons charging $265 for the same exact service. One hour massage services being offered for anywhere between $40 and $140 in the same shopping center. We can see similar examples when considering commodities such as vitamins, cosmetics, and clothing.
The key factor in de-commoditizing your product or service and creating a profitable (and marketable) pricing strategy? Give your market something else to consider besides price. Build out a strong reason they SHOULD choose you over any other option they may be considering. Craft incredible relationships with your target market. Create an experience for them, rather than simply an opportunity to buy. The most financially stable brands and companies have figured out how to sell value, experience, and various other intangibles separate from price. I encourage you to consider how can YOU do the same!
B. Michelle Pippin is a frequent guest blogger for SurePayroll. She is well known for her “NO EXCUSES…. JUST RESULTS” approach to business success, her passion for being an entrepreneur and the ability to create a life you love that is palpable and contagious. Michelle remains firmly committed to all things practical and profitable, always providing her clients with real-world, right-now solutions. You can read more from her at www.bmichellepippin.com where business success is more strategy than secret.