10 Jan How to Use Pricing and Value to Sustain Business
Many business owners think that lowering prices is the best way to maintain a competitive advantage. Unfortunately, this is an all too common misconception that can hurt a business more than help it.
Lowering prices may generate new sales for a while, but this strategy certainly isn’t something that’s sustainable if you want to have a profitable business that’ll go the distance.
Let’s take a look at why getting into a pricing war could ultimately lead to disaster, and how adding value to your goods and services is the BEST way to ensure long term business success.
The Problem With Lowering Prices
Lowering the prices of your products may generate more sales in the short-term, since let’s be realistic here, people ALWAYS like getting “a good deal.”
But what happens when your competitors decide to lower their prices too?
You, in turn, have to lower your prices again, which may trigger a price war that will cut into your profits. And let’s not forget that when you do this, your customers may start to think your products are cheap instead of conveniently affordable.
Another problem with lowering prices? When you finally reach a point when you have to increase your prices (and you will), do you think your customers will want to pay more – after months or even years – of a substantially discounted product or service?
Focus On Value Instead of Lower Prices
Instead of lowering your prices to gain a competitive advantage, you should focus on offering more value for your products. What does that mean?
When one of your customers says, “Your services don’t provide enough value for your price,” the most natural response is probably to lower your prices. But here’s the thing you’re missing.
What your customer is actually saying is, “I wish you would offer me more value for the price that I’m paying, or I won’t pay for your products anymore.”
So How Do You Increase Value
The key is to always focus on your customers, and there’s five ways to do that:
- Adding Features – You know what customers hate? Products that don’t offer the features they want. How do you stop that from happening? Easy. Ask your customers what features they would like to see added to your products. And then make sure those features are easy to use.
But don’t stop there. Make sure you also find out what features your customers are not using and get rid of them or find ways to make them useful for your consumers.
- Provide Outstanding Customer Support – Another way that you can boost value? Make sure your customer support reps speak in clear language that is easy to understand. Software language can get complicated, but using simple vocabulary can eliminate misunderstandings. Another way to provide outstanding customer support is to ensure that someone is always available to answer customer questions, and that includes any Live Chat options you may offer. Customers don’t like waiting, and when they abandon a customer service call, that doesn’t reflect well on your company.
- Provide Useful Information To Enhance Customer Success – You know that big subscriber list you have? You can use it to send emails and notifications that provide tips and suggestions on how to better utilize your products. You can also subtly provide information about upgrades to existing services that consumers may not be aware of.
By staying in touch with your customers, you establish a personal connection and help them feel more engaged with your products.
- Solicit Customer Feedback – We touched on this before, but it bears repeating here. You have to be in touch with your customers to get their feedback. They aren’t just people you sell products to, they are your best sounding board about what works and what doesn’t, and how you can continue meeting their needs. You can get feedback through surveys or by having your support team contact your customers. And make sure you offer some type of incentive or a ‘freebie’ to any customer willing to provide feedback.
- Analyze Customer Usage – Do you know which products sell the best? Do you know which features you offer are the most used? The least used? Although customer feedback can help you determine some of this information, it can’t take the place of usage analysis that provide you with solid numbers and trends that can help your product development team improve the services you offer.
Value Is An Ongoing Discipline
When you increase the value of your products, you don’t have to lower prices to gain a competitive advantage, because your customers will be willing to pay a higher price for everything they are receiving. But the one thing to remember is that you must continue offering value and adjusting your services to justify your prices, or you’ll end up with dissatisfied customers. Keep the focus on the value of your products and the price will take care of itself.