My grandfather once told me and story about a local car dealership that advertised: “We lose a little on each sale, but we make it up in volume.” The ad was a joke, but the reality is that this is the end point of a price cutting strategy.
I’ve heard countless business owners say that they need more customers, more sales, more revenue. The next argument is that the fastest way to get more people in your store or buying your products or services is to cut prices. “If we just charge less than the competition we’ll get more business”.
This might work in the very short run, but what happens when your competition lowers their prices even more? That’s simple you might reason, “we just need to cut our prices even lower”! If you race for the bottom at what point do you cut prices so low that you no longer make a profit?
There is a better way.
The way to make more profits is not to sell for less, but to offer more. Cutting prices makes whatever you sell a commodity. Do you really want potential customers to judge you only on price? Instead of racing for the bottom, why not race for the top. Differentiate what you sell by making it better than the competition. Make potential customers want what you sell because it’s better than what they can get elsewhere. Create a unique selling proposition and guarantee so that your ideal customers feel compelled to do business with you instead of your competitors because you are better than them.
What makes you better: a life time guarantee? Follow up service? Training? Expert staff? Sell what makes you better instead of what makes you cheaper. Your bottom line will thank you.
