Sunday, July 26, 2009

"Are You Being Pulled Into Price Wars?"

G'day friend,

90% of retailers are going to fail. They will crash, burn, and die. But why? What's the reason these companies will go under, their only memory being the occasional patrons reminiscing later, "Man, I sure do miss Jim's Friendly Corner Store."

It's very easy to understand. You'll notice if you pay close attention; just look around.

They Have Decided To Wage Price War
On National Super Powers!

Today, I happened to have been reading "Up The Loyalty Ladder' By Murray and Neil Raphel (I highly recommend this book). The first section goes into detail about prospects. And how they choose where to shop for a variety of reasons. Few have to do with price.

Along these lines, I recall a particular marketing guru (can't remember which one) saying, "If the customer is a price shopper, you haven't given them anything else to measure with." (This might be paraphrased, but you get the point).

You can't fight Wal-Mart. Or Staples. Or even Walgreens. If you're a marketer, or in some service business, you can't fight Servicemaster, Orkin, or Sears.
You can't fight them on the one front you approach instinctively: price.

These are monsters. The Raphels illustrated it perfectly:

"If a large retail corporation with $1 billion in annual sales loses ten Customers who spend $1,000 each, it has lost .01 percent of its business, a number that will barely impact sales. But if a company doing $200,000 a year in sales loses ten Customers who spend $1,000 each, it has lost 5 percent of its business. And that 5 percent may account for 25 percent of its net profits." (Emphasis is mine).

These companies can afford the loss. They can take the blow. You, as a small business owner, cannot. And you WILL lose if you fight them on price, precisely for that reason.

So stop being a price company.

Don't sell because you are a "bargain" or the "cheapest, lowest price" in town. Because I promise, someone like Wal-Mart will cost less and will have a larger inventory. Just like, for carpet cleaners and Sears, they will be able to charge less. They will do ridiculously low fees because it's in their power.

You have to start selling on value. If someone wants cheap, well, you can direct them to Wal-Mart, or the other discount stores in the area. But YOU, you are in the business of value, or selling worth.

So, Wal-Mart has fruits for $1.00 a pound? Great. We charge $3.50 for a pound of bananas, because ours are organically grown, have a proven health benefit because they were not raised in an environment of pesticides, had quality soil and fresh spring water to nurture them before being ripe. They have a clean, soft yellow exterior without degradation. We also take the time to meticulously clean and remove all dangerous micro-organisms which "hitch a ride" on fruits.

Tell me, does Wal-Mart do that for its bananas?

How about Staples? Sure, they have paper, ink, staples, etc, but you have an outstanding "replenishment" program. If someone pays $x for their stationary items, they can receive a x% discount on later purchases, and even set up an "auto delivery" system every month. Every 2/3/4 weeks they receive a package in the mail with a new batch of pencils, ink, paper, staples, etc.

PLUS, because of your joint ventures with printers in the area, your business customers can receive discounts at local printing companies for direct mail campaigns, brochures, etc.
Voila. We just repositioned your office supplies company into a "cater to the busy entrepreneur" company. Now you're the "office assistant.

Try this exercise with your company. Check and see if you are constantly marking down your prices because someone said, " is cheaper."

Over and Out,

Angel Suarez

No comments:

Post a Comment