Nothing causes panic and worry for a business more than when a competitor suddenly reduces their prices for similar products / services. But price wars are an inevitability in today’s crowded markets, unless your product is completely unique – which is unlikely. The kneejerk reaction for many businesses is to cut their prices to match, or undercut, their competitors. But this can be a counterproductive measure, and can end up losing you more business by undermining your company’s credibility and brand image. But there are other reactive strategies, with a longer-term scope. Let’s look at some ways to deal with competitive pricing.
Why have your competitors’ prices lowered?
You may think that your competitor has lowered the price of their product or service in an attempt to grab a larger market share, and this may be the case. But a price drop for this reason has to be temporary – if everyone in the market lowers their prices, everyone will end up with the same market share with lower profits! This is obviously a no-win scenario, so it’s worth investigating the real reason. A company might be selling off excess stock, especially if they are refreshing a product, so keep abreast of their newsletters, mail outs etc.
Stand by your price
It may seem counterintuitive, but immediately lowering your prices to match a competitor can have serious and negative ramifications for your business. Sticking to premium pricing can work to your advantage in a competitive market – while all buyers will factor in cost as a major part of their purchasing decision, it isn’t always the most important factor. Of course, this depends on your product, but customers are often wary about the cheapest possible product – it smacks of low quality and makes the business seem cheap. So, stand by your price, and boost your credibility (without slashing your profit margins!).
When prices drop around you it’s time to focus on the value of your product. It’s all well and good to have a valuable product, but selling value is a different story. What does your product give your customers? What does it provide that other company’s products can’t? Put yourself in your customers’ shoes, identify their problems, and work out solutions. This is something you’ve probably done in your initial product marketing, but refining your value selling technique, especially in the face of lowering prices, can help bring you sales and keep existing companies.
Keep your customers
A big risk when a competitor lowers their prices is that your customers will be tempted away. You’ve already worked on selling value, but now it’s time to show your customers that you value them. There are many ways to do this, such as sending out freebie promotional material – this can double as marketing material if you decide to send something like a branded diary, which will go to different offices with the customer. But simple touches, such as a personalized thank-you card when you’ve received an order, can go a long way to fostering loyalty and making your customer feel valued. Rewards, such as discounts, also help to build relationships. If your customers recommend your company there should be some financial incentive, a discount code for their next purchase or a free upgrade – depending on what product / service you offer.
Customer service and delivery
Service and delivery – the two most important parts of the customer / business equation. If you’re selling your products for a higher price than your competitors, even if your product is of better quality, these two areas are absolutely essential to excel at. Failing to deliver on a pre-arranged date will blight your bond with any customer, and almost guarantee you a cessation of repeat business. And your customer service itself must be second to none – make certain you have a firm grasp of all social media platforms, as this is now the best and most personable way to communicate with clients. In order to continue selling your product / service at a premium, the golden rule is to make your customer’s experience as smooth and professional as possible.
So, instead of panicking and slashing your prices in the face of opposition, draw breath and figure out the best route for your business. Playing the long game is often the more profitable option.