Nearly every small business wants to sell more stuff — stuff being whatever your product or service is. After all, your business can’t survive if you aren’t selling stuff and generating revenue. But not all sales are the same, and selling the wrong way can ultimately hurt your small business.
Here’s what I mean. You need to increase your revenue so you decide to discount your pricing to attract more customers or clients. You spread the word with via social media or email marketing, you hand-out coupons or you sign-up with a deal-of-the-day coupon company such as Groupon. In the short-term your strategy may work. You may see a significant increase in sales, but when your sale is over, the customers are gone too.
Competing on price is not a sustainable business strategy because generally there is always someone who is willing to provide the same product or service at an even lower price. Furthermore, if you offer bargain basement prices, you’ll be viewed as “cheap” rather than a quality product or service that offers real value. Your brand won’t build loyal fans because your customers will always be looking for the cheapest price. You’ll be a commodity.
Take a look at K-Mart and Wal-Mart. Both companies were founded in 1962, but their stories are very different. While K-Mart started off strong, Walmart ultimately became the leading discounter in the market. K-mart continued to try to compete with Walmart on price alone which landed them in bankruptcy in 2002. A Los Angeles Times article, January 23, 2002, noted “Wal-Mart stores quickly outpaced Kmart in new technology, store operations, and eventually, size and buying power. All of that solidified its abilities to promise customers unmatched value.”
On the other hand, Target, the other major discounter successfully differentiated itself from Walmart by defining its own niche. Target gives customers a slightly more upscale experience while still offering low prices vs. Walmart’s everyday low prices.
A quick injection of revenue may sound appealing today, but as a business owner you need to think about the long-term consequences to your brand. Rather than succumbing to a short-term fix, focus on creating real value for your customers. Give them something they can’t get anywhere else.
The Grateful Dead’s Jerry Garcia said, “It’s not enough to be the best at what you do. You have to be perceived as the only one who does what you do.”
Build an offering that is exclusive. If customers want X, Y and Z, then your business is the place to go. Otherwise, they have to settle for something less. And keep in mind customers will pay the price for something they truly want and value.
During the height of the recession, my favorite shopping mall was nearly deserted except for the Apple store. It was always packed with people buying stuff. And the customers weren’t just buying gizmos and gadgets — they were purchasing arm loads of products. If you love Apple technology as much as I do, then you know Apple products aren’t the cheapest products on the market. But people love their Apple equipment, and they are willing to stand in line and pay the price in order to get what they can’t get anywhere else.
Take a long, hard look at your business. Are you chasing after your competitors, struggling to get the next sale? Are you constantly competing on price? Does your product offering look just about like everyone else’s?
Stop struggling and start defining your uniqueness, then you can establish your price and get paid what you’re worth. No more major sales or discounts. Raise your prices and watch your revenue soar.