Everyone likes a good deal.
With unstable global markets, customers are buying with caution, which is totally understandable.
As a result, consumers either wait for their favorite brands to reduce prices or purchase the cheapest available product.
But in a highly competitive marketplace, store owners can’t rely on pricing alone to differentiate from competitors. It will halt growth, and monthly recurring revenue will shrink.
“If you compete on price someone will always be willing to go lower and at the same time you are ruining your chances of being able to grow your business. With tiny margins there won’t be any cash left for things like hiring, marketing or buying more equipment,” states Matt Remuzzi, owner of CapForge Bookkeeping.
Show customers how your brand is offering more than just a product. Counter price-conscious buyers with unmatched value.
Let’s explore how to compete beyond price to become a meaningful part of your customer’s lifestyle and psyche.
The Fallacy of Competitive Pricing
Want to still be in business tomorrow? Strive to be better than the competition. From expanding your inventory selection to providing unique services, you want buyers to choose your brand.
But there’s one problem. Your team wants to compete based on price.
They believe if your ecommerce services are less expensive than everyone else, customers will choose your product. But that’s not always the case.
To buyers, cheap items equate to low-quality offerings. The consumer may think: What’s missing from this service? What’s the hidden costs?
“Your brand identity as ‘the cheapest seller’ is constantly under suspicion – because a competitor can always undercut you at any time. Bargain hunters are only loyal to price – and their constant demand for lower prices threatens your profits just as consistently,” states Aaron Traywick, COO at Global Healthspan Policy Institute.
Understand that your competitor’s prices will fluctuate. Your business shouldn’t depend on how the competition runs their operations.
Pricing strategies should concentrate on your store’s ability to meet profitability goals.
For example, below is a month-to-month chart showing price changes for major retailers. You can spend an unreasonable amount of time trying to keep up.
IMAGE VIA THE DAILY EGG
Moreover, lowering your prices affects all parties involved. Customers receive lower quality services, businesses struggle to gain a decent profit by selling to the masses.
Competing based on pricing is a loser’s game. Stay in the winner’s circle by highlighting value.
Understanding the Customer
Today’s consumer has access to a lot more information than previous generations.
Advances in technology allow people to research products in minutes, purchase services on-the-go, and receive customer support without a phone call.
To compete on value, you must understand your customer’s behaviors and lifestyles. Developing a demographic buyer persona isn’t effective anymore. Your team must dig deeper.
Lee Huang, senior vice president and principal of Econsult Solutions, suggests asking yourself the following questions:
- What problems are customers trying to solve?
- What questions are buyers trying to answer?
- What information is hard for your audience to find?
- How are your customers’ behaviors and preferences changing and evolving?
Some of the best products were created by predicting the consumer’s future needs.
“Great brands create desire by anticipating a need in the marketplace or in the eyes of their client. Most things we consider innovations started as anticipations. Tablets, remote ignitions, magic erasers and most every innovative product we use today started as an anticipation,” states Gabriel Aluisy, founder of Shake Creative.
Narrow down what your customers need. Then, develop a sales plan geared toward meeting those demands.
Finding what your consumers value is one task. But communicating that value is another endeavor.
You’ll have to persuade potential buyers that prices are irrelevant. Focus the conversation on the customer experience.
Inc. contributor Sandra Wear, states, “Making a ‘value promise’ will help focus your thinking and delivery. The promise needs to be consistently communicated in everything your company does, from marketing materials to culture to user experience.”
For example, work with your team to develop a customized price structure. It will clarify your value and diminish price sensitivity. This strategy worked for one popular tire manufacturing company.
Goodyear experienced issues with convincing customers to pay a premium for their tires with extended tread life. With no reference point, buyers continued to purchase the lower-priced tires.
To solve the problem, Goodyear started pricing their tires based on how many miles they would last. This change gave customers an opportunity to compare offerings. Consumers immediately saw the product’s value and began purchasing the premium tires.
Ecommerce is a visual business. People remember 80% of what they see and only 20% of what they read.
