Discounting Pricing Strategy

Putting it bluntly, as a small business, if you live by price you will die by price. There are lots of companies out there that are cheaper than you and who have a strong discounting pricing strategy to get customers to buy their product/service. But guess what? They will probably be out of business within the next 12 month and making a very small profit margin.

Cost Leadership as a strategy for Large not Small and Medium Organisations

Marketing theory talks about “cost leadership” as an alternative strategy. Cost leaders engineer costs out of their business model so they can sell cheaper and still make a profit. Examples of these are Direct Line Insurance, Low-Cost Airlines, Primark etc. However these companies have the capacity to engineer costs down due to the high volume that they are selling at….

….but where a small business offers discounts without the benefit of having reduced the costs of their goods and services – they simply cut margin.

The other major risk with discounting is that you will only attract ‘cheap shoppers’ who are buying with you because you are cheap and therefore they have no loyalty. You want to attract loyal customers who are buying from you because they like your product or service.

Why you want loyal customers

Loyal customers bring repeat custom which brings your business its profit (Remember on average it’s 6 times cheaper to get an existing customer to buy from you than a new customer)

Niche and Adding Value

Niche is about avoiding selling on price (primarily*) by adding value.

  • Giving True Service
  • Upgrading Customers
  • Giving Customers more than they expect
  • Having a clear point of difference in your market place.

We give ‘Great Customer Service’

Put your self in your customers shoes. Don’t just talk about “we give exceptional customer service”. Everyone says that. What would “exceptional customer service” mean to a client….?

NOW GO AND ARTICULATE “EXCEPTIONAL CUSTOMER SERVICE” AND USE IT IN YOUR MARKETING!

For more information on how to add a point of difference to your organisation and make more profit please feel free to drop me a line at lukekay@actioncoach.com.