Competing in a local market
Adding value to a commodity purchase
You’re selling the same products as other retailers so why should people buy from you? This month let’s look at price.
There will always be someone who will sell for less than you do. Or who will sell a product “just as good” as yours for less. There are valid times and reasons for reducing price. If you have a sale on a selection of items as a strategy to get people in the door so they can learn about your business and your offerings, that’s reasonable. Just note it’s a good idea to record that lost revenue against your marketing expenses. You should know what you invested in discounting those products. You should also have a strategy to move inventory that becomes stale or loses its value over time, and reducing the price is one part of that strategy. For the most part if an item or service is priced fair, selling it for less than its value isn’t a good business practice. Discounting the price is essentially paying someone to purchase from you. Or buying the sale. It’s far better to add value than it is to reduce the price.
For years I’ve taught “helping the customer buy” is significantly easier and more profitable than “selling” and it seldom includes lowering the price. Instead, it’s based on helping the customer discover the value to them of purchasing the item from you at or above the listed price. There are no tricks or strategies to it. It simply requires learning enough about what your customer values to be able to show them how their purchase from you provides what they value.
I started off this column by saying someone will always be willing to sell for less than you. With that said and a fairly priced product, there are things customers value that either don’t add to your costs, or if they do, you can charge for and the customer will pay. The biggest is trust. The customer has to trust they are getting what they think they are. That’s what guaranties are all about and why you will always be able to beat online sales on trust.
Then there’s convenience and confidence. Convenience is about what effort the customer is expected to put into the purchase and use of the product. A drive through window or callin order service are examples of convenience. Confidence is more about delivery time accuracy and all components accounted for. The customer who can’t move forward in their project because there is a component they don’t have doesn’t care if it’s their lack of understanding of what they needed, or your staffs’ assumption that if they needed the additional part they’d have known or remembered to ask for it.
Sometimes closing a full priced sale is as simple as removing customer concern by being able to tell a customer where they can get the completing component. I’ve gone so far as to call the other vendor, confirm part cost and availability and asked them to hold it for the customer who’s standing in front of me. That customer then inevitably completes the full priced sale with me and heads off for the rest of what they need. Yes, there’s a risk that the other vendor may try and “sell” them if they also stock what the customer has already bought from you. However, there are two things in your favor. You already provided value to the customer in helping them solve their problem, and they will feel they owe you for that. And secondly, you have built some level of a relationship with the customer through the conversation, respectful questions and listening you used to determine the customer’s need and what was of value to them in solving the need.
If you start with a fair market price, understand where the value in the purchase is for the customer, and help them confirm that value in purchasing from you, you’ll seldom find yourself passing your paycheque back to the customer.