"Maybe I can take a little off the price." Sound familiar? Too often, as business owners, the first thing we do when a customer hesitates is drop the price. "I'd rather make a tiny profit than lose the sale," we reason. As a result, we end up getting the lowest price for our goods and services.
Then there's the competitor down the street. Their product may be identical, but this company is ringing up sales big time at higher prices. Does this business owner know something we don't? Yes. And maybe it's time we learned it, too.
Keep in mind that price is only one factor in the buying decision. "According to the Small Business Administration, only 27% of the population uses coupons," says marketing strategist Thomas J. Winninger.1 "That means 73% buys for reasons other than price." Nonetheless, he adds, many businesses tend to price product, not value, and they base their price in relation to what the competition is doing.
How can you get top dollar for your goods and services? Here are ten ideas:
- Get away from the "price tag philosophy." When you lead with price, this turns your product into a commodity, without any regard to the value you offer to your customers.
- Focus on the buying process, not the product. For example, explains Winninger, travel agents today must do more than just sell seats for the lowest price. He contacted one travel agent about the price of flights to London. The agent gave him a price. Looking for a better deal, he called another agent. This agent, however, began asking questions: May I ask if you are going to London for business or pleasure? First time there? Do you know what you plan to see when you are there?
"By the time we were done," says Winninger, "I spent $6,000 on a customized vacation package where I had started hoping to shave a few hundred dollars off the airline ticket price. This travel agent took a total solution approach to meeting my needs, and made a large sale."
- Create an environment that promotes sales. That's one reason Barnes and Noble stores are successful, says Winninger. "They create an environment where people can come in, browse, sit down and read. They buy books almost incidentally."
- Package value. One book seller found that, if readers like an author, they can increase sales by offering three of that writer's books in one package.
- Aim high. Present the fully-loaded option, not the bargain-basement, no-frills version. Example: If you go into a Ford dealership to order one of its limited-edition 2002 retro-design T-Birds, virtually all options are included. You have just a few minor decisions to make.
- Stress quality and service over price. Most of all, says Winninger, be able to define service in a concrete, quantifiable way. Don't describe your delivery as "fast"; instead say, "you'll be in and out in 15 minutes." In this respect, you are not competing with your competitor, stresses Winninger. This goes back to the value you can offer your customers.
- Make it easy to decide with the "Rule of Three," says Winninger. Rather than lowering your price, offer three value-based options. If you are painting a house, give one price that includes all prep, paint, painting, trim, and clean-up; one that provides all these services except the trim; and one that offers just the painting, letting the customer do prep and clean-up. This provides three options.
- Sell the knowledge. The successful hardware store doesn't sell nuts and bolts, but information on how to solve its customers' problems. That's the niche of the mom 'n pop store. That's also why stores like Home Depot hold seminars on remodeling kitchens, building decks, installing screen doors, etc. They sell knowledge along with the product.
- Make your offer unique to each customer. Customers want the offer to be unique to them. That goes back to asking questions as part of the buying process.
- Communicate to the customer what makes you unique. It's not good enough to offer the best value in town, says Winninger. You must make sure the customer knows it. Once again, this goes back to how you lead into the sale. Don't flash the price in a super-sized banner. Instead, promote "Free Delivery" or "Assembly Included" or "25 Years of Experience."
The bottom line: Forget about the 15% markup over wholesale or 2% below the big discount house across town. Develop a marketing strategy based on value pricing and start getting top dollar for your goods and services.
1 Thom Winninger shared his marketing strategy ideas with New York Life in a telephone interview (May 7, 2001). To learn more about how he helps clients get top dollar for their goods and services, visit the Winninger Institute for Market Strategy at www. winninger.com.
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