With the holiday season in full swing, so many businesses are trying to wage a price war in the hopes that consumers pick them for gift shopping. This is especially acute online, where the same bed set can cost a dozen different prices, depending on shipping, processing, and sheer sales volume.
Furthermore, sporadic sales pop up, further complicating matters. Flash sales. Today only. Few hours remaining. Use this offer code for your first order. Those kinds of sales tactics are the new weapons in the price war.
There’s a problem with this thinking, though. Your competitors are racing to the bottom line right along with you. While you may take home a seasonal battle, you can’t win this war. Here’s why.
Never Compete on Price
This is one of my favorite phrases to tell new clients (and it’s one I seem to be saying a lot lately). Many companies want to goose sales by taking a percentage off the top. I hate that idea for many reasons, the first of which is that it doesn’t work forever.
Someone will always do it cheaper than you. They’ll find new inefficiencies you hadn’t found, lower their overhead, do more with less and charge less too. That’s why you can’t win. Kmart begets Walmart which begets Amazon. There’s always a less expensive option. It’s not always going to be you.
And a funny thing happens when you compete on price when trying to win a price war. Customers find you less valuable. You cheapen your brand. You become known as the low-cost leader with even lower margins. And as we mentioned before, someone will come in and take that crown from you. That will leave you with low sales volume at lowered prices. Why would you ever welcome that?
There is a strategy you can use to avoid falling victim to the trap of a price war though. But you might not like it.
Always Build Value
Instead of waging price wars, think of how you can increase your value without becoming a value brand. By building value with your customers, you justify whatever you charge for your products and services. Everything is worth what it’s purchaser will pay for it, after all.
Some ways you can add value to what you offer include:
- Explaining the difference premium materials make
- Promoting features competitors would have a tough time duplicating
- Additional services with purchase, like shipping (so much free shipping)
- Creating prestige that comes along with your brand
- Baking your message into a culture or lifestyle (GoPro is especially good at this)
- Building a seamless integration between your products
- Including services for which other vendors explicitly charge extra
- Positioning your business with a clear mission
- Breeding a culture of friendly customer service
When you constantly strive to be the most valuable choice out there, it has the added benefit of raising your own prestige. Even though you may cost more than the competition, people will feel more satisfied with their purchase from you. That satisfaction breeds loyalty, so long as you continue to live up to the high standard you’ve set.
Why do so many businesses forego this? Because it’s hard, and it can take a long time to pull off effectively. It’s difficult to show your value to so many different customers who value different things. It’s way easier to cut your price to the bone and become a commodity. The best businesses steer clear of such thinking, though, and compete to be the most valuable in the eyes of the consumer.
Nobody Really Wins a Price War
The only real way to win a price war is by not getting into battle. Make sure your customers know they’re getting a premium product or service every time they do business with you. Throw in some value adds where possible as a thank you to customers willing to pay a premium for good service. This helps create consumer loyalty without shortchanging what you do.
People like to feel as if they’re getting a deal. There are two ways to do it. You can cut your price and battle in the trenches, or you can soar above the fray as the most valuable brand. It’s up to you how you choose to fight.
While you may win this round, next time you might not be so lucky.