Monday, 28 March 2011

Who Wins a Price War?

Aussie 100 Dollar
Who Wins a Price War?
I was running an MC Mastery workshop on Saturday and there were questions about pricing. In the industry some are charging 10 to 30% of what others charge.

I learnt early in the game "No One Wins a Price War".

Look at recent price fights with the supermarkets.  Milk prices are down, bread prices down and beer prices were almost down.  Supermarkets have long had "loss leaders" - products at or below cost to get customers in the store. They then make up the margin on other products.  Customers get the illusion of a bargain but suppliers get taken advantage of!  Dairy farmers make less profit per litre on milk than supermarkets do yet the farmers do all the hard work (I grew up on a dairy farm and know the large amount of work for the small amount of money).

CUB chose not to participate in a beer war but not selling product to the two major supermarkets. They also sent team members to buy back valuable brands of wine that were being sold below wholesale. Don't mess with CUB!

What about your prices? Once you have to start defending your prices, you are lost.  Put your efforts into showing your value and how much it is worth and you stay out of a price war. Show your prospect what they get for their money.  What intangibles as well as tangible products and services. 

This is the same for employees. Don't ask for a pay rise because you haven't had one for over 12 months. Justify your pay increase or bonus request by showing how much value you have brought the business.  Money you have saved, sales you have contributed to, and value you have brought to the business.

No one wins a price war, so don't even think about it. Focus solely on the value you are providing and make it a logical win-win decision.

No comments: