Ask 100 small business owners what the most important factor is when a consumer chooses where to do business—and about 90 of them will say “low price.”
Is that really how people shop? Is that really the predominant factor in buying anything?
In survey after survey, when people were asked what was most important in choosing a grocery store—price ranked fifth. Not first. Not second. Not third. Not fourth. FIFTH!
Don’t get me wrong, price is important. If you’re selling gasoline for $5.00 a gallon when the competition everywhere else is selling it for $2.00, you have a problem. But if your price per gallon is $2.04 or $2.05, you’ll still see good traffic at the pumps. It is important to be competitive. It’s not that important that you be the lowest.
Smart customers are smart shoppers. They demand value for their money. Sometimes the “lowest price” ends up being the “most expensive” because it didn’t perform to their expectations. They believe in the “get what you pay for” principle.
A couple of other thoughts on low price. When you try to compete on low price, there will always be somebody out there with a pencil sharper than yours. Always somebody willing to give it away to get the business. Always somebody willing to take a loss just to keep business away from you. I say let ‘em have it. The only loyalty you will create by building your reputation on low price, is a loyalty to low price. Your customer will leave you in a flash when another business beats your price. Why would you want to attract customers at prices that don’t allow you to make a profit?
Here’s a word to the wise; be price-competitive. Communicate the values of doing business with you. When you add value to your price, your product becomes a better deal in the minds of smart consumers. You can actually charge more if people perceive higher value. And remember this…it’s always the customer who beats you down on price that is toughest to deal with after the sale.
