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Countless times I’ve heard clients tell me, “I have a better product, I provide better service, and I’m sick of customers telling me my prices are higher than the competition. If only I could convince my customers that my product or service IS worth a slightly higher investment.” In this article, we’ll discuss principles, approaches and techniques that will help you to build greater value, a higher product/service perception and improved profitability.

The Lowest Price
Let’s face it- securing the business often boils down to the lowest price, in one form or another. Are you cheaper than the competition? If not, you may be up for a battle of the wills. No matter what price you quote, many customers will automatically say it’s too high. That response is so deeply drilled into their mindset that just about every product or service they come in contact with gets the same reaction. The trick is to get beyond the knee-jerk reaction and into a reasonable conversation about their situation, needs, budget, and time frames. Until you achieve that level of rapport, price itself simply isn’t the issue. 

Another facet of the price objection is the explosion of options every client faces. There are more varieties of products and more vendors to buy from than ever before. Multiply varieties by vendors and it’s clear that the total number of available choices has grown exponentially. This overwhelming amount of data can lead customers to making comparisons between options that aren’t strictly comparable- the proverbial apples vs. oranges debate. While the solutions being considered aren’t equal, the prospect is conditioned such that they can’t look beyond Price A vs. Price B. 

The “I can do it cheaper” Strategy 
An often used but ineffective strategy is the “I can do it cheaper” strategy. Why do so many small-business owners confuse low pricing with proper pricing? 

Maybe the answer is because it appears as though the easiest way to attract customers is by offering low prices. Perhaps another part of the answer has to do with the fact that low prices often work well for big businesses, and a distinction is not made between big and small businesses. 

We have all seen, however, small retailers go out of business after trying to compete with Wal-Mart or K-Mart on price. Even K-Mart themselves nearly bit the dust because of their aggressive pricing. Anyone who’s heard my show or seen me speak knows how I feel about cutting price. A great example was demonstrated when an Ikea decided to drop their price too far: Would-be bargain-hunters in London suffered heat exhaustion as a crowd of thousands forced a flagship IKEA superstore to close on opening night. Up to 6,000 people flocked to the opening of the store, which was touting cut-price offers throughout the 24-hour opening, including a leather sofa for £35 ($65) until 3 a.m. The company had expected 2,000 customers.
–CNN.com Think any of them will return? Maybe when they’re out of the hospital!

Harvard Professor Michael Porter, author of Competitive Strategy, tells us that “The presence of economies of scale always leads to a cost advantage for the large-scale firm … over small-scale firms.” 

So why do so many small businesses charge low prices anyway? Porter says that small business owners “may be satisfied with a subnormal rate of return on their invested capital to maintain the independence of self-ownership, whereas such returns are unacceptable and may appear irrational to a large publicly held competitor.” In other words, small businesses often settle for less profitability than their larger competitors.

Give them a reason to pay a higher price
Why should your prospect do business with you over any of your competitors? Especially those that have lower prices? Do you have a “wider selection than anybody in the tri-county area” or do you “deliver within eight hours after the purchase”? Often your unique competitive advantage is the biggest benefit you can offer your prospects, so consider including it in your headline, bulleted copy, or your guarantee. If by chance, you don’t have any unique competitive advantages, then you better get some…fast. Not having a unique competitive advantage with which to show value results in competing solely on price – – and that’s a losing proposition (unless you have a significant cost advantage).

As I noted earlier, “Your price is too high” is an objection we all hear. In fact, if you aren’t hearing it then your prices are too low, you’re leaving potential profits on the table, or you just aren’t doing enough marketing. There is no single, sure-fire, works-every-time solution to this problem, but there are lots of great ideas. The more arrows in your quiver, the more options for handling it– and the greater selling success you’ll experience.