10 Reasons A Retailer Would Be Crazy To Lead With Price

If you want to compete on price, think, think again. Not only are there are many, many bigger competitors that are already offering low price strategies that you would find hard to meet, you are setting yourself up for some extremely negative consequences.  "…You are saying price is your competitive differentiator and signaling the customer to be price sensitive…"* Here are 10 reasons why leading with price is bad for your (business') health:

1. Leading with price starts your negotiations off on the subject of price. 

2. It keeps the focus on price.

3. You have bypassed your opportunity to evaluate and speak to the customer's needs.

4. You have distracted from (or totally ruined) your opportunity to prove the value of your services or product.

5. You've missed the opportunity for your customer to feel grateful that someone truly listens to him/her, understands the problem, and tries to help find solutions.

6. Once you start with price, you have nowhere to go but down. (Unless you have a lot of customers that would be delighted to pay more than the original price discussed). 

7. The customer may tell your competitors about your price offer -- in an effort to get similar prices, look for a price match, or have you bid against each other.

8. Now your competitor knows your price strategy.

9. You may get into a price war, which is the last thing you want, as it lowers everyone's perceived value. A race to the bottom, as they say.

10. You create the spiral of ongoing lower prices and encourage the customer to continue to ask for, expect, and haggle over prices.

I recommend several articles on retail pricing strategies; and 8 secrets to setting your competitive prices wisely.

Bottom Line For Your Bottom Line: 

Leading with price rarely works for any meaningful period and is frequently harmful to the health of your business. Your customers will be trained to ask for lower prices and happy to let the competitors battle each other for the lowest price.

With all the noise around price, you will lose the chance to tell your value story and explain why you are better. There's not much upside in any of that. A value-based pricing strategy will be much more profitable.

The whole purpose of using pricing intelligence solutions is to give you information and wisdom about your competition as well as pricing strategy guidance. It tells you what is happening in the marketplace, what your competition is charging for any particular item, whether they have it in stock, any additional promotions, information about shipping and other services, so you can see where you can price "right" to make the biggest profit. Even about lowering your prices as appropriate, if you happen to be way out of step with the market, and wonder why you're not making any sales.

*A Big Thank You to Scott Francis, Strategic Pricing Solutions: The Dangers Of Leading With Price.  Gilon  

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Gilon Miller, CMO

About Author

Gilon is a seasoned marketing, sales and business development executive with over 15 years of experience in the software and Internet business. He is the Founder and CEO of GuruShots. Previously, Gilon was the CMO of Upstream Commerce, VP of Marketing at iMDsoft and Director of Global Marketing at SAP. He earned an MBA at the MIT Sloan School of Management and a BS in Electrical Engineering from Tufts University.
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