Economists claim that prices are set by markets. But they are wrong.
Prices are set by people running businesses. People like you. And they are among the most important decisions you will ever make. Get them right and you could be on the road to fame and fortune.
But get them wrong and your business will be doomed to failure – and so many businesses do get it wrong.
Some businesses try to a low cost provider. To be successful with a policy of being the cheapest is very hard and is best avoided.
There is still a temptation for new businesses to discount prices to gain sales. But there is a fundamental point that is all too often overlooked: stimulating sales by cutting prices may boost your top line turnover, but it can just as easily devastate your bottom line profits.
Customers care about prices. But they are certainly not the only thing they care about - and your business and marketing strategy should mirror that fact.
In other words, you should never compete on price alone. Instead you should start by making sure that what you are offering exactly meets the needs of your customers. And then you should sell it to them on the basis of “best value” rather than “lowest price”.
What is “best value”? As we see it, “value” is the gap between the benefits a customer perceives he is getting and the price he perceives he is paying. So offering “best value” means offering a bigger gap than anyone else.
The three keys to offering best value are to make sure that:
- Your products and services are exactly what your customers need and want. That is, they offer the best and most appropriate combination of benefits.
- Your customers fully understand those benefits - because unless they understand that what you have to offer is special, they will assume it is average, and that means that you’ll only be able to charge an average price.
- Your prices are presented in the best possible light.