How To Compete In A Market That’s Obsessed With Price (1 of 2)

In a truly open market, there’s one parameter that’s always in the minds of potential clients – your asking price. You can argue that your product or service is worth the the price you’re asking for. But you also can’t deny the face that you’ll have competitors too. And very likely some (or most) of them will be selling something similar (or even identical) at a lower price.

Living In A World Obsessed With Price

It’s true that we’re experiencing an overall global economic slowdown, And everybody seems to be adapting to this lean times by finding new ways to cut down expenses. While it’s okay to look out for bargain-bin purchases occasionally, most are actually taking this belt-tightening a little too far. Customers and clients are basically looking for the cheapest option. And by “cheap” we mean the lowest price, not the cheapest value of the product or service that they seek to purchase.

As a result, the corporate world has developed a very strange purchasing ritual. It’s quite normal to request for quotations from suppliers when companies are looking to buy something. However, many are insisting on getting three (or more) quotations from the corresponding number of suppliers only to compare their prices… Their objective?… Well, according to them, it’s to ensure that they get the “best deal” from the lot. And some of them actually believe that this practice discourages suppliers from intentionally profiting too much.

So does this practice actually bring in the best deal in town?… Well, if your definition of a “best deal” simply means purchasing something at the lowest possible price, then yes, you’ve indeed got the “best deal”. But if you’re looking to get the best value, then more often than not, you’ve got the worst deal. You see, cheap price normally gets you cheap products or services… And I mean literary cheap quality products or services.

Cheap Price Vs. Cheap Value

Let’s put things into perspective with a real world example. Let’s take a look at the wedding photography industry. You get married only once in your life (well, most people do anyway), and you’d want to immortalise your dream wedding. This usually is in the form of something permanent, like a beautifully done wedding photo album. So taking a cue from the “best of three quotes” as described above, you seek to get three different wedding photographers for their quotes.

(1) Full-Time Professional Photographer

The first photographer asks for $15,000 (substitute with your local currency where applicable). He’s a full-time working professional, and has many years of experience, shooting countless weddings. He also has the sample albums and testimonies from previous clients that vouch for the quality of his work. Needless to say, he works with a full set of professional gear, and works in a team of three or four equally experienced photographers. And for that price, you get a luxurious wedding album, with thirty preselected large photos inside. You’ll also get two extra-large photos beautifully framed in textured wooden frame.

(2) Part-Time Experienced Photographer

The second photographer is freelancing on a part-time basis. He has a day job doing something completely unrelated, but he’s very passionate about photography. And is pretty experienced at shooting weddings too, with a handful of satisfied customers vouching for him. Asking for $5,000 to shoot your wedding, he works with a set of medium priced equipment, usually shooting alongside an equally experienced partner. And for that price, you’ll get a reasonable quality photo album, also with about thirty preselected large photos inside. In addition to that, he’ll throw in a set of all the photos taken during the course of the event as well. However, there’ll be no framed large photos.

(3) Inexperienced But Passionate Photographer

The third and final photographer is an art college fresh graduate. Equally passionate about photography, but he lacks of experience in shooting weddings. He works alone, and shoots with a very basic set of equipment. What he lacks in practical experience and photographic gear, he makes up with a very attractive quote of $200 only. And for that price, he’ll email you all the digital images captured during the event. No, there’ll be no wedding albums, no photo enlargements, and no printed photos.

So Who Do You Hire?

Based on the logic of getting the “best deal” solely on comparing price alone, surely you’d go with the last photographer. It’s a no brainer… The last quote is the cheapest price, and by a very long shot too. But do you ask yourself if that choice will give you the best value for your money?… Is it wise to trust an important event like your wedding to a less experienced (or in this case, inexperienced) service provider?…

Whether you realise it or not, the situation is the same with any corporate scenarios. Management’s decision to make purchases based solely on the cheapest quote is akin to hiring an inexperienced photographer to shoot an important event like your wedding. You’ll most likely be short changed. The cheapest option is almost always guaranteed to never meet your expectation. But then you secretly already know this, and you conveniently choose to ignore it. In the end, you’ll end up lowering your expectation to meet the inferior supply. But then again, it’s because that’s exactly what you paid for…

How To Avoid Falling Into This Trap?

First and foremost, understand exactly what your requirements are. Armed with that understanding, find out which supplier can meet your requirements. From that shortlist, then only ask for their quote. You can then make an informed decision based on the available information, with the full knowledge that the shortlisted suppliers can actually meet your requirements.

Please don’t make a fool of yourself by blindly asking for quotations. It’s very rude to ask for written quotations if you know very well that you won’t even consider purchasing from them. If you know that any given supplier can’t meet your requirements, tell them straight. There’s no need to beat around the bush. They’ll appreciate your honesty. Just don’t disrespect them by fishing for a cheaper price by comparing them to other similar suppliers.

Most importantly, understand that cheap price is almost always directly proportional to cheap value. So unless all you’re actually expecting to get is cheap value, don’t expect to pay a cheap price for it.

What If You’re On The Other End Of The Transaction?

So what if you’re on the the selling end, not the buying end? How can you compete with a world of clients who are obsessed with how much you charge for your services or products? How do you convince them that you’re worth every single penny that you’re asking, or maybe even more than that? We’ll share more about this in our next article. Don’t forget to come back again for a perspective from the opposite end of this equation.