Note from Rod: Spike Santee posted this article to his blog on September 28th. I think it's a super piece of work, and worth a few minutes of your time to read and consider.Getting Your Premium Price When Your Competitors Are Giving It Away - by Spike Santee
You’re involved in a very important presentation with an extremely valuable new prospect. You’re going head to head with your frequent competitor. The one that always undercuts you on price.You think to yourself that this is another sale you will loose because of price.
You know the competitor very well. You run up against them on a regular basis. Both of you have very similar products but your competitor will usually discount their price below what your company will allow. Now your worst fears are coming true. The prospect has informed you that both you and the competitor have very similar features but the competitor is coming in at least ten percent below your very best offer. The prospect says they would rather deal with you but price is an issue. You’ve gone back to your manager and made your best effort to get some pricing help but to no avail. Sadly for you, the prospect decides to go with the lower price competitor. You’re so depressed. You can’t take losing out to the lower price competitor any more. You’re even thinking about changing careers.
Stop! Before you make such a drastic decision, face the fact that price competition is and always will be a competitive issue regardless of which sales profession you pursue. Don’t throw away all of your present experience and product knowledge just because you’re frustrated with a low price competitor. You’re not suffering from a pricing problem; you’re suffering from a lack of knowledge and skill. You’re experiencing a lack of initiative to come up with creative new ways to deal with price competition.
Just imagine if your competitor routinely gave away their product for free while your company insisted on getting a premium price! What would you do then? How would you convince your customers to buy from you when they could routinely get the product for free somewhere else?
It can’t be done you say. Consumers just want the lowest price. It’s all about the price. The company with the lowest price will make the sale.
Really?
Then answer this; why are Rolex, Mercedes, Tiffany and thousands of other similar companies still in business? Not only are they still in business, they are thriving during difficult economic times.
They offer a better product you say. You’re situation is different. There isn’t that much difference between your product and your competitor’s product. It’s easy for the customer to see the difference between a Rolex and a Timex you explain. Your product is just like the competitor’s product except they’re cheaper.
Exactly!
Have you ever looked up the definition of cheaper in the dictionary? In addition to lower price, many of the definitions imply inferior craftsmanship or inferior materials.
The real secret to getting a premium price for your product in the face of stiff price competition is creating the perception that your product is of superior quality to that of your competitor. You must define your product as superior and worth the extra money.
Take water for example. On the surface, water doesn’t seem very exciting. You can open the tap and pour yourself a glass of water any time you want. But put water into a plastic bottle and give it a name and it turns into $22 billion a year business!
Bottled water costs about two thousand times more than municipal water. We don’t think twice about spending a couple of dollars on a bottle of water do we? But who would pay $10,000 for a hamburger?
The quality is better you say. That’s why it’s worth the price. It tastes better. It’s better for you. It’s safe.
Is it really?
There are multiple studies showing numerous bottled water brands containing harmful substances. According to a four-year scientific study by the Natural Resources Defense Council, over a third of the tested brands contain contaminants such as arsenic and carcinogenic compounds. This study of 103 different brands encompassing over 1,000 bottles showed that only one-third of the water in these bottles exceeded state or industry safety standards.
If two out of every three airplanes that took off crashed, would you consider air travel safe?
Walt Boyes, principal of Spitzer and Boyes, consultants in water treatment and distribution says “New York City’s water is every bit as good as bottled Evian.”
As you read on, remember this, one of the top selling brands of bottled water is called Evian. Have you ever looked at what Evian spells when the letters are reversed? It spells naïve.
The bottled water industry has done a marvelous job of creating a perception that bottle water is tastier, safer and healthier than the water you can get for nearly free right from your own faucet. The bottled water industry has created a huge business built solely on perceptions. They have taken creativity to new levels with healthy sounding names and innovative packaging. The bottled water industry has not only defined their product as better, they have defined the competitor, tap water as inferior.
According to the International Bottled Water Association, there are two types of sources from which bottled water can be drawn. One is natural sources such as spring and wells. The other is approved potable municipal supplies. Companies that use the latter reprocess the water using methods such as distillation, reverse osmosis, de-ionization and filtration.
US law requires all drinking water to be treated so it doesn’t go bad in the bottle, Boyes explains. Since there isn’t a taste difference, all non-carbonated water is basically the same.
And that’s where branding comes in.
“Branding is extremely important for water,” says Chiranjeev Kohil, professor of marketing at California State University at Fullerton. “In a lot of categories, you can duplicate products and get an edge on quality or attributes, but that edge can be shaved off very quickly by competitors. In the water category, there is no technological superiority. The only thing that differentiates one bottled water product from the next is the brand.”
Marketing experts say that a commodity such as water can be branded effectively. The key is differentiation, but that’s also the challenge. After all, water is water.
Let’s take a look at some of the top selling brands and how they differentiate themselves.
Nestlé produces a brand of bottled water called Pure Life. The slogan on the bottle says Embrace the Pure Life. There is a small graphic icon that looks like people with their hands in the air as if they are celebrating. The label says the water comes from the public water supply but then the water is purified using reverse osmosis or distillation and enhanced with a balance of minerals for taste. The minerals include Calcium Chloride, Sodium, Bicarbonate and Magnesium Sulfate.
PepsiCo produces a brand of bottled water called Aquafina. The slogan on the bottle says Pure Water, Perfect Taste. The label says Aquafina is purified water. “It originates from public water sources and is then purified through a rigorous, seven-step purification process called HydRO-7™. This state-of-the art process removes substances most other bottled waters leave in. So the only thing you taste in your water is water. Aquafina, Pure Water, Perfect Taste Every Time”.
These marketing techniques are at the heart of the consumer perception that bottled water is safer for you and tastes better.
So the next time you feel the competitive pressure of lower price, instead of just relenting and cutting your price, perhaps you should invest some of your time and creativity to work on improving the perception of your product.
You can rest assured, when you feel the pressure of a lower price competitor that means the customer can’t tell any difference between your product and the competitors. The only thing the customer knows for sure is if there is no difference in her mind, she might as well go for the lowest price.
One of the easiest ways to illustrate a difference and therefore a value for a higher price is to develop the perception in the prospect’s mind that YOU are a better sales person than the one from the other company. Do you begin your selling process by establishing YOUR credentials? What sets you apart? Is it your education, your training or your experience? How does that add value to the transaction? In many cases it means you are more qualified to handle the business relationship. That will save the prospect both time and money in the long run because the business will be handled in a more professional manner. In the end that is worth more money.
What many sales people fail to realize is that most buyers hate to buy because they fear they will make the wrong decision. So they figure if they are going to make a wrong decision, the want to at least spend as little as possible just in case. Most buyers would gladly pay a little bit more for the assurance they were working with a professional who will make sure the order is placed and fulfilled exactly to the customer’s specifications.
Think about the last time you received exceptional customer service. It was probably such a shock to you that it left a positive impression in your mind about that sales person or company. Chances are you’ll go back and might even pay more because of the pleasure of being treated like a valuable and important customer.
Whatever you do, don’t just lie down and take it anymore. That is no way to make a career out of selling. Start working on developing your value proposition and you’ll be on the way to a larger paycheck and more fulfilling career.
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Spike Santee blogs about radio at
http://www.spikesantee.com/Notes-from-Spike/
