A lot of businesses think they have a great product or service. Something above and beyond what the competition offers. But when it comes time to put a price on all this awesomeness, they are still cheaper than the competition. This is a particular problem for small, service-oriented businesses that try to compete with larger companies. Often, the service and support is far better. But the business owner fears taking on the larger player and charging the “right” amount. So they try to compete on service and price. This is a recipe for financial and psychological pain.
If you’re better, be better, NOT cheaper.
If you believe your offering is worth more than the competition, but you don’t know how to ask for it, if you’re somehow embarrassed about the price, here’s an exercise you can do as a buyer: Go test drive your favorite car– preferably something expensive and Italian, but as long as it’s (really) expensive, it doesn’t matter. This sounds like fun, so far, right? Then tell the sales man that you love the car but you just can’t see paying $X, since it pretty much does what the Kia across the street does for $20K. Ask if they’ll match the Kia price. If you don’t want to drive any cars, pick a different category.
The point is that no one is going to sell you a brand new Ferrari for $20K. They might laugh, but they will be able to tell you why the Ferrari is different from the Kia, and why, if the Ferrari is really right for you, it’s a good deal. And way, if it’s not right for you, you should just head on down to the Kia dealer.
If you can’t do this from the seller’s side when someone challenges you on price when you offer more value, you are destroying your business. Don’t fret, lots of businesses do this and recover. So have your story ready. Bonus points for having a lower-priced, lower-value offer ready for price sensitive customers. (They key is to make sure you have a good fence between the different levels of value and different price points.)
Concisely put Reuben. Alot of companies lose ‘sight’ of building(and enforcing) fences in order to protect and promote their value based priced products. Some additional “2-cents” – sometimes it’s a battle of “wills” between the seller and customer. Some alternatives that sellers can consider when dealing with price challenges. 1. Do nothing! Wait-and-see attitude. (maybe the customer is testing the sellers resolve.) 2. Package ones offering through bundling(if appropriate) and/or value adding; 3) Cut costs – taking the value, and associated costs, out of the product or offering will help you to protect margins while offering a lower priced product. If customer wants the value, they must pay for it.
Companies can not and should not give away value that costs them to provide!