IMAGE VIA NEOSPERIENCE
Collaborate with a design agency to display your products in creative ways. Some industries are even using virtual reality to create 3D showrooms.
Luxy Hair sells clip-in hair extensions. To demonstrate their value, the brand posts before and after photos.
IMAGE VIA LUXY HAIR
In addition, experiment with social media. An engaging digital presence helps foster customer relationships.
For instance, rather than broadcasting company news on Twitter and Facebook, try posting value-added content for the consumer.
Communicate your brand’s value with a purpose. And don’t be afraid to do things differently.
“We have a mantra around here and it’s all about being fearless,” says Lauren Fleischer at Mondelez International, the maker of Oreo cookies. “We market fearlessly which means we’re disrupting the status quo to accelerate growth in ways that are also meaningful to customers.”
Differentiation isn’t about being different than your competitors. Instead, your business should aim to offer a distinct value to consumers.
A brand differentiator sets you apart from others in the marketplace. It can be a specific expertise, proprietary information, or unique management systems.
More importantly, it gives the buyer a benefit. It helps them solve a problem, avoid a disaster, or improve a situation.
For some brands, the differentiator is high-quality products. That can be luxury items with first-class customer service and one-of-a-kind loyalty programs.
“It’s only for the sake of luxury that you would pay for something you can get for free...Enveloping your prospect in luxury throughout their experience makes paying for the indulgence more palatable,” writes Joanna Wiebe, a conversion copywriter and the founder of Copy Hackers.
People like convenience. And they are willing to pay to avoid any unnecessary headaches.
Well-known for its helpful customer service, Zappos considers quality service as its differentiator. It’s one of the main reasons for the company’s significantly high customer retention rates. The online clothing store found that “70-75% of purchases came from returning customers.”
Social proof is another way to be valuable to your customers. Product reviews provide social proof to potential buyers.
IMAGE VIA SHOPIFY
According to researchers, 90% of consumers say their buying decisions are influenced by online reviews. They can provide a better perspective about your brand than a product description.
“Anyone can become an online retailer and offer products, but only the most trustworthy and consistent will gain a loyal following. A substantial number of positive reviews provides a snapshot of a product’s quality and makes it easier for shoppers to complete their orders...,” writes Angelica Valentine, content marketing manager at Wiser.
Differentiation isn’t always centered around the product. What about your employees?
Your team has remarkable skills and talents. Their viewpoints give context on how to serve your customers better.
David Wolfe, co-founder of Leesa, believes his company’s employees are the ultimate differentiator.
“We’ve built a business with a soul,” Wolfe says. “And that’s what differentiates us from competitors.”
Going Beyond Price
Future business growth hinges on innovation, not pricing.
Walmart is notable for its low price guarantee. However, a study revealed that the big box retail chain is losing ground.
Data showed that Walmart’s “electronics cost on average 8.3% more than Amazon’s.” Now, the brand plans to impede the competition with a wider selection of products and curbside pickup.
“Price wars can create economically devastating and psychologically debilitating situations that take an extraordinary toll on an individual, a company, and industry profitability. No matter who wins, the combatants all seem to end up worse off than before they joined the battle,” writes Akshay R. Rao, an associate professor at the University of Minnesota.
Focus on your customers. Carve your marketing message around their perceptions of value. For instance, “50% of purchasers between the ages of 40 and 44 are willing to pay more for products from socially responsible companies.”
Flaunting elaborate features won’t suffice. Give benefits that enhance the customer experience.
“Those who can leverage technology to engage customers and create experiences that impress and exceed expectations will be the ones who win new business and see their market share grow,” says Ross Beard, marketing at Elucidat.
Compete on Value
Price-obsessed customers will always exist. The key is to provide value that exceeds the customer’s expectations.
To do that, you need to understand the purpose behind the purchase. Communicate value that will captivate the buyer. And continue to find new ways to differentiate your brand from the competition.
Know the customer. Compete on value.