In the battle to capture and retain customers, businesses employ a wide range of tactics to beat competition. One of the most effective weapons is offering lower prices for similar products or services.
The first thing you must bear in mind is that you should never start a price war. The war will probably be costly, not only for your rivals, but for your business too.
Customers might start wondering if your lower prices mean the quality of your products or services is inferior. This might inadvertently lead them to opt for your competitor’s more expensive products or services. On the other hand, your customers might get so used to the low prices that when you raise them, they’ll feel betrayed and run to your rivals.
Still, it is difficult to avoid being entangled in price wars. If you find yourself engaged in a price war come up with clever strategies to stay ahead.
2. Figure out if Your Business is Affected
Before you start worrying about your competitor’s price reductions, consider if those changes are really affecting your business. Do they serve the same customer as you do? In some industries, price reductions might not mean much to customers.
There’s even a chance majority of customers might not realise your competitor is offering lower prices. If you have managed to establish and maintain great customer relations and have a loyal customer base, they might opt to stick with you in spite of the higher prices. Figure out if you are losing customers, or if your customers are dissatisfied. You can do this through analysing your customer data and conducting surveys. Make sure your marketing material doesn’t emphasise on price.
3. Focus on Quality
Customers are always willing to part with more money for a product or service which they perceive to be of higher quality. This is why customers are willing to pay more for home-crafted products on Etsy than their retail store counterparts. When describing your product or service to existing and potential customers, focus on the superior quality. You can show off your high-end production process, capitalise on your rich history and get endorsements from influencers.
On your website, make sure that your pictures reflect the high quality of your products or services. This might mean hiring a professional photographer to get well-lit photographs which highlight your product’s best qualities. While at it, also ensure you get a professional web developer to make your website as attractive and user-friendly as possible.
4. Improve Customer Experience
An extension of quality, customer experience is one of the best marketing tools for a business. According to a 2015 Customer Experience Matters study, customers are 5.2 times more likely to buy from companies with great user experience.
Better user experience means more user convenience and people don’t mind paying more for convenience. This explains why customers prefer the more expensive iPhones over cheaper android counterparts. Apple tends to offer a better customer experience, right from shopping to the software.
To out compete your rivals, analyse their customer experience. Do they offer 24/7 phone support? Are their customers complaining about slow responses? Do they engage their customers positively on social media? Does their website have clear product details and engaging articles to help customers in product selection? Do they have friendly return policies? You can learn a lot by studying your competitors and outdoing their customer experience.
5. Change your Product’s Positioning
When your competitors go low, you can choose to go high instead of matching them. You can position your product as high-end and hence worth the higher price. For example, instead of competing with existing companies in price wars, Steve Jobs aimed at creating premier products and charging a premier price for them.
Right now, it seems like Apple is always competing with Samsung to release similar products. However, Apple positions itself as the premium product with its unflinchingly high prices. In their adverts, they focus on showing you how the product will enhance your daily life, instead of boring you with product specifications. They don’t even mention the price; unlike lower brands whose selling point is the price.
If you decide to take this route, you have to make a big change. First, determine if the existing market has a sustainable appetite for premium products, or if there’s a new market you can tap for selling premium products. Then take into account all the costs and resources associated with the positioning change. You might have to change your logo, packaging, product quality, marketing strategy, website design – all of which don’t come cheap.
You can also segment your customers by charging different prices to different groups for similar products or services. For example, you can give discounts to students, while offering VIP prices to the high-end market.
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