You have to determine which 2 of the 3 you are going to give your customers that will allow you to stay in business and profit. If you are in a market where you feel low price rules. A market where you must be the low price to sell, (I have never seen a market area like this, other than in the minds of sellers doomed to fail), then you must either give the customer poor service or sell low quality products.
The problem with selling at low prices is your overhead is the same whether you are selling high quality or low quality items or giving good service or bad. Shortly after I opened my furniture store I realized that selling at low price would not allow me to prosper in the furniture business. My advertisement for a 4 piece bedroom suit appeared right across from my competitions ad for the same bedroom suit. My competitor’s price was $4500. Mine was less, only $3500. Every time I sold this bedrooms suit I made $1500.00. My competitor made $2500.
The ad cost me exactly the same as it cost my competitor. My competitor’s cost for delivering the bedroom suite was the same as mine. And his overhead, lights, heat, labor, etc. were comparable to mine. I knew right away I was doing something wrong. I was loosing money because we were selling the same bedroom suite (same quality) and I actually delivered better service, which of course cost me more. I was giving the customer all 3 things he wanted, high quality, great service, and low price). I realized it would not be long before my increasing overhead would cause me to operateting in the red.
Shop your competition. Shop the most successful and the least successful. See for yourself that the higher priced seller is more successful. The success sellers have figured out you can not give the customers all 3 things they want.
For those of you that are reading this and saying, “Bob does not know our market, we cannot increase our prices!” Look around you, unless you are in a very depressed area, there are high priced sellers selling every kind of product and service. Do you have a gas station/convenience store in your area? Their prices are 100’s of percent above a grocery stores. They get those high prices because they deliver what is more important to the customer than price, they deliver the service of convenience.
Diminish the importance of price with the use of Benefits. The more benefits you give your customer the less price is a determining factor in the purchase of your products and services.
When my customers say, “Your price is too high!” I use a technique my father taught me to turn the conversation to the benefits I give. I agree with them and then offer them a reasonable explanation why my price is higher than the competition or higher than they are thinking it should be.
I say…“I understand how you feel, and yes it is a few dollars higher. That is the same way all of these satisfied customers felt (give names) before they realized the value of the extra benefits we provide (name benefits) more than out weigh the few extra dollars,”
If the customer tells me they do not want the benefits I offer, but instead want the lower price. I have a decision to make. Should I take away the benefits and sell at a lower price? One day I was selling a washing machine and the customer was beating me up over price. Finally I asked him how much he wanted me to take off the price for him to buy the machine. He said $10. I said fine, I will take $10 off the price if you take the machine with you. He agreed. This was a win fall for me. One of our benefits we offered was free delivery. It cost us $35 to deliver a washing machine. I was making an additional $25 by reducing the price. That is called negotiation. When you give something you get something. In this case I was giving a lower price but I was getting the customer to take the machine with him.
You can only give the customer 2 of the 3 things he wants. You must decide which 2 things well enable you to increase your sales and profits.