More & more the complaint heard regularly from Small to Medium business owners is that they can’t compete with on-line sales, the mass merchandisers or overseas imports on price. The assumption is that the customers buying decisions are being governed by price. Whilst in some cases this is a reality, there is another group of consumers who are willing to pay a premium for products that have a real or perceived higher level of quality, branding or benefits that suit their requirements.
It could be asked whether your current pricing strategies may have unconsciously trained your customers to look for price rather than substance?
Businesses who offer unqualified “discounts” or resort to the dreaded slogan “we’’ll beat any competitors ticketed price by 10%” are conditioning the consumer to make decisions based solely on price.
Unless you are a multi-national chain or mass merchandiser, it will be difficult to compete on price and retain an acceptable profit margin. If you are still intending to compete, keep in mind the impact that discounting will have on your profitability. If your current gross margin is 45% and you discount your price by 10%, you will need to sell 29% more product to achieve the same profit result.
This highlights the importance of moving upmarket by promoting and selling the value of the goods, rather entering into a price comparison.
Product positioning should be an integral part of your product strategy. This means pitching your product in the right way, to the right consumer, and carving out a niche for your business market .
By identifying key points about your product or service that competitors don’t offer or fail to promote, you can create selling points which allow you to compete using an alternative strategy. If you can’t be unique, you need to identify some other form of selling point.
When we talk unique, this means one-of-a–kind product. This doesn’t apply to service or quality unless you are prepared to offer something that is not available elsewhere.
It is also important to identify and target your consumer market. In a small to medium business environment the temptation is to use the “shotgun” theory of selling to everyone. By identifying the target market, you will be able to make intelligent decisions about your product lines, pricing strategies and marketing campaigns. This will allow you to make the best possible use of your resources, benefiting your consumer and your business