PUT YOUR
PRICES UP
Tired
of being pressured to give discounts? Fed up with watching your margins
go down while the prices you pay for raw materials go up? Well, don't
put up
with it any more. Put your prices up!
I know that is advice that goes against the trend. I know it sounds like a
suicidal move in a crowded and competitive market place. But don't be so hasty
to reject the idea.
The fact is that while price is important, it is not the most important thing.
Look at your own behaviour. Do you always buy the cheapest product? Do you
ever willingly pay more for convenience or speed? When buying for your business,
are you prepared to risk dealing with an unreliable supplier to save a few
dollars? Probably not.
The problem is that we have trained our customers to expect cheaper prices.
Something like 80% of all clothing bought in Canada is bought on sale. Who
would pay full price when someone in the mall is likely to be having a sale
- if not today, then tomorrow. In my own business I always tell suppliers their
prices are too high even if I don't think they are. I've learned that 90% will
drop them without a murmur.
But the real problem is that most of us have forgotten how to compete on anything
other than price. When people question our price we try to defend it, and that
is almost impossible to do. These days no one cares how much your raw materials
cost or what you have to pay for labour. Nor are they interested in whether
or not you can make a profit. They are too concerned about their own survival.
There is an alternative to dropping your price or justifying your costs and
that is to compete on value. Think of your basic product or service as being
a stone. This basic solution is to your customers just a commodity item. Your
stone is, in their eyes, no different from your competitor's stone. The only
difference, therefore, can be price.
Since we don't want to compete on price, we must wrap our stone in layers of
benefits that our customers are prepared to pay for. Customers will, for example,
pay extra for convenience, speed and reliability just like you will. The costs
of time, effort and dealing with unreliable products or suppliers is so great
that most of us are prepared to pay money to reduce them.
But that's just the beginning. There is a whole range of benefits that you
could use to wrap around your basic product. For example, people will pay for
having a wide range of choices, and for products and staff being available.
They will pay for information and expertise. They will pay to have their egos
stroked. We all like to be recognised and appreciated. Customers will pay for
being able to influence or even control the buying experience. Today people
want to shop when they want to, where they want to and how they want to. They
want to dictate the terms and many will pay for that power. Similarly, many
people will pay to have fun, to be in a pleasant environment, to experience
comfort and luxury.
Of course, it is not enough just to provide these benefits. You must be able
to sell them, to turn them into cash. You do that by showing your customers
that these extras are solutions to problems that bother them and, therefore,
are worth paying for. Do this and you can put your prices up.
And both you and your customers will be happy.
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