Before I go through my tips on how to stop competing on price, let me ask you a couple of questions. When was the last time you bought something wholly and solely on price alone? It doesn’t happen, yeah it does but it’s not the only deciding factor in your buying decisions. In fact, let’s use an example: say, you had to get a root canal done and there was a dentist down the road that had a special on root canal for $14.95 tomorrow… Are you’re going to that dentist? Why not..?
Because it’s too cheap and if it’s too cheap, it’s probably cheap and nasty. And this is how the brain works. The brain says that if it’s cheap it must be nasty and if it’s expensive, let’s say another dentist down the road is charging $5,000 for root canal tomorrow, We all say ‘well he must be good!’ And it’s this psychology of understanding the pricing sometimes can influence someone’s decisions before they can even look at the product or consider the product.
Why is it that so many people compete on price?
It’s because they’ve got nothing else for their customers to differentiate it from one supplier to another. So we’re force to compete on price. And petrol is a classic example. They sell petrol in the service station from a dollar forty a litre to a dollar eighty a litre and they call one premium and they call one the basic. They charge you more for premium… Now we are talking about the same stuff. Certainly the premium one could be better for your engine and they added all of this value; it’s better for your engine, you’ll get better mileage, it will make your car last longer, it’s better for the environment. Who knows what it is but they add all this value and you go, ‘You know what… I’m gonna go premium! I’m going to spend extra 30 or 40 cents because it’s going to be better for my car’.
What that proves to us is we wont buy on price and price alone and if we can see that there is added value in spending a little bit more money then that’s we will do. We’ll spend a little bit more money and we’re okay with that, we don’t want the cheapest. What we want is great value for money.
How to Stop Competing on Price!
Now if the only way a customer can differentiate you between you and your competitors is by your price, then you’re in trouble. Competing on price is a mugs game and is the fastest way to go broke. What do I say? STOP! Stop it. Stop competing on prices. Start to think about how you can offer something that has an added value or that is unique to your customers base or your prospective customer base that your competitors aren’t going to think of or that they’re not even willing to copy.
What you should do
The first thing that I would say is come up with a way to make yourself different so that they will want to pay more. A good way to do that is to create what we called a guarantee. Now you have all heard of the word guarantee before. But how many of you actually offer a guarantee that your competitors aren’t willing to offer. Let me ask you this, what guarantee is that you that scares you. If it scares the crap out of you, then it’s probably a good guarantee.
Let me give you some examples.
I worked with a plumber once and you can apply this to any business by the way but I’m just going to use a plumber as an example. And if you’re a plumber, I’m sorry if I’m picking on you but plumbers have really a bad reputation and customers get frustrated at them for turning up late, for leaving a mess, for charging them too much and there’s plenty of other things. But let’s just pick those three things. The whole idea is to pick three things that fundamentally frustrate your market place with dealing with your industry. So for plumbers, the frustrations are: turning up late, they leave a mess, and they charge too much.
So if I’m a plumber that guarantees those three things won’t happen. Can I charge more? Imagine this is my guarantee as a plumber, and like I said, I worked with a plumber before and I’ve done this guarantee and it worked gang busters. So if you are a plumber, write this down.
First of all we guarantee this; we will turn up on time or before. We will leave to your place, cleaner than what it was when we arrive, and we’ll give you a fixed price that won’t change no matter what, or we’ll give you 200 percent of your money back.
Now some of you are going, “Oh but Ben, I can’t do that! I can’t predict the traffic, I can’t predict the weather, I might not be able to start the plumbing job, and it’s longer than I expected…” Sure, that is likely to happen. These things are likely to happen; but can you charge more? If you have that guarantee, do you think you can charge more? Yes or no? Well, of course you can! People are willing to pay you more if you’re willing to have some sort of a solid guarantee that reverses the risks our of dealing with you.
So by charging more, you can make up the fact that every now and then you’re going to lose a little bit of money on the job but then the benefits far out way cost of doing it. So that’s why I suggest you do it!
Creating a Unique Selling Proposition
So, in your industry, the quickest way for you to create your uniqueness or what we call a USP, unique selling propositions, so you can stop competing on price is to create a guarantee. So, grab your pen, grab some paper and write down the three things that frustrate the people trying to buy your product or services from your industry, and then work how that how to guarantee that won’t happen. Sure, you’re going to have to work on creating some systems and putting some things in place so that you can guarantee those three things and you can’t guarantee until you get there but at least it’s a good starting point.
So, hopefully that’s helped shown you that you can stop competing on prices and you can start making some decent money!
About the Author
Ben Fewtrell is a sought-after Business Coach, Keynote Speaker and trainer who has featured in Virgin’s Inflight Magazine and Entertainment Portal, SKY Business and “Secrets of Top Business Builders Exposed”. He is also the host of the popular Business Brain Food Podcast where he interviews leading experts on anything and everything business.
