Competition among businesses can reach a feverish intensity that results in price wars. We have seen this in a number of industries from hospitality to fast food to oil and gas. The common consumer goal is to obtain top quality products and services at the lowest possible price. Price wars result when a competitor drastically lowers prices and others follow suit to protect their customer base. When there is a large differential in price, customers will often go out of their way to obtain the lowest price, and businesses risk losing even the most loyal customers. While there is a risk of losing business in the short term, becoming caught in a price war could actually be detrimental to your business.
Price sensitive buyers are a reality. In today’s economy, most buyers have some sensitivity to price and certainly everyone wants to get the maximum value from their hard earned dollar. However, if you win on price, you can also lose on price and that simply creates a cycle of customers coming and going. However, you can effectively position your product or service to meet the needs of the price sensitive buyer without dramatically reducing your profit margin.
Price is only one factor in the buying process, but one that often receives the great attention. However, value is more important than price. Customers set their price expectations based on their perceived value of your product or service. For example, customers do not consider all automobiles to be of equal value. Thus, a buyer would not expect a Rolls Royce to be competitively priced to a Toyota. However, if they were in the market for a Toyota a price sensitive buyer would likely shop around for the best price among Toyota dealers.
The key to success with a price-sensitive buyer, in fact with any buyer is adding value as a part of the overall selling equation. This means working hard to come up with innovative technology, resources, services, and products, benefiting you and them. Obviously, this value-added strategy requires good planning and organization within your own company. The way in which sales are projected to the buyer would have to change.
One strategy for handling a price-sensitive buyer is to present ways in which the use of your product or service will save them money and/or increase their own profit. For instance, labor costs within a business are typically high. If you were able to show the customer how your product and/or service could make work more efficient, thus cutting labor costs, you would have a win/win situation. In showing a greater return on their investment you are able to overcome the up front price objections.
You can work successfully with price sensitive buyers by uncovering other needs and taking the focus off of the initial price. Your business may offer additional services which are of value to the customer and included with the price, or perhaps you can demonstrate a cost savings over time as a result of using your product or service. For example, you may sell a computer system that is $100 more than a competitor. However, if your system has a lower ratio of problems then the customer may opt to spend a little more up front to have a better product over the long term.
The color printing industry offers another example. If you have a product and/or service that utilizes new technology to create color prints but at a better price long-term, chances are you will have a new customer to add to your list. Although the buyer may be paying more per print, providing customers with a better product in the end would result in increased revenue.
Winning over price sensitive buyers requires understanding that price is not the only component of their buying decisions. When you take the time to uncover your customer’s needs you will be able to present the full value of your service or customer. If you fail to uncover the complete picture you may find yourself in the position of answering price concerns, and in the long run that will not help your business to succeed.
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