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Price and Prejudice

Price and Prejudice

June 08, 2009 by Chris Barling

Some people think that price is everything. My son currently works in my company, SellerDeck, sitting beside me in the home office. His job is account managing customers who use our ecommerce web hosting. It’s very instructive listening in. We’re not the cheapest offering, although we believe that we offer good value. Since you will start losing orders and customers the second your ecommerce web site goes down, and Google research suggests that marginally slow sites reduce orders by 20%, you would expect quality of service to be the major topic of conversation. Often it is, but for a minority, price is all that matters. In fact, there are relatively few products and services where price should be the sole criterion. These probably include electricity, where the same stuff always comes down the same wire anyway, and petrol, where rival brands across town often sell petrol from the same refinery. But some people always focus on price. The question is; do you even want to speak to customers who only care about price? Wouldn’t these customers be better hassling the competition? They not only pay less, they can also waste a lot of time. Competing on price requires the lowest possible cost base. So most businesses try to compete on overall value. My suggestion is if you aren’t losing a few customers on price, you probably aren’t charging enough. And those customers that you would lose from slightly higher prices, will probably be the very same ones that would be the least profitable and the most trouble.

Comments

Hi -agreed! In my salon business I am not the cheapest, just the best I can be. One new customer actually asked me whether I had 'done the checking' ie rung round competitors pretending to be a customer and checked their prices. No- I price according to what the job is worth and that brings me out at the 'pricey'end I believe, but I still get plenty of bookings.

This is a common issue in sales (price being the main objection). The trick is to get customers to understand the value of what one does before they part with any cash. Once they understand this the "price" often falls way down the list of priorities. However the difficulty is getting the customer to understand the value of your product or service in the first place.

Some of the techniques that can be used to do this include:

- Free product trial (often used on Software sales)
- Free session for an hour or two (effective when selling consultancy)
- Money back guarantee (removes the element of risk for the customer)
- Monthly payments - spreads the cost so they don't have a big initial outlay, even though they may pay more for the product in the long run.

The other technique is marketing that creates a 'buzz'. Think about how Apple launched their iPhone. Not the cheapest smart phone in the world, but one of the most sought after once Apple had created a 'buzz' about it.

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