Are your customers focussed on price?
Do you sometimes lose customers because they can find the same or a similar product or service cheaper elsewhere?
Do you discount your prices because you are afraid of losing sales or to avoid difficult conversations?
If this ever happens to you, then you need to read this:
1. Customers focus on price because that is the only thing they understand about your product or service. This can usually be dealt with effectively by asking them for permission to ask them a few questions to determine what they need before you give them a price. Differentiating their “needs” from their “wants” is a key component of the value you add.
2. Educating customers on the benefits of your products and the benefit of dealing with you.
3. Avoid apples for apples comparisons and offer something to the market that no one else is. If you can’t change the product, change the packaging. If you can’t change the packaging, change the delivery. If you can’t change the delivery, offer a unique guarantee.
4. Discounting to the 90% of customers that are happy to pay full price because 10% complain or might complain doesn’t make any sense. Better to send those 10% to your competitor or develop a script to deal with the complaints so it isn’t an unpleasant experience.
Still think this doesn’t apply to you or your industry? Think again.
Let’s take a look at water as an example. It is available at a cost of approximately 1 cent per litre from your tap compared to an average of more than $2.50 in a plastic bottle.
Despite this price differential, various studies demonstrating the quality of much of the tap water in Australia as superior to bottled water and the enormous environmental cost of production and distribution of bottled water, we drink an average of 26 litres per person each year.
The formula V=B/P where V=Value, B=Benefits and P=Price is a useful way to remember when talking to your customers.
If you move the conversation from price to benefits by asking great questions, then as the customer’s perception of the benefits increase, then the price can increase with the value maintained.
There is also an interesting process whereby a higher price leads to a perception of a superior product and can actually increase sales. Think of expensive car brands. But, that is another story for another day.
Remember, of all the drivers in your business, price is the only one where 100% of the gains can go directly to the profit.