One of the best ways to ensure your business remains profitable is to keep your prices high. But how can you compete when you face competitors who are cheaper than you? The obvious way is to reduce your prices to make it easier for your customers to choose you. But that puts a squeeze on profit margins, which in turn places strain on all areas of your business. The real question is how to successfully compete while keeping your prices high – higher than your competitors.
There are lots of real world examples you can look to for inspiration. In fact you might even be using one right now – the Apple iPhone 6. If you have bought it recently you will know that it is one of the most expensive mobile phones on the market. You can get phones made by other manufacturers that offer very similar levels of functionality, and that cost much less.
So how has keeping prices high affected Apple? In the last quarter of 2014 it reported the highest profits of any company – ever. So, the iPhone 6 has been a phenomenal success, with users more than willing to pay two or three times more money than they would for a phone made by another manufacturer.
Apple achieves this by focusing on the value proposition of the iPhone 6, rather than the price. In fact, they don’t even focus on functionality alone. Instead it is all about the value to the user. So, in the case of the iPhone 6, this means stylish design, ease of use, features, and superb customer service. All of this combined delivers a value proposition for the customer that places their product in a higher price bracket than their competitors.
Offering this value proposition to customers is something that all businesses can do. Here are some things you should consider:
- Unique – if you can make your offering stand out because it is unique, you will have more success in charging a higher price. There are lots of ways that you can do this. For example, you can offer more products, you can make your products better than the competition, or you can help your customers by saving them time.
- Sales team – if you have a sales team they will need to be fully on board with your pricing strategy. To start with, they have to believe in the product or service that they are selling – completely and wholeheartedly. Secondly they should know as much about your business, your products and your industry as possible, as the more they know the more confident they will be when it comes to discussions about price.
- Improve – if you do not have an offering that is unique, and a team that is equipped to ask for a higher price, you will have to spend time improving your offering
- The pitch – finally, when it comes to selling and marketing your products and services, don’t focus on price. Instead highlight areas where your offering is better than your competitors. This demonstrates why the extra cost is money well spent.
For some business, competing on price is a key strategy, and it works in many situations. But you can also go the other way: by offering your customers more you can charge more, and potentially make greater profits.