Edmonton Business Coach | Why Lowering The Price Is Not The Answer
Hi there! Welcome back to the Inspired Method YouTube channel where you’re Edmonton business coaches, Trevor and Karen Samons, and today’s topic is lowering price is not the answer.
Here’s a quote from Zig Ziglar, one of my favorites: “It is unwise to pay too little. When you pay too much, you lose the little money, that is all. When you pay too little, you sometimes lose everything because the thing you bought was incapable of doing what it was bought to do. The common law of business balance prohibits paying a little and getting a lot.” So true.
Business Failure Statistics
Here’s a quick statistic we want to share with you, and it’s something that keeps us going day in and day out: 50% of all Canadian businesses will go out of business in the first five years, and 29% of these failed businesses will list running out of cash as the main reason for their failure—making running out of cash the second most common reason for business failure.
Story: The Myth of Price as Top Priority
That is huge. Here’s a quick story. Business owners think that price is the thing that customers value the most. I’ve seen this so many times with different businesses.
As an Edmonton business coach, we’ve talked to people and asked, “What do you want to do?” and they say, “I want to be the cheapest out there. I can outbid anybody else in the marketplace, and that’s going to make me win.” I spoke with a guy last week who was looking for an Edmonton business coach, and his thing was, “I am the cheapest.” I said, “Okay, then you’re going to go out of business first,” and he was kind of shocked. He said, “What? What? What?” I told him, “People don’t just buy on price,” and we’re going to talk more about that.
Example: Nissan Versa
Why do you like to talk about the Nissan Versa? Because it is such an amazing car. It is just the best. No, I’m kidding. The Nissan Versa is the lowest cost-of-ownership car on the market today and actually has been for several years. If price was the only reason people bought a car, everyone would be driving a Nissan Versa. Do you drive a Nissan Versa? I saw my first one yesterday. They are a very small little car; they look inexpensive, cheap, and I could not buy that car for me and my family, and we just have different needs. Because you have different needs and your customers have different needs, price is not the main factor.
Personal Preference & Status
A good example of how price is not number one is personal preference. People like to feel special, have status, and prestige, and we all have different tastes. Because we have the ability to purchase what we want, it’s all over the map. People will usually go to the higher end of their personal budget or preference when buying clothes. Think about your cell phone. Even if you can’t afford Rice-a-Roni, you probably have either an iPhone or a Samsung Galaxy or some kind of fancy phone, but the type of phone and budget was not the contributing factor.
Otherwise, you would have a flip phone with maybe a camera and maybe be able to send or receive an email, and that’s about it. You would not have a fancy phone with all these apps and games and widgets and all the things that come with a smartphone. Do we even make calls on our phones anymore, Edmonton business coach? I know a guy who was homeless, sleeping on couches, but still had a cell phone with a plan. We’re not giving up those phones.
Hard Facts for Businesses Selling on Price
Edmonton business coach, what difficult facts do business owners who can only sell on price have to face? The difficult fact is if you want to be the low-price offering in your market, there’s always going to be someone lower. There will always be someone who wants to be the lowest-priced option for whatever is out there. You need to come to terms with that. You need to price yourself based on value and then over-deliver so that you can demand that price. This is the advice I give my Edmonton business coach clients.
Cutting Corners on Time & Products
If you continue to sell on price, will you have to cut corners on time and products? I’ve seen it many times in construction—people come in saying, “Oh yeah, we got the bid, we’re the lowest price.” So many times I’ve seen bad things happen when somebody wins based on price because they don’t show up on time, they’re not committed to the job, they run out of money halfway through and abandon the job. Then the general contractor has to find somebody else to pick up the slack, which usually costs more because they went for the lowest price offer. That is a sure way to fail and go out of business faster than anybody else.
Affording Quality Team Members
If you continue to sell on price, will you be able to afford team members? That’s pretty self-explanatory. If you don’t make enough money to even pay yourself, how are you going to pay for good quality people? You won’t be able to. A good business with good people requires a certain level of revenue. If you don’t do that, you’ll have low-quality people who may or may not show up on time—or show up at all. They might steal from you, talk rudely to your customers, or steal from your customers. If you’re not able to pay the right people the right price, you won’t survive. That’s just the way it is.
Are Price-Focused Customers Bad Customers?
Here’s another question: Are customers who only value price generally bad customers? Typically, people who are really tight with their finances—cheap and always looking for the bargain—are your biggest pain in the butt. They’ll want everything for nothing, expect the most, pay the least, and give you the most headaches. If you want to be the lowest price offering in the market, then those are the customers you’ll deal with. People who pay the least are the biggest pains in the butt.
Features & Functionality
Do people value features and functionality? Yes, absolutely. For example, we had the privilege of using a Volvo for a month. It was great—thank you Volvo Edmonton. It had bells and whistles, a touchscreen, climate control, adjustable suspension, a moon roof, everything. We’d love to have that in a new vehicle because it makes driving more enjoyable. It makes you feel more special. When you put on nice clothes, you stand up straighter and feel better. It’s the same when you have better features and functionality on products and services you buy. You feel good, you feel a sense of pride of ownership.
Reputation Matters
Do people value reputation, Edmonton business coach? Yes, reputation matters. It can take a lifetime to build, but can be destroyed in minutes. That’s why reviews are so important for your business—five-star reviews, as many as possible. Then, when that one hater or angry employee tries to sabotage you, you have a lot of goodwill to counteract that. Reputation is huge.
Speed & Convenience
Do people value speed and convenience? Absolutely. People like to get in and out quickly so they can move on with their lives. Nobody wants to wait in line all day just because they love to wait. Even if you have a nice car like a Volvo, you don’t want to sit in it all day in line.
Customer Experience
Customer experience is likely the most underestimated consideration. Being in marketing and business coaching, we see how huge it is. Customer experience is paramount. I like to point out when it’s done right and also when it’s not up to par, because I want to give credit where it’s due. If I can help someone improve, then I’m doing my best to provide a solution.
Conclusion
Thanks so much for joining us here today on the Inspired Method Marketing Edmonton business coach channel. Don’t forget to subscribe, like the video, and comment. We’ll see you on the next video.