How your business competes is as important as what you sell. Competing on price is a strategy that is often overlooked, due to the fact that most business owners feel the quality of the product should speak for itself, without the price. This popular misconception can cause more damage than good; the small business owner of today has more stiff competition as they usually cannot compete with large chain store prices. Today’s consumer is more savvy when it comes to researching products before making a final decision on purchase; therefore price is much more important than small business owners like to think. Here are some tips on how to compete on price without sacrificing value.
Making the Most Out of Your Bread & Butter
Each company offers both specialty products and "bread and butter" products. In most cases, your bread and butter products can be offered at a more competitive price since you sell more of a quantity; therefore, even if you lower the price you can still make a profit. This is where you offer your customers coupons and special deals. First determine how low you can go on bread and butter products while still making a profit. Then, offer occasional deals at this significantly lower price. In a struggling consumer market, deals are where it’s at.
Offer Less Quality at a Lower Price
This suggestion may sting at first, but if you are advertising the lower priced product as lower quality, you are not deceiving your customers; you are simply offering them a more affordable choice. For example, if you sell specialty all natural dog food, still offer customers a more affordable commercial product that may not meet your standards of quality, but will meet the customer’s needs as well as their budget; let the customer choose whether they want quality or quantity.
Offer High Quality at a Discounted Price
This can sometimes be a gamble, but if you offer high quality products at a more affordable price you may garner more sales. The only issue with this strategy is you must have traffic to your store or site. This is the only way you can make a substantial profit from lowering the price of specialty items since they usually are sold to you by your distributers at a higher price. In some cases, distributers will offer you a discounted rate on specialty items if you buy a higher quantity, ask before you buy. But remember to only buy what you think you can sell, keeping high inventory costs you money.
Add Value to Specialty Products
Your competitor may sell all natural dog food at the same price as you, so in order to spark sales add value to these products by including a freebie or "combo deal" with every purchase. Adding value means the customer is getting the same product your competitor sells at the same price, but with additional benefits. Add a free chew toy or a pack of dog treats to each order either for free or at a discounted rate and you will have added value to your specialty products.
See also: How to Present Pricing to Clients
Being competitive by getting creative with your prices and selling strategy can help you garner more sales and higher profits. When offering lower quality products at low prices, be sure to inform the customer about what they are buying, being honest can go a long way. Being competitive with pricing doesn’t always mean selling cheaper, it could also mean you are adding value. Remember when practicing pricing tactics to continuously monitor sales to find out which strategies are working and which aren’t.