In this third article in the series, we look at whether you really should be competing on price, or whether it’s your customer who is encouraging you to do so. To see the other articles in this series, type ‘Competing on price’ into the search function on this website, or click here to see the first article in the series.
It’s usually in a customer’s interest to look at what you are offering as a commodity. If they convince you it is a commodity, then they have greater chance of driving your price down. But there could well be things about what you do or offer that they really do value, things that make it anything but a commodity.
A while ago my wife and I looked into building our own house. At a ‘Build your own house’ exhibition we met all sorts of potential suppliers including a business selling hand-made bricks, which were considerably more expensive than regular bricks. Walking into the show that morning I believed a brick was a brick and that the price differences between them was going to be modest. But the chap selling the hand-made bricks was convinced that his bricks were different, because they added significantly to the value of the house we were building, and relative to the cost of the land, and other costs, bricks constituted a relatively small part of our expenditure. In other words, he was deciding that they weren’t a commodity, and was pricing and selling them accordingly.
Do the same for your product. If there is additional value, or a point of difference in your product make sure you and your team can articulate that, and put a value on it.
Take action: Decide whether your product really is so price-sensitive. Compete on your terms, even if your customer is suggesting otherwise.
Coming next…we look at a great question to ask your customer