Discounting is not the answer: Compete with value
“There is hardly anything in the world that some man cannot make a little worse and sell a little cheaper, and the people who consider price only are this man’s lawful prey.”
Today's customers are intently focused on getting the lowest price. With advances in technology customers can compare products and prices before they speak to you. Increased competition is making price pressure more intense, with a race to the lowest price being the easiest way to win the deal. But, at what cost to your company?
Everyone knows that price discounting reduces profits, but it also makes the customer believe that your products and services are only worth the discounted value. This cycle leads to a slow and agonising decline in your company. To reverse this trend you need to communicate clearly the true and often unique value of your products and services.
To defend your higher prices you must be able to communicate your value in dollars. Only when you use a language that your customers understand, the cost of your product to the dollars of benefits they will receive, can your customers be sure they are getting a good deal. Discounting is not the answer, prove your worth.
If a new delivery system will save your customer a day's wait - what is that worth in $. If a new treatment means that 15% fewer patients will be readmitted to hospital - what is that worth in $. Find the benefit to your customer and what the benefit is worth in dollars to your customer.
To truly add value to your customers, you need to know what is most important to them. Every customer is not the same and some of your services may be more important to some customers than others. When you find out what is important to each major customer you can create a value proposition for each of these customers to help you fight off price pressure. Plus, you won't spend unwanted time and money on services that some customers are just not interested in. Leaving you time and money to spend on excelling in areas that your customers do value.
Don't fall into the trap of assuming that you are a commodity supplier who needs to discount to succeed. Find ways to differentiate yourself from your competition and you will find your competitive advantage. The value that you provide to your customers is limited only by your own creativity and your own willingness to understand your customer and your company.
For more insights into how to fight price pressure read our eBook: How to Fight Price Pressure.