Competing on price is a race to the bottom. No matter what product or service you offer, there will always be someone else who figures out how to offer it for even cheaper. This is exactly why you never want to compete on price alone. Unless you’re Walmart, competing on price is the fastest way to kill your profits, and ultimately, your business.
When you compete on price, you become a commodity. You attract price sensitive customers who are loyal to the seller with the lowest price tag. What you want is to be in a position to charge a premium for your products or services, and attract customers who are happy to pay that premium.
How do you charge a premium for your product or service?
It’s all about positioning.
In a recent interview I did with John Tighe, host of the Publish Position Profit Podcast, we discussed this subject in detail. John is an expert at helping entrepreneurs position themselves as authorities in their industry, enabling them to charge top dollar for their products or services. I highly recommend listening to our interview together, but for your convenience, here’s a summary of some of the insights he shared:
1. Get clear on who your ideal customer is
Before you invest time, energy and money creating a product or service, and then spending more time, energy and money marketing it to the world, take some time to get clear on who you ideal customer actually is. Who would you happily serve, and who would happily pay you top dollar for helping them?
Talk to your ideal customers. Seek to understand their needs, desires, pain points and frustrations. When you truly understand your customer, you equip yourself with the knowledge necessary to find or create a product or service to help them.
2. Get your message in front of them
Once you know who your ideal customer is and you have a good understanding of what result they want, you can begin to craft your message and publish your message using a medium that is most likely to reach them.
Fortunately, we live in a time where technology enables us to publish our message in many different forms for little to no cost. Blogs, books, podcasts, social media, and live speaking are just some of the ways you can share your message, build an audience, and earn the trust of potential customers.
3. Differentiate yourself from your competitors by becoming an authority
No matter what industry you are in, your ideal customer likely has several different vendors competing for their business. Differentiating yourself from your competitors is critical. Don’t bother trying to be like someone else or model their business exactly. Be authentic. Be unique. This will enable you attract customers who choose to buy from you because they like your style, what you stand for, and recognize the value of what you offer.
Remember, you are a brand. Your personal brand is what people think of when they think of you. You need to position yourself in the mind of your prospect as somebody who is valuable – as an expert, as an authority.
As an entrepreneur, your reputation and perceived value in the marketplace is determined by the people you associate with. Increase your perceived value by aligning yourself with high-profile individuals and experts in your industry. By associating with people who have authority, by default, you increase your own authority.
“If you publish your message to the right people, and position yourself in the right way, the profits are going to flow from that.” – John Tighe
I hope that you will avoid competing on price along and becoming a commodity in your industry. The truth is people will pay whatever you ask for something they really want, and the more they pay, the more they value what they purchase.
This is a point worth remembering, especially if your business consists of helping people obtain specific results (coaching or consulting, for example). Higher prices attract people who are more serious, and more committed to achieving the result they want. They are willing to invest in themselves, and often take pride in paying a premium. The belief that “you get what you pay for” is still alive and strong. Charging less than you know your products or services are truly worth projects a lack of confidence in the value you provide.
Do yourself a favor. Increase your authority, then increase your prices. You will attract more serious buyers, and force yourself to step up your game and provide more value to your customers.