Previously we looked at how the market is generally obsessed with looking for a cheaper price. In this article, we’ll take a look from the perspective of the seller instead. Let’s discuss how to sell to a market that’s trying to outbid each other by going cheaper than the next guy.
Buyers’ Market Vs. Sellers’ Market
We do have to admit that the global economic slowdown has tightened the purse strings of the general public. And with what little’s left of the expendable income, many individuals (and organisations alike) are looking to get more with paying less. So can you blame them for being obsessed with saving every single penny that they can?
It all seems counterintuitive, but given the circumstances, many sellers are actually giving the customers exactly that… Totally impossible, you say?… Here are some general examples on how it’s usually done :-
(1) Lowering The Upfront Selling Price
This is an unscrupulous method of “appearing” to reduce the price tag of a particular product. They make up for it later with hidden costs that they customer will eventually have to pay… Which is usually more than if they were to buy it at the market price from a competitor. When a browsing customer compares the price to the competitor, the lower-than-market price tag will stand up like a sore thumb. Once hooked, the seller will start reeling them in, slowly but surely.
An example where this will happen is when selling electronic gadgets that comes with lot’s of attachments or accessories. One typical example is the photography market. You’d normally have a specific model in mind when shopping for a brand new camera. And the prices for that particular camera is clearly displayed at the retailers’ display cabinet or catalogue. So the chances of closing a sale is pretty high if you display a much lower price than your competitor… especially if it’s below your cost price…
You see, no customer comes in to buy just the camera body itself. When you close a sale, all you need to do is to start introducing all the accompanying attachments and accessories to that particular camera model. Lenses, flashguns, eye-cups, battery-grips, filters, remote controls, spare batteries, straps, bags, pouches… The list is endless. If you can close the sale of the camera, the chances of selling these additional stuff are pretty high. They literary sell themselves… It’s an open secret that the retailer’s profit margin for the camera body is slim to none. But when compared to the camera body itself, accessories reel in a really big fat profit. And nobody compares the prices of these accessories like they would the camera body itself.
(2) Maintaining The Price, But Throwing In Freebies
This is a tactic favoured by real estate developers, especially when selling residential homes. Buying a house is everybody’s major big-ticket purchase. Most of us makes this purchase only once in our lifetime. So it’s undeniable that everybody will pull out their calculators, and punch in all the parameters to make sure that they can afford to take that big step. The price of a house is pretty much depended on the three conditions of real estate, regardless how you look at it – location, location, and location. And that means that every competing developers out there will be selling their houses at roughly the same price for the same location.
So how do they attract house buyers to them?… Simple, by appearing to “give away” freebies for each purchase. Free wardrobes, free air conditioners, free water heaters, free kitchen cabinets, and sometimes even free living room furnitures too. So how do they manage to throw in all the extra “value” without eating into their profit margin?… Simple, bulk purchase cost.
As a house buyer, you’ll crunch the numbers and find that all the “freebies” thrown in really sweetens the deal. But do they?… Well, yes and no… Yes, because you were going to have to buy all those stuff anyway. And it’ll definitely cost more to furnish your home that way. So in essence, you’re actually saving money by not having to buy them after you buy the house. But also no, because those “freebies” actually doesn’t cost the developer all that much in the first place. Remember the bulk purchase? Plus, you don’t get a choice of what type and brand of appliances that you want to buy. And the “freebies” are most probably bottom row cheap products to start with anyway.
(3) Reverse Engineer The Product With Cheaper Components
You see a lot of these “cheaper” options when it comes to the el cheapo products that are generally made in China. No, I’m not saying that all Chinese made products are inferior, but the general perception pretty much say so.
Electronic products bear the brunt of this assault. Everything from professional gears like studio photography lights to toy cars, if you can make it, it can be reverse engineered. And if you don’t care too much about the product refinement or quality, you can buy anything for half the price of the market equivalent.
The same goes for reverse engineer professional services too. A typical example is the wedding photography market. There are professional photographic services that offer quality services that cost an arm and a leg. You’ll get quality service, rendered by highly experienced photographers, shooting your big day with expensive equipment. After all, it’s a once-in-a-lifetime event, right… Well, at least for most people…
Then there are the cheaper alternatives who hitch a ride on the fame of these expensive professionals. These cheaper service providers are probably new players in the market, with little or no experience shooting weddings. They try to close the sale by offering a lower than the market rate price. What they’re doing is essentially disrupting the market equilibrium.
Hey, don’t blame the service providers for delivering “cheap” work if you’re so obsessed with getting a bargain for your wedding photo shoot in the first place. After all, cheaper price often means cheaper value.
