All local businesses are in a battle against their competition, trying to find ways to win over customers.
And when times get tough, a majority of businesses make this common mistake.
They compete on price.
At face value, it seems like the best tactic to take more clients in your market. Everyone wants cheaper things, right?
Not exactly.
If this is your main business tactic, you will run your business into the ground. I’ll explain why.
Simple Economics Is Too Simple
At some point in our journey as business-men and women, we have learned basic economics - if you decrease your price, your volume of sales will increase (and vice versa).
So, more often than not, what do local business owners do? They match or undercut the competition in an attempt to attract more customers.
We are local businesses, not large multinational companies.
As a local business, you must differentiate yourself from your competition, and simple economics doesn’t exactly apply.
Consider this.
I have been seeing the same barber for 12 years. He has progressively become more expensive, and I don’t live as close to him anymore. Yet I still go out of my way to see him and I pay whatever it costs.
He knows exactly how to cut my hair, and I have a personal relationship with him now. I am a loyal customer.
Now if the barber down the street offered me a free haircut, I’d refuse. It comes across as desperate, and I don’t really care about the cost. The value for me is in the whole experience itself - I get a perfect haircut and I get to catch up with a friend at the same time.
We can all relate to this. It’s not always about the price, it’s about the value that you get as a customer.
Let’s flip it and put yourself in the barber’s shoes for a second. Imagine that every customer walking in was just looking to get the cheapest possible haircut. Would you really want to deal with people like that all the time?
If that’s the only value that you offer, these are the people you will attract.
Not only that, you will deter good customers for one simple reason…
Your Perception Is Your Value
If you’ve ever been to an art gallery, you’ll know that some paintings can have an exorbitant price.
One time I walked past a painting at a gallery, barely noticing it, then as I reached the end of the line, I came across a book which listed the value of every painting…
… this painting was $200,000!
My immediate reaction was to go back and stare at this painting. It was interesting how this painting caught my attention only after I saw the price. I guess I was in a daze prior to that.
Then I noticed that every single person who walked the same path as me, did exactly the same thing.
And it’s because the price is one of the biggest marker’s that dictates a first impression!
Let that sink in.
If you are competing on price, you paint yourself as the cheap guy. This is the impression you give customers.
You set yourself a precedent, especially if you are getting testimonials and referrals. Now you are well known for that - that image is permanent.
And once you have that image, it is almost impossible to shake it off without massively rebranding your business.
Why Your Competitors Are Making More Money Than You
Here’s a little assignment.
Select 2 of your competitors - one who is cheap and one who is expensive.
Analyse their business model and pick out the differences, aside from their price.
I’ve done this for multiple industries, and if you deep-dive into the mechanics of two different businesses in the same industry, there is no difference…
…until you look at the bottom-line and see that the expensive competitor is outperforming the cheaper one!
Because good customers will pay when you are expensive, as long as they get value from your business.
It’s the perception of value that wins the battle every time.
How You Can Make More Money Than Your Competitors
The beauty of business branding is you can paint a picture—that is, your business perception—that gives your customer a good first impression.
So instead of matching or beating your competitors on price, try charging at least 15-30% more.
Be confident in your unique value proposition. Portray yourself as the top 1% of professionals in your field.
Because your audience will perceive you with higher value from their first impression, and in the long run, you will make more money than your competitors - guaranteed.
P.S. If you want help unlocking your value with effective marketing, Get In Touch to see what we could do for your business.
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