Written by Sean McPheat |
24 November, 2008
Here’s a question I was emailed over the weekend:
“Sean, here’s my main problem: Our clients want to reduce their business by a few ££ or say that they will have to stop doing business for a few months. I cannot afford to lose total revenue so being forced to compromise on profits. Or do I take a risk and say I cannot lower prices?”
You mentioned the options are to either make compromises on profits by lowering prices or remain firm and risk losing business. Well, there is a third option: Raise the value. Or use a combination, by dramatically raising the value and only slightly reducing the price.
There are usually several ways to raise the value and the perceived value of a product or service without significantly increasing costs. Often this may include more attention, more time or more personal service, which yes, will increase the overall cost basis, but not the cost of goods sold.
Look to finds areas where you can raise the tangible or perceived value of what you sell. This can be in services or in processes or in even in people. As long as you remain in the general range of the market for your product, you should be able to gain an advantage on the competition by raising value. Without knowing exactly what you do, I can’t give you any suggestions, but here’s a generic example:
Two shoe repair shops across the street from each other. Due to lean times, one cuts prices and reduces the space he is renting to save money. The other, uses this fact and instead of cutting prices or space, adds some comfortable seats in his shop along with free coffee and cakes while you wait.
Now the choice for customers is a shoe repair while you stand for 30 minutes or go out and walk around, for £4. Or sit in a comfy chair, watch a bit of TV and have coffee and a doughnut while your shoes are repaired for £5.
One has a sign that says, “Shoes Repaired While You Wait.” The other says, “Shoes Expertly Mended While You Rest!”
I know these are generic examples for illustration, but I hope you see what I am getting to.
I know sometimes that it’s not even possible, but first do everything you can to explore every area to increase the value far beyond the cost. Also in a selling situation, remember that people and process can add value. Where one software firm employs high school grads and college interns to help with programming, the other only uses skilled programmers—this is an added value.
Whenever possible look for ways to add more. Remember that every price or money centered objection, whether that be in the form of the economy or not, is still about value. Once the return for letting the money go, exceeds the cost of holding on to the money—sold!
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