Price is often the primary consideration when customers make a purchase, but cutting prices isn’t the best way to compete. Here’s how you can add value to your products so you can avoid discounting.
Let’s acknowledge what most business owners already know: prices drive decisions. But before you use that fact as a source of frustration, remember that when you make purchasing decisions for your own business or family, you strongly consider price as well. Decisions have to be largely based on money because very few people have enough of it.
We have to find ways to make our product more valuable because discounting robs us of profit margins that we can’t afford to lose.
Before we go any further, get yourself to a place where you embrace the value-minded customer. That person that only wants to talk about the price isn’t being offensive. She wants to do business with you but needs to get the best deal she can. She might have bosses (or a spouse) breathing down her neck to stick to the budget but she wants to the top quality you have to offer.
What are the Benefits?
A savvy customer is looking for a product or service that feels more like an investment than a purchase. If buying a programmable thermostat will pay for itself in 2 years, the price becomes a little more secondary because it’s an investment. Don’t focus on what the customer pays out—focus on the rewards.
Find documentation of these benefits that the customer can read and verify. Or compile case studies of your previous customers.
Create a Demonstration
The higher the price tag, the more proof you should show. If you’re selling a saw, you better have a shop where you can show the benefits of one saw over another. Again, price becomes secondary when the person sees that the higher-priced item is faster, safer, and more precise.
Throw in some Freebies
Let’s be clear, knick-knacks aren’t going to do it. Instead of discounting, add on some free extras. In the case of the saw, it could be safety glasses, gloves, or another accessory. They might have a high retail value but you can ask the manufacturer to throw some extras your way. Even if you have to pay a little for the items, the perceived value is much higher than what you paid.
Add in Some Consulting
Especially if you’re a business to business vendor, nothing beats bringing a customer into the network. Marketing consultants may not just help a business get noticed, they may also introduce clients to each other or show them how to use LinkedIn to find more customers. Maybe you could host a lunch with your clients that serves as a networking event. Helping your customers in these ways could end up being more valuable to them than the actual product or service you’re offering.
Creating a community or ecosystem with your business keeps customers coming back.
Target the Right People
If you sell a higher-priced product or service, don’t go after every customer. Find ways to target and qualify your customer. If their budget is far below your price point, it’s probably best to let them know that you’re here to help whenever they’re ready. Sometimes, regardless of how valuable your product is, a customer simply can’t afford it.
But be careful to not send them out the door in the wrong way. Just because they can’t afford you now doesn’t mean they never will. In a year or two, they could be in a completely different financial place. Keep in touch with them.
Know When to Say “No”
Along the same lines, think about the future when landing a client. If they’re nickel and diming you now and clearly are high-maintenance people who aren’t going to be happy regardless of what you do, it might be best to tell them that things aren’t going to work out on the deal. High-maintenance clients can cost your business a lot of money if you negotiated a bare-bones deal to get their business. Too many of these customers can seriously hurt your bottom line.
Price the Discount In
Sometimes strategy and spin doesn’t work if you’re in an ultracompetitive industry known for offering discounts. If that’s the case, price accordingly. Move the price slightly higher and when the person expresses an interest, find a reason to give the discount. Maybe they’re a first time customer, a small business you want to help, or they’re a non-profit.
A 10% discount is more than meets the eye. When you run the numbers at the end of the month, a 10% discount can easily translate to a 50% reduction in profits when adding in overhead, the cost of holding the inventory, and more.
Although you never want to run your business as if the most important thing is making money, you aren’t going to be in business very long if you give away the store. Know the value of your product or service—especially the value that money can’t buy. When you position it as an investment instead of an expense, conversations change—they begin to move away from price.