[Note: This is a guest post from Ankesh Kothari, who is the founder of Promotioner.com - a new app that enables you to convert your readers into active evangelists, and help grow your website traffic.]
A high end hair salon was in a quandary. A discount haircutting chain had just opened an outlet next door to them. The discount outlet kept their prices extremely low, and they launched an aggressive marketing campaign. They advertised in the newspaper that they charge a low price of $10 to cut hair. They put up a big board promoting their discounted prices. They distributed brochures. The works.
When competition opens up right next door, offers reduced prices and advertises aggressively, you know you’ll have a problem. Bargain-seekers may see the new rate as the norm, and the perceived value of haircuts could drop altogether.
The high end salon wasn’t price gouging, but when anyone with a cosmetology school degree and a pair of scissors can charge record low prices for bare minimum services, there will always be that perception.
There’s always the temptation to take the Faustian bargain; to slash overhead and offer the lowest common denominator. Professional stylists stay on top of the latest trends, continually learning new styles and techniques to improve their craft. They go back to school to learn more advanced methods, and constantly seek out master technicians to polish their skills. And then there’s the equipment costs. Professional stylists make sure their shears are always sharpened, and continually replace clippers and accessories. Why not do away with all these unnecessary expenses and make do with the bare minimum to compete with the market?
But there’s an art to providing a true quality haircut, and this particular high end salon refused to compromise on their ideals. And so they saw a significant dip in business in the first week itself. They knew that they had to do something, or else they wouldn’t survive. And they didn’t see slashing prices, replacing their professional stylists or downgrading their wages as an option. So what else could they do?
What they did was invest in a huge white board, and wrote four words on that board in huge red bold font. These four words not only made the customers who were going next door come back to them, but also allowed them to increase their prices further without decreasing business. What were the four words?
“We Fix $10 Haircuts.”
4 Steps to Positioning Yourself Against the Low Cost Competitors
If you want to command higher prices, you have to position yourself properly. You have to dissuade the bargain seekers from even contacting you and asking for a quote. A customer seeking the lowest possible price for a service you care about is not one whose business you want to fight for. Instead of casting your pearls before swine, focus on what you do well, and help people who are looking for it find their way to your door. They’re the ones who won’t question your prices.
In a nutshell, here’s a simple approach to take:
1. Find out what your low cost competitors have to skimp on because of their low prices. This is true in any business. Which services are now automated, or handled by inexperienced, unmotivated personnel who could really care less about what they’re doing and are just collecting a paycheck? How would you not only provide a better service, but totally change the game?
2. Focus the opening of your sales pitch on that point. Instead of being defensive about your perceived shortcomings, make sure your passion and expertise shine.
3. If necessary, educate your prospects as to why your higher prices are justified.
“Fast, good, and cheap. Pick any two.” – Dr. Martin Barnes
But it’s not just better quality that is a game changer. Another option would be to showcase that you deliver on time or that you provide better after sales services… and won’t disappear after you’ve been paid.
Here’s three examples of ways you can inform your clients about the strengths you have which your competitors don’t.
Example 1: Showcasing better quality
Just like a hair stylist, there is a huge difference between someone who constantly hones and perfects their writing craft, and someone banging out words on a page. (In the immortal words of Truman Capote, “That’s not writing. That’s typing.”)
This is a problem in many industries, including web design, graphic art and illustration, but here’s one example. A freelance writer who was fed up with being asked to write for mere pennies wanted to position herself as a professional and distance herself from inexperienced low cost writers, so she begins her website with the following pitch:
“If you are looking for writers who can write scrappy $15 blog posts for SEO purposes, you are in the wrong place. But if you are looking for a professional writer who can provide your readers with highly engaging content, read on.”
Example 2: Showcasing speed of delivery
If you open your Yellow Pages, you’ll find that most HVAC service providers compete solely on price. They don’t differentiate themselves at all. What’s the problem people face with them? They rarely show up at their appointed time.
So when Clockwork Home Services started their HVAC division, they used a name that focused on this problem. They called themselves: “One Hour Heating & Air Conditioning,” and their tagline promised: “Always on time, or you don’t pay a dime.”
Because of their promise, even though their prices are higher than the competition, they are the fastest growing franchise in all of United States.
Quick turnaround times are absolutely valuable in many industries, with people willing to pay much higher prices for convenience, especially when they’re in a pinch. Could you apply this to your business?
Example 3: Showcasing after-sales services
When Mosman started his plumbing business, he knew that he couldn’t compete on price alone. So he made the following pitch:
“Do you hate servicemen who fix your problems but leave your home in a mess? We clean up after fixing your plumbing problems. We make sure your place is spotless before we leave.”
If you care about your work, you won’t disappear if there’s a problem. Whether you charge for after-sales service at a discount, or include some kind of follow-up in your project fee, many clients see immense value in service provider who doesn’t disappear when most needed. If you offer this kind of service, make sure to publicize it.
- Point out your competitor’s weakness.
- Educate your clients that your prices are higher because you solve that weakness.