Why You Shouldn’t Aim To Undercut The Competition

Sales Funnel

Businesses compete to offer their goods and services to customers at the lowest price. The average sales pitch these days serves as a vehicle to deliver that number to customers. Many entrepreneurs pride themselves on cutting back their costs in order to attract customers by offering the lowest prices possible. As a result, some businesses have become engaged in an endless battle to drop their prices faster than their opponents.

It doesn’t have to be this way, though. You can earn more sales when you refuse to play that game and you stop undercutting your competition.

What happens when you undercut?

This is a familiar story for any entrepreneur who has fought to provide the lowest prices. Your customers choose your business because they believe in the values you emphasize. When the incentive for potential customers to buy from you is price alone, that’s all your customers will care about. As a result, the moment your competitors undercut your prices, your customers will rush to them. That moment is inevitable; with so many businesses fighting to be the lowest, there’s no way to stay on the bottom of the pile forever.

The typical response to being undercut by a competitor is to drop prices and undercut them back. That option may work for a short while until someone else finds a way to offer even cheaper goods, but it comes at a cost. Every time you reduce prices, something has to be sacrificed. The quality of your products and services may drop, or you may have to fire valuable personnel. You may even slash your profit margin. Each time you undercut your competitors, you are forced to give something up. As a result, the battle to be cheapest becomes an endless series of sacrifices.

What can you do instead?

If everyone else in your industry is doing whatever they can to drop their prices, you can stand out by going against the grain. Don’t fight to be below; strive to be above. Charge high prices. Of course, you will need to be able to justify charging more than your competition. That’s when making sales stops being about just listing numbers. Identify what your customers really want. Then, do whatever it takes to make your products and services more appealing, and earn the right for your prices to be higher than your rivals.

As a result, your customers will choose you not because you’re currently leading the race for lowest prices, but because you offer something that they are willing to pay more for. That likely entails not only offering excellent goods and services, but also building personal relationships. Make yourself present in consumers’ lives.

For instance, you may send customers gift baskets on their birthdays or ask about their families and follow up from previous discussions when you call. Go the extra mile to be there for them and let them know they can always rely on you. Customers who buy solely for prices can always find something more satisfying. So, be unique. Customers who choose your business because of what you personally offer can never find an alternative.

Many business owners choose to forgo this strategy. That means charging luxurious prices does more than just ensure your customers will stay loyal to you. It also makes it easier to make a name for yourself. There are a million unknown cheap watch manufacturers, but everyone knows Rolex.

Through building a personal connection with your customers and ensuring that the quality of your products and services justifies the price tag, you can make your company the gold standard that everyone talks about. No one can win the race to offer the lowest prices. The best option is not to participate.

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