A well worn phrase that people of a certain age (like me!) will have heard many a time from parents and relatives in the past. Come to think of it, isn’t it interesting that all these old clichés that our parents repeat, and that we used to scoff at, turn out to be sound advice after all?!
I’ve found it fascinating to watch how so many businesses have moved their price position over the past year or so. With the economy in very sensitive times and now with a VAT increase to factor into the ever-changing fiscal landscape, there seems to be a theme emerging that suggests the only way to win customers is to discount prices.
Slash and burn tactics on your pricing are all very well and good… if you’re a market trader, selling poor quality items that people will only buy when the price point is ludicrously low. For the serious business person, attention to price point is even more critical right now and any changes need to be thought through with real care.
In seminars and with clients I’m constantly explaining to that price point is just like any other business-critical factor; you need to have evidence to make decisions on changing it. The biggest myth of all is that “if I reduce my prices I’ll win more new clients”. Of course this could be entirely true. If you’re over valuing your offer and if the marketplace doesn’t share your perception, then you’ll find it hard to attract buyers. However it’s dangerous thinking to believe that all consumers focus on price as a priority.
There are certain products, commodities like fuel, that are price critical but in the majority of cases the prospective consumer is looking not at price but at value. If you’re facing a challenge over increases in VAT and scratching your head to figure out where you can cut costs just to keep your price point static, then you should consider taking a very different perspective.
I’ve always taught clients the concept of stacking up value. It’s a remarkably simple principle, so simple that very few business owners ever do it. So here’s my sixty-second buzz session on it!
Before you rush to the calculator to work out how you’re going to factor in a new VAT rate, or rather, before you just decide to pass on the increase and blame Mr Osborne, stop and take a fresh look at your product or service. Then do two simple things:
- Break down the product or service into the separate parts and assign a nominal value to each. But rather than focusing on the £s value of each consider the benefit of each to the consumer. For example, if you offer free delivery look at how that saves the customer time and provides convenience. You should end up with a more comprehensive summary of the features and benefits and know how to articulate these – this is marketing!
- Then look at simple and low cost ways that you could add extra value to the product or service. The trick here is to add value that costs you less that the perceived value to the consumer. Write up the new added benefits in a way that will get your customer thinking.
This simple process is something every business should be doing in their six monthly review (what do you mean you don’t do a six monthly review?!). Essentially you’ll increase the perceived value in your product. If you’ve got fierce competition, then look carefully at what value you can add to your product/service to make it stand out, without cost you much or even anything.
Above all, don’t rush to chop your prices about, and don’t lay the blame for falling sales at the feet of a new VAT rate, as easy as that might be. Of course the good news is that if you take this more tactical approach the chances are that your competition wont be and you could end up grabbing more of share of the marketplace as a result!
One final thought on this subject; a student on our PUSH Marketing Academy recently learned this very concept and came rushing back a few days later to tell me how he had used value-stacking in a call with an enquiry. In the space of ten minutes he turned a request for voluntary services into an £800 sale and confirmed booking!