So How Do You Maintain Your Price (And Sanity)
As mentioned above, we’re looking at this from the sellers’ perspective. So how do we, as sellers, maintain our business in a market that seems to be obsessed with bargain hunting? Well, for one thing, we have to accept the fact that there’ll always be these “outside forces” trying to upset the balance. A balance that we’ve grown accustomed to, a balance that we’re comfortable with. So when something happens to challenge this balance, a new balance will eventually be attained. Remember, change is inevitable. The only thing constant in life is change itself.
“The Only Thing That Is Constant Is Change” ~ Heraclitus
So you’re running a business for profit, not charity. We can understand that. But do understand that there are other sellers just like you, offering equivalent product or services for a very wide range of prices. Of course, the value of the service or product that they offer may differ greatly from you. And there’s also wide range of of price that customers are willing to pay for the purchase too. So here’s some suggestions to help maintain your business from party crashers :-
(1) Establish Your Niche, And Set Your Own Market Price
What you can (and should) do is to establish your niche. The fewer players there are that offers what you have, the better control you have over the price. Accept the fact that there’ll be others who will try to penetrate this niche, and offer a lower price than you. After all, you’re not invincible. But then again, if you have experience and market familiarity on your side, you’ll have a better staying power.
There WILL be others who’ll try to shove their foot into the door of your market. They’re probably new players with relatively little experience and/or exposure. They’ll have to significantly lower their offering price if they want a piece of your action. They’ll rock the boat, and rock it hard they will. There’ll be a shift in the balance, but eventually they’ll fade away. They’ll learn it the hard way that there’s no way to eek out a living by undercutting the asking price. They’re probably operating at a loss. So if they can’t significantly increase their asking price soon after that, they’ll be operating on a constant loss. And nobody can survive that. So eventually, they’ll fade away.
If it’s of any consolation, their main target is the clients who are obsessed with cheaper alternatives. And these are NOT your target market. Remember, if there’s demand, supply will rise to meet it. So if you’re not interested in bottom feeding, leave it up to them to mop up all the bread crumbs.
The lesson here is to stay your course, and weather the storm. It’s not always sunny and bright. If you’re good at what you do, customers will eventually find their way back to you.
(2) If It’s Cheap In Price, It Must Be Cheap In Value
You know your products or your services. And you’re proud of their quality too. Needless to say, they’re worth their weight in gold. So when a competitor crashes into your party, offering a very much cheaper alternative to your products or services, just hold your true course. The law of business is the same everywhere you go. You have to make a profit in order to stay afloat.
Time, effort and raw material needed to run the business cost money. So in order to stay afloat, you’ll have to sell above your cost price to remain profitable. The only way for your competitors to undercut your selling price is to invest less time, effort, and purchase cheaper and inferior raw materials to lower their cost price. And this will result in inferior products or services, which they will then sell to the customers at a lower price. So rest assured that if they can afford to sell their products or services at a very cheap price, they’re very likely offering inferior products or services.
As above, they WILL rock the boat, and rock it hard. But eventually, they’ll tire themselves out, and/or customers will acknowledge their inferior offerings.
(3) Invest In Brand Identity And Customer Relationship
Business does not exist independently on its own. If a customer chooses to buy from you, they do so because they like you (or your product or service). Essentially, it’s your brand identity that’s attracting their attention. And likeability is more important than the actual value of the product or service that you’re selling to them. So it pays to invest intelligently in building a recognisable brand.
New players who crash into your party usually do so with no forethought about building a relationship with their customers. And when they do that, they do it without thinking about staying power. They make a big splash, crashing into the party midway through, with all their loud music and fanfare. They get attention of all the people there with their grand entrance. Eventually, they’ll get thrown out of the party in pretty much the same way. If you don’t have a long-term business plan, you’ll be shown the door very soon by the established players.
So do yourself a favour, invest in your brand identity, and build your business relationship with your customers. At the end of the day, customers always choose to buy from a supplier that they like. They do this regardless whether it’s more expensive, or you deliver less than your competitors. It’s one of those unexplainable traits of paying customers. Hence, it pays to be likeable by your customers.
That’s How You Thrive In A World Obsessed With Price
Your customer base turned away because they’re obsessed with saving a few bucks? Well, fear no more, it’s just a little storm in a teacup. They may (will) wander off with new options. But if they really like you, eventually they’ll find their way back to you. Why should you be obsessed compete head-on with your competitors too? Under no circumstances should you also be obsessed with competing head-on with your “cheaper” competitors.