Why selling on price is a Bad Idea

Is cheaper better? Sometimes. And sometimes not.

You walk into a shop. There are three pairs of shoes (for shoes, substitute your fetish). They all look similar. But one pair is £50, one £100, and one an eye-watering, wallet-withering £325. Which pair is best? Well, you say to yourself, there’s only one way to find out: try them on. So you do. The £100 pair is OK, but something doesn’t feel right. They’re not pinching, exactly, but something’s amiss. Like writing with the wrong hand. So you take a deep breath and try on the £325 pair. Good heavens, you think. Now that’s just bizarre: they’re your size, they’re reassuringly expensive, and yet they constrict your feet, crush your big toe and either one of your legs has suddenly grown three inches, or the heels are uneven. Well well, you say to yourself. More expensive isn’t better. Finally, you pick up the £50 pair. The shop assistant cracks a professional smile – the one she’s paid to do 9-5. But you know what she’s thinking: cheapskate. They fit beautifully. The leather is soft and pliant. Your toes breathe a sigh of relief. And your arches sing with happiness. And all for £50. Well well, you say to yourself. Cheaper isn’t worse. “I’ll take these,” you say to the Ice Maiden with a triumphant smile. She puts them in the box, scans the barcode, and her smile dissolves into perplexed confusion. “I’m sorry,” she says, “there appears to be a mistake.” She calls a supervisor. They scan all three barcodes. And then the penny drops. Oh, of course, they say. It was Sophie – the new girl. She put the price tags on the wrong boxes. Your heart is in your (as yet unpurchased) shoes. Knowing your luck, the right price will be £325. But it’s not. It’s £100. With unaccustomed presence of mind, you remember what your friend Margo told you. Under EU Directive something-or-other, subsection 32/573B, the displayed price is the price you pay. And if they say no, they can talk to your lawyer – in Brussels. And so, 10 minutes later, you stride out of the shop swinging a glossy tote bag with a pair of shoes inside. A £100 pair of shoes you’ve snagged for just £50. What just happened? Well, you’ve learned something about price:

Cheaper isn’t better.
More expensive isn’t better.
You’d rather that expensive was better – that way, you’d have got the £325 pair for £50.
First impressions can be misleading.
So can second impressions.

And (most importantly) price is often not related to quality, comfort or satisfaction.

A fistful of dollars

I’ve written about it before. There is no ‘right’ price. The right price is the one you set. Double it, and you’ll appeal to a whole different segment of the market. Halve it, and you’ll do the same (and in the process, you may discover the wonderful world of tyre-kickers). Never sell on price. At least, not on price alone. Yes, I know it’s the credit crunch, and cheaper is better, but there’s one problem. And it’s a Very Big Problem. However cheap you are, somebody can always undercut you. UK cut-price retailer Pound World discovered this recently to their cost. Pound World was a skinflint’s delight. The principle was simple: everything, but everything, cost just £1. (I visited a similar outfit locally and saw grinning, swivel-eyed customers scooping products off shelves as if WW III was just around the corner.) Then the inevitable happened: across the road, a 99p shop opened. One penny. And that was all it took to spell doom for Pound World. One penny.

What’s your secret weapon?

Of course price is important – and never more so now that we’re the icy grip of the global downturn. People want value. But they also want service. So make sure your price is fair, but add value by doing the simple things give people that little bit extra:

Answer email sales enquiries as if the person was standing by your desk waiting for an answer.
Smile before you pick up the phone. Keep smiling throughout that conversation.
Deliver before the deadline you committed to.
Give away something free: an e-book, 15 minutes of your time, a valuable marketing idea.
Give away something that’s not free, but brings in more customers – like UK fast-food chain Pret, which now has free WiFi across most of its branches. No strings attached (well that’s wireless for you, isn’t it?).

If somebody asks you ‘What makes you different?’ and your first response is price, think again. You don’t want to be the cheapest. Neither do you want to be the most expensive. You want to be the best. Because that’s priceless. Find out more:

In for a penny, in for a pound at Pound World.
Now that we’re credit-crunched, everyone’s your friend. But is it charm or smarm? Manners maketh the businessman at Economist.com.

Kevin Marketing, Pricing.