Don’t Aspire to be the cheapest, Be an Entrepreneur

Price is always an emotive issue. Have you ever heard these statements or as an entrepreneur, you utter it yourself? :

– We have to lower the price to keep in line with the competitors.
– How to sell at this price?
– I couldn’t make the sale Boss, the customer was putting too much pressure on me to lower the price.

Entrepreneurs are worried about how they price their products or services compared to their competitors. They will find out what everyone else is charging and price their products and services towards the bottom end of the price range. Their reasons for doing this is they want to be competitive and ensure their price isn’t a hurdle for potential customers.

Be an Entrepreneur, Don’t Be The Cheapest On The Block

When dealing with the price of a product or service, entrepreneurs need to understand that there can always be a cheaper option. Regardless of how cheap they go, their more established competitors can choose to price their product or service lower! The competitors have established brands, usually more cash on hand, and are often willing to lose a little money in the short term to price out the competition. Don’t get into a pricing war with your competitors. Instead, offer something better than them.

Quality is often measured by price, especially amongst your potential customers who may not know all the technical differences between your product or service and that of your competitors. By charging your premium price, you are differentiating yourself from your competition. Your potential customers will subconsciously believe that yours is better quality because the price is higher, making it easier to sell.

Don’t believe me? Do these tests :

Test 1 :
If you think that your customer always buys the cheapest, do yourself a favour. Next time you visit a potential customer, arrive 15 minutes early, take a walk round the car park, find their parking space and look at his/her car. If you find the cheapest possible car to get him/her to work in the morning then you are probably right, he/she always buys the cheapest. But if you find, as I suspect you will, that there is a Volvo, a BMW or a Mercedes in that parking space then you know they don’t always buy the cheapest, they are just negotiating with you.

Test 2 :
– When you buy something, anything – do you always buy the cheapest? What about the coffee you have at home? Is it the cheapest coffee you could buy? Probably not! :-) When we look at ourselves as a customer, we don’t buy the cheapest, but as soon as we become an entrepreneur, we think that our customers only care about price. It is just not true.

Imagine you have two cars in front of you. One is a 1995 VW Citi Golf, price on the window is $10,000. Then next to it there is a brand new, straight out of the box Mercedes Benz S class 500, price on the window $250,000. What is the first question you ask about the VW?

The first thing you will want to know, is there any chance of you getting the thing going at all? This is always the question you ask about the cheapest. Now, what is the very last question you would ask about the Mercedes? That’s right! “Does it work?” You know that, at that price, of course it will work. When your customers see your product or service selling at a higher price they never question its ability to do the task, they may not be able to afford it, but they will want it.

Be Competitive Doesn’t Mean Being The Cheapest

1. Sacred Rides

We know we’re not the cheapest option in the market, but we make up for that by providing our clients with once in a lifetime experiences and providing them with the best guides and programs

Mike Brcic, the founder of Sacred Rides, a mountain bike tour company based out of Toronto that was recently ranked the mountain bike tour operator by both National Geographic Adventure and Outside Magazine.

SacredRides are aware that they are not the lowest-priced option in their industry but also understands that their customers are ready to pay for an amazing experience and because of that, this company has grown aggressively for the past few years.

2. Abode

Our rentals are not for everyone, and I’m alright with that. This just means that we are better able to focus on our core audience and this makes our marketing efforts easier and keeps our customer service requirements at a minimum.

Abode, a luxury property management company that specializes in high-end ski lodge rentals, decided to eschew the low end of the market to focus on lower volume and higher margins. Abode, like many other entrepreneurs in the luxury market have avoided pricing wars altogether and instead focus on a small segment of the market. This helps with marketing, infrastructure, growth, and overhead costs. Plus, Abode never has to nitpick over a dollar here or a dollar there when looking at his competitors.

3. American Express Studies
The recent study conducted by American Express on Australian consumers highlighted how important it is, not only to provide quality products, but match those products with excellent customer service.

The study found that 73% of respondents were more willing to pay more for a better experience in choosing their merchant. And these 73%, would also be willing to pay up to 12% more for a product if accompanied by excellent customer service. While these findings do not claim to reflect every individual, or even claims to affect every business sector, it gives a staggering insight in to the importance of factoring in how well you treat your customers.

Providing a product or service is not simply about offering it at the cheapest price.

There are other items involved in the decision, like quality, delivery, comfort, relationship, value for money, reputation etc. Don’t fall into the trap of pricing down the bottom of the market with the rats and mice in your industry. Be confident to charge your premium price and, as long as you can back it up with a quality product and service, you will gain a greater market share of more profitable business.

If the cheapest services or products does seem to offer the best value for money, customers will doubt it’s validity and be forever searching for a catch. They know that there’s no such thing as a Free Lunch and knows that if they want great quality, they have to be prepared to pay for it.

Remember the saying that sums it up : If you pay peanuts, you get monkeys

Thus, instead of offering the products and services at the cheapest price, look at how you can charge MORE by offering a better quality experience and value for money for your customer.