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Jason Cunningham
Entrepreneur

Jason Cunningham is a finance whiz, speaker and media personality that can be heard on SEN1116 and The Living Room on Channel 10

Jason Cunningham
Entrepreneur

Jason Cunningham is a finance whiz, speaker and media personality that can be heard on SEN1116 and The Living Room on Channel 10

When competition increases, regardless of the industry, the temptation is to offer lower prices to secure a greater market share. It’s unlikely this is the right strategy for your business.

While it’s tempting (and easy) to drop your price when times are tough and customers scarce, it’s rarely an effective long-term strategy to build a thriving business.

A price drop (such as a ‘sale’) can be a legitimate short-term tactic to attract new customers – it’s a good way to increase foot traffic, and a great excuse to communicate to potential customers. But while it may get you a sales spike in the short term, any benefit will only last until your competitors drop their prices. And price wars don’t benefit anyone.

Price signifies value and quality. Consumers use price to help them choose between competing products – to ensure they are getting value for money, but also to determine quality. As a result, a lower price can have the inadvertent effect of reducing your perceived quality in the eyes of your customers. So we’ve established that lowering your price shouldn’t be your go-to move when the competition heats up. So what should be?

card in eftpos machine

Loyalty

One of the secrets to business success is to develop long term relationships with your customers. You do this by listening to them, understanding their needs and key issues, and providing an offering that meets those needs – as well as consistently exceeding their expectations. These become what Ken Blanchard calls ‘Raving fans’ – customers who become a free sales force, telling others how great you are (the most powerful way to generate hot leads there is). It’s hard to develop loyal, long-lasting relationships based on price, as the minute a competitor offers a better deal, they’ll leave. 

Sell your “why”

Do you know your ‘why’ – the purpose, cause, or belief that inspires you to do what you do? In his seminal book Start With Why (check out his powerful TED talk on YouTube too), Simon Sinek argues that customers don’t buy what you do, they buy why you do it. Most businesses talk in terms of ‘what’ or ‘how’ (e.g. product features), while super-successful organisations such as Apple differentiate themselves from their many competitors by communicating a core philosophy or brand personality that people can relate to.

Your “why” encapsulates both why your business exists and what gets you out of bed in the morning, and provides an emotional connection with your customers that is worth far more than a one-off purchase with no margin.

Give customers what they want

The best way to attract and foster loyal customers is to give them what they want. To do this, you need to look at your business through your customer’s eyes. What image and values are you portraying, from the moment they first experience your brand through to the provision of the product or service? Understanding and articulating your “why” will go a long way to helping you look at things from your customers’ perspective.

It’s important to remember that price is just one of marketing ‘4 P’s’ – meaning there are lots of other tools at your disposal to attract new customers.

To develop a lasting business, hold off on slashing prices and instead focus on creating an amazing customer experience. If you serve a need, people will happily pay for it.

Telstra has provided you with access to a range of articles and information which may be of interest to you and your business. The content of our articles does not constitute the provision of financial or taxation advice, and we strongly encourage you to seek independent professional advice or consider for yourself if this information is appropriate for you and your circumstances.

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