You may have seen the first article kicking off this series. Businesses are often drawn into price battles, and the purpose of these ten steps is to give you as much chance of winning deals when price becomes an issue – without simply dropping the price. In this article we explore your true price.
In IBM we used to talk about ‘Cost of ownership’. Much more important than what your product costs to buy, is what it actually costs the customer to own, run and use product. What’s included when they buy from you? What about the competition? What are they charging extra for?
If you can clearly explain the true cost of ownership of your product, then it’s also a good way of showing your knowledge and expertise. For example, a car salesman who understands and can explain the cost of running, insuring, taxing the car, and knows its residual value when you come to sell, has a better chance of selling a more expensive vehicle.
In many sectors, a cheaper price doesn’t mean ‘cheaper overall’. Airlines are a classic example. Budget airlines may appear cheap but then add in the extras (luggage, credit card fee, taxi from remote airport) and sometimes the ‘more expensive’ option looks better value.
There are all sorts of things to look at here. Products that last longer, are more efficient, come with warranty etc all command a higher price, for a good reason. Examine your product and be clear on the true cost to the customer. Do the hard work up front and find a value for each of these.
If you are still ‘more expensive’, set it in a wider context. In the case of the airline, setting the price of the flight in the context of the overall cost of a holiday reduces the impact of the price difference.
Take action: Examine the true cost of ownership of your product? Look at all the things you include in your price, things that other businesses may charge for. How expensive or inexpensive are you to deal with?
Coming next…. we look at whether you really need to compete on price.