Why Winning By Lowest Price Is A Losing Proposition For Everyone, Especially Your Customers

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Probably the most common reason I hear from clients about why they couldn’t close a sale or why they can’t convert all of their leads, prospects or visitors is that their price wasn’t low enough. Especially in the Ecommerce world, everyone talks about how their is no customer loyalty, just price loyalty, and they hear from prospects who they can’t close that they want to see other options, compare prices, and than decide on the best price.

The Truth Is…If You Lose A Customer on Price, You Lost Them Long Beforehand.

More importantly, even if you did lose a customer on price, this is a good thing, which you will understand as you read the rest of this post. Even More Important than that, is if Win customers because you had the best or lowest price, they are losing out and so are you. Here’s why…

Let’s get one thing straight…Lowest Price Does Not Mean BEST VALUE. Most Customers Want To FEEL like they got a great deal. They want to feel like they got the best of you, and a better deal than anyone else. Everyone Wants The Best Value Proposition, but there are all sorts of ways to create value.

There are 3 types of customers who shop by price alone.

The first type is the person who simply put cannot afford to pay more. This person is hardly the ideal client or customer. Unless you are starved for business, more often than not this customer is more of a headache than others and this customer definitely won’t have any long term value. After all, a successful business has strong long term customer relationships, and a long term relationship with someone who can’t afford your products is hardly worth the time and headache involved.

The second type of customer who shops by price is the person who doesn’t understand or know enough about your product. He is not willing to take the time to truly differentiate between top notch quality which I hope you are providing, and low quality. This guy will never appreciate your value, won’t refer friends, and most importantly, will probably end up unsatisfied because they simply don’t understand what you offer and why you are the best choice. This guy can sometimes be won with the highest price as well because they associate price with value and highest price equals highest value to them…

The third type of customer that shops by price is the person who is simply put extremely cheap. This person will stop at no effort to haggle you down, squeeze your margins, milk your customer service staff, and won’t be satisfied until he takes you for all your worth. This guy is a nightmare and should be avoided at all costs.

While most people claim price is what drives their decision, probably only about 20% of the market actually makes their decision purely on price, and as you can see they are hardly the customers you want.

Now, let’s talk about the other 80%. The people who can afford your product, can appreciate your value proposition, and will refer friends and be a healthy long term customer with your business. One that doesn’t drain resources, one that can truly appreciate what you bring to the table…

The first question I have for you is… Do you really think this guy, who is making his decision based on value and service, not just price wouldn’t be willing to pay more than the bottom price? I bet if you raised your prices by 20% today, the only customers you will lose are bad ones and the ones who appreciate your value will gladly pay more.

This is actually the reason why I raise my prices instead of growing my business. I know how to find customers. Most people Do. But finding the right customers is not easy. It requires qualifying customers from the outset. I know I deliver an excellent service, so I want people who can appreciate the fact that I am a great value to them. So, every time I have a surge in client requests, instead of scaling my operation,  I scale my prices. I make more money, work less, have fewer headaches, and most importantly, I have the time, energy and peace of mind to focus on my clients and serving their needs as well as possible.

When you cut your margins, lower your price, and try to compete for the bottom of the market, you have less resources to devote to creating a better product and delivering better service. Between me and you, any customer worth having wants both… The Best Product and The Best Service. So, if you win by price, you are really selling your customers short and selling yourself short.

I know what you are thinking… But, my product is a commodity, there are others with a good or better product than mine. The fair market price for my product is X, I want to be competitively priced.

To this I tell you… The Single Most Important Thing You Can Do For Your Business Is to Find a Way To MAKE SURE YOU CANNOT BE COMPARED TO OTHERS.

This is why a Unique Selling Proposition, differentiation, and branding are so important. As Dan Kennedy always says, “Never Compare Apples To Apples. Always Compare Apple To Oranges.”

There are lots of ways to position your business, and I will cover those topics as well as price strategy in future posts. If you want specific insight, tell me about your business in the comments and I will write a post discussing several ways you can immediately differentiate your business and raise your prices without losing good customers.

Remember, Tie Your Product To Value…Not Price, and you and your customers will both win!

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About David Melamed

David Melamed is the Founder of Tenfold Traffic, a search and content marketing agency with over $50,000,000 of paid search experience and battle tested results in content development, premium content promotion and distribution, Link Profile Analysis, Multinational/Multilingual PPC and SEO, and Direct Response Copywriting.

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