Many times I hear the complaint of a competitor undercutting someone in their business. Are they really undercutting? This misperception is typically based on losing customers to someone offering a lower price on a similar service.
Pricing is subjective. It is based on many factors including but not limited to: cost of supplies, labor involved, overhead, quality of goods, experience of provider, brand name, etc. Pricing is not always apples to apples, many times it is apples to oranges. If you are a veteran in the industry, you do not want the newcomer to price themselves equal to you because it doesn’t accurately portray the differences in value, experience, and quality. Being able to charge more takes time and is an earned privilege. If you look at it from a different approach, would you pay a store manager and floor sales person the same? No, because they bring different experiences and skills to the table. The same applies to your small business.
To dismiss the loss of a customer to undercutting does not help you. Instead look at what opportunities are available to better share the value of your product or service. Evaluate your marketing copy. Hire a sales coach to learn new ways to overcome pricing objections and how to share the value of your product or service. Create a competitive analysis so you can compare the true differences between you and your competitor. This is where you will discover it is not apples to apples and learn to focus on your strengths.
*Espresso Series – Short daily opinions and thoughts about business from our founder.