#6 – Competing on price instead of value.
How does this happen?
Well, it’s pretty simple really.
Most of us are doing something that other people do too, very few of us offer something truly unique, even if the other people doing it deliver their service differently or their product isn’t quite the same, from a customers perspective there are a lot of options.
We start our business, enthusiastic about helping our clients in a better or different way to what the ‘others’ are.
Usually we start it off with limited funds and not much business nous, so we think that if we have a business card, a website and some basic printed collateral we look ‘legit’ and if we ‘put ourselves out there’ and go to networking events, hand out flyers and tell people how amazing our offering is then soon we’ll be really busy.
And … that’s just not how it works.
But often when things aren’t working the way we’d hoped we think we need something we don’t have, maybe its a Facebook course, or an explainer video that will change everything. Maybe we need to get some more Instagram followers or start a youtube channel.
And off we go, down the rabbit holes one after another. We go to a workshop on sales funnels, buy an online LinkedIn course, hire a social media manager from the Philippines to post things on our Facebook pages for us.
In the meantime we need cash, now, so we take anything that comes our way and we do it for the bare minimum we can afford to do it for.
Which is good in the short-term because people want to hire us, and we get a few jobs.
It starts to become bad pretty quickly though, when those price shopper customers send you other price shopper customers, and to stay afloat you need so many of them that you’re run off your feet and can’t deliver anything other than a cut-price mediocre level of service.
So you can’t afford to hire staff to help, you can’t afford to invest in a business coach to help you set up systems and processes, you can’t afford to take time off to refresh and step back from your business AND worst of all your reputation is built on being the cheapest.
All that has to happen for you to loose customers is a) someone else comes into the market cheaper and because your whole value proposition is “I’m the cheapest” you’re screwed AND / OR b) someone else comes into the market and adds value to the service delivery so that customers don’t mind paying more because the value proposition is so much better and because you’re the cheapest your level of service actually sucks, so you loose customers.
I’m not saying it’s easy, I get it, I’ve done it, it’s tricky to figure things out at the start, but I am saying it’s essential to look at your entire business as an overall value proposition and think about why someone would want to work with you and not the other guys – make sure that you have something other than “because I’m the cheapest” and as tempting as it sounds “I’m the best” is no good either.
How you add value is up to you, it depends on your industry, your perspective on what’s currently broken and why you think you can do a better job or do things differently.
The key is to do at least one thing REALLY differently to everyone else. Don’t fall into the trap of sameness if you don’t want to end up competing on price. If you don’t want to be a commodity and be price-shopped every day of the week, you need to have a point of difference.
Now, here’s the kicker, it’s not enough for you to think up a point of difference that you care about, for example, “we use better quality products in our salon” … right … what does that mean for me the customer? How much better? How are they better? Is this “better” costing me an extra 25%?
You need to be able to tap into something your CUSTOMER WANTS that they’re not getting everywhere else.
So for example you could say that you use organic products at your salon, which would instantly appeal to a niche market who are willing to pay more for this. To add even more value you would set up your salon so that it looked and felt organic, with only natural fibres and materials, only eco-friendly and organic decor, furniture and products on display. You’d offer only organic teas and mineral water, you’d have health and wellness magazines on display. And so many other little things you’d do.
Suddenly you’ve created value ON TOP OF the transactional value of salon services. You can charge more. Your specific customers want what you are selling, the way you’re delivering it to them.
So take a look at your business and see what you can do to add value, to set yourself apart as the perfect solution for a specific type of client, and then go get started.