I recently posted the following on my Facebook page:
“When you sell on price you are a commodity.
When you sell on value you are a resource.”
One person suggested: “So let’s lower the price and raise the value.”
I replied that in certain very specific situations, that works. Not too often, though.
By and large, when you “compete” on price, it’s a losing proposition for everyone involved.
Yes, everyone. Obviously for the one who didn’t get the sale because…they didn’t get the sale.
But, also for the company that did get the sale. After all, by lowering their price, their profit margin shrinks. It is harder to service the account, invest money in other necessary areas and, if they do this too often, perhaps even to remain in business.
Key Point: And, when someone buys from you only because you had the lowest price, they will be “loyal” to you only until someone comes along with an even lower price than yours. This is commonly known as “the race to the bottom.” Again, it’s a race that everyone loses.
Everyone? But, what about customer; they certainly didn’t lose.
Actually, especially the customer. When their vendor can not afford to service the sale, they lose. When their vendor goes out of business, they lose.
On the other hand, when you sell based on value (not just the intrinsic value of your product or service, but the entire customer experience), you have added much more in “use value” to their lives than what they paid, while also making the substantial profit you deserve.