Always High Prices-Why We You Shouldn’t Compete On Price

Jake Porter
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“A big reason so many businesses compete on price is because they can’t prove what value they offer, so they’re stuck with the one selling point that’s a breeze to communicate: cheapness.”  Mish Slade, Author

Pricing is part of your brand.  It is also part of your strategy.  It can make or break you.  Too many businesses try to compete on price and get themselves into a war with the competition. It is a war that too often they cannot win.

I had a lot of good business professors in college, but my favorite was Professor Johnson.  Several years ago, long after I was out of college, I happened to be at an event and noticed he was teaching a class.  During his class he discussed pricing. One thing that stuck with me at his presentation was when he said “Walmart’s slogan was ‘Always low prices’ should Apple’s slogan be ‘always high prices’?”

Years later, I did a temporary contract job with Apple and in their brief training, I was told I could never say “cheapest” to describe any of their products.  I could say “least expensive”.  Obviously, Apple doesn’t want to associate their brand with being cheap.

I must admit that I am a Microsoft customer.  I use Dell and Lenovo computers that run Windows. My cell phone is a BlackBerry (don’t laugh) that runs Android.  That said, Apple has an excellent brand.  Does that brand exclude me?  Kind of.  That is fine.  I am not their target customer.  If they attempted to lower their prices to get my business, they would ruin their brand and chances are, I still wouldn’t buy from them anyway.

An annoying habit many of us have is to negotiate ourselves lower even after the sale has been closed.  When the sale has ended, quit negotiating.  I have watched business owners make a sale and then start offering special discounts after the sale.  It is one thing to offer a discount for an additional purchase or to handle any customer service issues.  It is another to start throwing away money.  When the sale is agreed upon, it is time to shut up.

Don’t compete on price if you can void it.  Unless you have a unique competitive advantage to where you lower costs to where your competition cannot compete or find a way to compete, you will get killed.

If you can’t compete on price, what can you compete on?  There are several things you can compete on.

  • Customer Experience
  • Customer Service
  • Quality
  • Reputation
  • Technology Advantages

I should be honest.  You may have to compete on price a little, but it should never be your sole competitive point to make.  If you set your prices too high, you won’t get customers.  If you set your prices too low, it devalues your products or services and therefore either people still won’t buy from you or if they do, you will have to sell a lot more to break even.

The good thing is that finding the price point isn’t extremely difficult.  It is basic economics. You name a high price and get some rejections and then slowly work it down to where you find the point it should be.

WARNING:  Having Too Frequent of Sales

A lot of business owners have this misconception that they must run constant sales to drive business.  An occasional sale is not necessarily a bad idea.  It becomes a bad idea when you have sales so frequently that customers become accustomed to only buying your products or service on sale.

Remember, lowering pricing to get more customers isn’t always a good idea. More customers=more staff time+greater expenses. You want increased revenues and profitability and not an increased headache.

Author: Jake Porter