WHY HIGH PRICES ARE EASIER TO SELL THAN LOW PRICE.
Are You Capable of Delivering What You Promise?
Before I delve into this topic, it’s essential to clarify that this discussion applies only to authentic products or services that truly deliver on their promises, without any misleading claims.
Now, let’s explore why selling at a higher price is often easier than at a lower price. If we examine most products or services at the lower end of the market that have the potential to scale into significant businesses, it’s likely that they are already under the control of major corporations. If you manage to offer something at a lower cost than these big players, chances are someone else will eventually undercut your price. In the business world, being the cheapest isn’t necessarily an achievement to be proud of or boast about.
Less Competition At The Top
Observing the higher tiers of your industry, you’ll notice significantly fewer competitors. Would you prefer to contend with thousands of businesses or just around a dozen? The critical inquiry is whether you can offer greater value and perform more effectively than these approximately twelve players, who are likely well-established and dominant in the upper echelons of your sector.
This brings forth a strategic consideration: positioning oneself in a premium market segment not only reduces the number of competitors but also challenges you to elevate your quality and service. It’s about asking yourself if you have the capability and innovation to not just enter but excel in this exclusive space. Dominating a niche at the top requires not just competing on quality but also continuously evolving to stay ahead. It’s a dynamic environment where the focus is on excellence and constant improvement rather than just competing on price.
Do You Have The Confidence In Yourself To Charge More?
The interplay of fear and confidence often determines whether businesses find themselves stuck at the lower end of the market, competing primarily on price and ultimately becoming just another commodity. There’s no inherent issue with this approach, as evidenced by the success of pound or dollar stores. However, it’s crucial to reflect on your aspirations: consider the market segment and type of clients you ideally want to serve compared to those you are currently serving.
This introspection is essential for business growth. It’s about understanding your unique value proposition and having the confidence to position your business accordingly. If you believe in the quality and distinctiveness of your offerings, you might find greater success and fulfilment in targeting a more discerning customer base. This shift requires not just confidence in your products or services but also in your ability to communicate their value effectively. Ultimately, the decision to move upmarket should align with your business vision and goals.
Case Study Of Dog Food Company
Several years ago, I collaborated with an online dog food retailer whose sales were around £3 million, yet net profits were a mere £136,000, which seemed quite low. The business suffered due to a vast inventory aimed at catering to a broad market, resulting in substantial loans, high storage costs, and hefty payments for Google advertising.
To address these challenges, we significantly narrowed the product range from over 30 varieties to just six, specifically targeting certain types of dogs. This process of rebranding and repositioning the company as a specialist in dog food took about seven months. We also increased the prices of these products threefold, enhancing their appeal in the process.
A year after implementing these changes, the company’s overall sales decreased to £1.63 million from the initial £3.2 million. However, more notably, the profits surged to £413,000 from £136,000 within the same period. This shift illustrates the impact of specializing and value-based pricing on profitability.
Not Trying To Impress You But To Impress Upon You The Importance Of Price.
My intention isn’t to impress but rather to emphasise the significance of pricing strategies. It’s about making a strategic decision: do you continue to operate in the lower end of the market, or do you have the confidence and courage to shift to the upper market segment?
In the premium market, the competition is less about price and more about value, with only a few competitors to contend with. The question is, are you ready to make that leap and compete on value rather than just on the power of price?
The Value You Offer is Crucial
The value provided by your product or service must exceed the price you’re charging. Defining this value depends on your understanding of both your customers and what you offer, as well as your ability to effectively communicate this value.
As an example, a client I worked with was later acquired by one of his suppliers, three years after we repositioned his business. The sale price exceeded his wildest expectations. He continues to work with the new owners on a retainer, a success he attributes to his willingness to target a more upscale market.
Ultimately, the decision to either remain in your current market position or to venture into a more upscale market rests solely with you. It’s a choice that can define the future trajectory of your business.
If you’re thinking about elevating your product or service to a higher market segment and would like to discuss this over coffee or a Zoom call.
please use the following link to schedule a meeting with me.
https://moenawaz.com/coffee-with-millionaires-mentor/
Moe Nawaz
