Subscribe

Stay tuned to the latest posts by having them delivered to you for free via RSS or Email. Simply Enter your email address or click on the "Subscribe to RSS" button.



OR

Subscribe via RSS

Fighting the lowest price

Fighting the lowest price

pic courtesy of imageafter.com

This is the first of a series of sales and marketing tips drawn from my long experience of trying different things. Some could call these street fighting ideas…

Say you operate in a market with many small competitors. Price will become a major decision factor and price competition will be fierce. Some competitors will pitch their prices at levels where they cannot give the service they promise, but they will establish a low price perception in the minds of customers.

People in courier services, stationers, web site development car repairs and a host of other business types will have experienced this problem.

Your company wants to be there for the long haul and give good customer service, but you cannot compete with the prices offered by those who promise the world and don’t deliver, or those new entrants who are still to discover how costly customer service is. How do you compete?

You could make the mistake of sitting back and waiting for your customer to get bad service from a fly by night competitor and then return to you as the best supplier. You will probably wait for a long time. There are a few exceptions but few people who have rejected your bid will come back to you. Embarrassment at having made a bad decision, fear of an I-told-you-so response and the natural ability of all humans to delude themselves that their idea was right only the implementation failed will conspire to stop them from coming back to you with their tails between their legs. You have probably lost them forever.

Defending your price

How then can you convince a prospect that your price is the right level for the service he requires?

One of the fun techniques to do this is to follow the prices in your industry like a hawk. Keep looking for the lowest quote, the most absurd offer. This will probably come from a brand new entrant who has broken away from a former employer and now uses price to lure his former customers, or the company which is about to go under and desperately seeks the last orders at any price.

Now when your prospect tells you that he can get the same service cheaper, you should ask him for the comparative price, and say something like “So the price is really the most important factor to you?” He may make some noises about service but price has to be a key in his mind, otherwise why did he raise it – so he will generally concede that his main buying criterion is price. He may even suggest that he would buy from you but that you, but not when he can get ‘the same thing’ cheaper.

The unexpected question

Then you scornfully ask him why, if price is crucial, he is planning to pay so much! Tell him that if he really wants a low price he is paying far too much at the level he is considering from the competitor. He may now be in a state of mild shock, so you add to this by hinting at the lowest price you have heard recently.

This is the first of a series of sales and marketing tips drawn from my long experience of trying different things. Some could call these street fighting ideas…

Say you operate in a market with many small competitors. Price will become a major decision factor and price competition will be fierce. Some competitors will pitch their prices at levels where they cannot give the service they promise, but they will establish a low price perception in the minds of customers.

People in courier services, stationers, web site development car repairs and a host of other business types will have experienced this problem.

Your company wants to be there for the long haul and give good customer service, but you cannot compete with the prices offered by those who promise the world and don’t deliver, or those new entrants who are still to discover how costly customer service is. How do you compete?

You could make the mistake of sitting back and waiting for your customer to get bad service from a fly by night competitor and then return to you as the best supplier. You will probably wait for a long time. There are a few exceptions but few people who have rejected your bid will come back to you. Embarrassment at having made a bad decision, fear of an I-told-you-so response and the natural ability of all humans to delude themselves that their idea was right only the implementation failed will conspire to stop them from coming back to you with their tails between their legs. You have probably lost them forever.

Defending your price

How then can you convince a prospect that your price is the right level for the service he requires?

One of the fun techniques to do this is to follow the prices in your industry like a hawk. Keep looking for the lowest quote, the most absurd offer. This will probably come from a brand new entrant who has broken away from a former employer and now uses price to lure his former customers, or the company which is about to go under and desperately seeks the last orders at any price.

Now when your prospect tells you that he can get the same service cheaper, you should ask him for the comparative price, and say something like “So the price is really the most important factor to you?” He may make some noises about service but price has to be a key in his mind, otherwise why did he raise it – so he will generally concede that his main buying criterion is price. He may even suggest that he would buy from you but that you, but not when he can get ‘the same thing’ cheaper.

The unexpected question

Then you scornfully ask him why, if price is crucial, he is planning to pay so much! Tell him that if he really wants a low price he is paying far too much at the level he is considering from the competitor. He may now be in

Then (and this is the really fun bit) you tell him that if he really wants the lowest price you will happily give him the contact details of the really cheap supplier. Ask him outright if he would like those details. Try to keep a straight face. There may be a few brave souls out there who will ask for the name but so far I never found one.

Instead this technique usually forces a discussion about price versus service level trade-offs and allows you to discuss the justification for your price, and bring the negotiation back to a sane level where he can decide how much value he wants and what that is worth.

Try it – its fun and usually works. If you do, please post a comment here and tell us about whether it worked for you or not.

About Ed Hatton

Ed has mentored and advised entrepreneurs for many years from his consulting company The Marketing Director. He is known for his successful work with start up companies and in helping SMEs to grow and develop. He is a speaker and writer, the person behind the advice column The Start Up Coach in Entrepreneur magazine, and contributes regularly to other publications. More details are available here or contact Ed by e-mail

©copyright  Ed Hatton. All rights reserved. You may republish this article or extracts from it provided you acknowledge me as the author and acknowledge my copyright.

4 Responses to Fighting the lowest price

Leave a Reply

Your email address will not be published. Required fields are marked *