Price is not the Issue.
This one issue has been the demise of many startup business. Many new entrepreneurs and some veteran entrepreneurs get caught in a pricing war with another business they perceive as their competition. The problem with this process is no one wins in the long run. I’ve consulted with many startups and one of the answers they gave me for going into business was they “feel” that the price is too high and they “believe” that they can sell it for cheaper and get “all” the customers to come to them. They have not done any research in the market. They have not determined their costs, and they don’t know what their “competition’s” cost is either. One of the major problems with underpricing is that there is very little capital for up-keep, improvements, quality staffing, marketing, expansion, or a quality product or service.
Have you ever gone to a store to purchase an item, but you decided not to buy strictly based on how you were treated? Have you purchased something from somewhere although you knew you could get it cheaper elsewhere? Where did price factor into the equation? It didn’t. Was price the issue in either of those instance? NO. Price is rarely the issue when it comes to providing a quality product or service to your target market. I want to make sure there is no confusion. I not saying that you can sell a Hyundai at the price of a Rolls Royce. I am saying that you can request and receive top dollar for your product in your market niche. When it comes to pricing I have seen more entrepreneurs underprice their product or service than overprice it. Many are afraid to hear the words “That’s too much.” It doesn’t matter how low you price it. You will always have someone that will say the price is too high. Don’t believe me? Have a yard sale. You can sell something for 5 cents and you will have someone offer 2 cents.
For many years I have consulted, partnered and owned MLM/Network Marketing companies. I have designed and written commission/pay systems and marketing plans. I have also built and trained down-lines of significant sizes. Many entrepreneurs should pay close attention to how these companies create brand loyalty and growth in spite of price. These companies experience billions of dollars in annual sales because they understand the power of relationships. As an entrepreneur if you are not building relationships online and off-line then your competition who is, will leave you behind. There is nothing more powerful than being referred to someone’s warm market. Automatically you are now someone they can trust. I will keep emphasizing that “People do business with people they like and trust.” There has never been a time in history when you have immediate access to so many people (for free). To those entrepreneurs who are starting to get into social media and they look at only a means of pushing a product or service, it will not work. Social media is not traditional advertising. It is “social” media. So you must be social. You must build relationships. I wrote a blog a while ago titled “Those who give the most will have the most.” I discussed the importance of giving first. There is a natural balance in life. When you are consistently providing value to your market you are creating and imbalance. This causes the market to flow back towards you to balance this out. Have you ever asked anyone to change a dollar for 4 quarters? What happens if they gave you only 1 quarter? You would demand your other three quarters. What if they gave you 95 cents and said keep the bill. You would be trying to chase them down to give them the dollar. Most people are familiar with the phrase “Pay it forward.” That is based completely on the belief of creating an equal balance.
Proper marketing of you product ties all the value into one complete package and eliminates the price issue. The one thing that can completely undermine all the value you are providing is poor marketing. Marketing is every contact your business has with a customer or potential customer. This includes you advertisement, how you answer the phone, your website presence, how easy it to conduct a transaction, how customers are treated, how your employees, dress and conduct themselves. Marketing is everything and everything is marketing. Change your point of view. Stand in your customer’s shoes. Review every customer contact point and ask yourself would you want to do business with this company. If you answer is no. That’s probably what your would-be customers are saying too.
As entrepreneurs let’s not focus on being the lowest price in every venture we undertake. Let’s try to be the best choice for what we are providing. If that happens to be the lowest price, then so be it. It’s O.K. to end there, but not to start there. Educate your customers on their cost not your price.
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Dewong Lucas, Sr.