One mistake that is really common among small business people, especially first time entrepreneurs, is that they automatically try to compete as if they were running a Wal-Mart store. This is definitely a bad approach. What do I mean by this? Read on to find out.
One of the carnal sins of new entrepreneurs is that they try to beat their competitors on price. They think that price is the main motivating factor behind why people are going to buy from them. This is Tom Foolery. You are mistaken if you think that price is the reason people are shopping with you instead of your competition. Your customers might even tell you that is why, but they are lying. Yes, they really are lying. They might even believe that is why they are doing it, but most of them are dead wrong.
People buy from you for a variety of reasons. Price is almost always lower on the list than two or three other things. They might be buying from you because you are more convenient. I could be that you responded to them faster than your competitors. It could be because someone referred your name to them. It could be that you are the only one they know who does this. You might provide one on one service along with explanations of what you do for them. The list goes on and on. It is very unlikely that the majority of your customers are truly that sensitive on price.
When you cut your price you cut your own wages
If you are competing on prices then I also can almost guarantee that you aren’t having as much fun running your business as you should be. You are also struggling way more financially than you should be. This is common knowledge. Trust me. I have been there.
When you offer a lower price than your competitors you also attract the worst possible class of customer. You get the demanding people who want everything for nothing. These people absolutely suck to work for. I can’t stand it. Why would you go after these people? You don’t want them. You want the highest paying customers who aren’t afraid to pay more for good service. I bet those people are out there and would welcome you with open arms if you would just try it. Then you can have nicer equipment for your own business. Your image will improve. Your brand will improve. You should consider pricing yourself above your competition just for this purpose alone.
Think about the people you always see standing in the return lines at Walmart. Do you really want them for customers? They are bitching and whining about something they are unhappy with. Some of them are trying to pull a fast one on the store and somehow cheat that store out of money. Do you really want these people for customers? These people will try to do the same damn thing to you. They will want you to sell them your product or service at the lowest price humanly possible. They aren’t afraid to complain or to return things either. The big box stores have turned these people into abusive customers because their return policies are so liberal.
Instead of cutting your price or rolling back your price you should be looking for ways to increase your prices. You can probably increase your price immediately without ever even adding more value to your product or service. Your good customers won’t care one bit because you have been undercharging anyway. Your bad customers might care and they might leave. I say good riddance.
Do not make the mistake of under-pricing yourself. You aren’t running a Wal-Mart. You are running a small operation that cannot afford to cut prices like that. You can’t afford to buy at the quantities that Wal-Mart does. You can’t afford super small profit margins. If you aren’t going to earn great profit margins in your business, then why bother being in business. You can charge more than you think. Determine at least two things that people want more from a business like yours other than a low price. Focus on delivering those needs.
