When it comes to pricing, it feels like navigating the maze of a competitive market. So you must know how to handle competitors. Since their pricing strategies will have a direct effect on your sales. Thus, whatever action you take could influence the positioning of others. However, how do you remain competitive without losing sight of your business objectives?
When Should You Lower Prices?
There is always the temptation to lower prices when competition enters the market with cheaper alternatives. Nonetheless, we can take two paths: the first is usually incorrect and the other is a more strategic option.
The Common Mistake: Engaging in a Price War
The easiest approach to matching or beating competitiveness is quickly resolvable by simply lowering your price in the market. However, it can also become a price war—slugging it out to the lowest often hurts profit margins and long-term sustainability. Although this is one tactic that some use as part of their pricing strategy, it often does not work best for most, particularly in service industries such as accountancy practices.
The Smarter Move: Differentiation and Value-Added Services
Instead of reducing the prices, try to offer a unique service that people are willing to pay high prices for. This process allows you-to-not- compete just by price. If customers feel that something is better than other offers, or more valuable they will pay a higher price for it. Adding value to your services justifies the prices you set.
Mastering Two Essential Skills for Premium Pricing
If you are not competing on price, then there are two important factors that you must excel in to maintain your pricing strategy:
1. Easing Customer Concerns about Higher Prices
Your product or service must address customer worries upfront, showing the extra value of what you sell over its cost. As explained above, this is all about presenting them with what they are about to gain if they purchase your offer instead of another competitor.
2. How to Effectively Deal With Price Objections
Be prepared to justify your higher prices confidently. Discover how to handle competitors ‘ and customers’ price objections by outlining the added value and benefits your service provides. It will get easier the more you practice having this kind of conversation around pricing.
Beating Competitors without Competing on Price
The guiding principle of how to handle your competitors, you need to remember when in a position where your competitors offer something less expensive. If two products/services are equal, then people will choose the cheaper one. However, customers are going to be willing to pay more if your product or service is different and better.
Highlighting Value over Price
Do not forget: The right kind of people are willing to pay a premium price. If it seems like you offer something they need. Your task is to make that value crystal clear.
Why Most Customers Don’t Buy on Price
Although customers will argue that their choices are price-based and they do value these products highly. Never delude yourself into believing price is the most important consideration for a majority of buyers.
Recognizing Genuine Price-Sensitive Customers
Most customers use price as a bargaining tool, some of them may have truly very sensitive prices inside your customer segment. These are some of the characteristics that differentiate a real price-sensitive customer:
• Frequently complain about pricing.
• Waste a lot of your time and add very little value in return
• Brags to others about how little they paid for that.
• Quick to leave your business at the sight of something cheaper.
• Sometimes neglects to pay you on time.
Key Strategy: Avoid Price-Sensitive Customers
Whenever possible, try not to attract those customers who care about pricing. Most times, they are who suck from your energy yet while providing a minimal return. Attract and keep customers who get value from your product or service, and pay for it openly.
Conclusion
Pricing is always a balancing act when you operate in competitive markets. Lowering prices, for example, might be one way to get ahead of the competition – but also a potentially expensive mistake. Spend time differentiating, adding value, and learning how to respond to price objections. It allows you to charge more and attract a loyal, values-minded customer base.
