I sit in many a group that deals with issues that face all small businesses. I get it, you want to keep your doors open and if you are a service-based business, you need the clients to keep walking in. I understand that. I know the fear that you face when you hear that a company that does that exact same thing is opening within 5 miles of you. You freak out.
They are running a special. They are selling their services for 75% of mine.
What do you do?
Take a minute, breathe and think about it. What runs through your head in those moments?
One of the thoughts that runs through our minds, out of fear, is the idea that we should lower our prices. We have to stay competitive or everyone will end their time with us and go to the new, shiny place just 5 miles away. I hope that before you make that plunge you think about two very important things.
- Do you provide the same, more, or less value than the new place you are not competing with?
- What are you NOT doing that would cause your current clients to leave?
Through many of the books, podcasts, and other business resources that I have access to, dropping your prices only makes sense if you are admitting that you offer an inferior product than the other person. If you look at it with a critical eye (and not an over-inflated sense of value), can you truly say that you offer more to your clients, then why would you even think about or worry about dropping your price?
Keep your price relevant to YOUR value, not the prices of a competitor. It is a race to the bottom then if everyone wants to undercut everyone else. It is a slippery slope that ends with people out of business. Everyone is out of business, not just you. Set your prices based on the value you provide. If you have superior talent working for you, that increases your value. If you have more programs that are of high quality and unique, that adds value.
Clients want access to that value and are willing to pay for it. If someone is basing their decision on cost alone, that is probably not a client you want. I can guarantee you that they will not be taking the time to refer anyone to you. Those people who base everything solely on price are not who you build a solid business foundation on; they should not be the core of your business. They are the ones that will leave when the next deal comes to town. Loyalty is a foreign term to them.
So should you drop your prices? I wish I could tell you yes or no, but all I can honestly tell you is that you need to look at yourself with a critical eye and see what you are offering. If everyone is providing more than you for less, you might have to explore lowering the price to be competitive or you have to up your game. Start finding ways to add value to your offerings that no one else is. Find opportunities to not be cookie cutter and the same. Start seeking ways to be different. Find a different crowd to cater to, find your niche, be the business that focuses on philanthropy or some other area that gives you a unique selling point and perspective.
And second…and almost as important…FOCUS ON YOUR EXISTING CLIENTS!
I cannot tell you how crazy I think it is to spend all your resources and energy on the clients you do not have already. I sit back and see all the switch for free ads and laugh. Why are you spending all your time going after people who are content? How many times do we see (and I have been guilty of this) specials for new clients only?
How do you feel when you see that as someone who has been a paying user of that service for years? I’m looking at you cable and satellite companies! Switch now! Leave your tribe!
I would encourage you to take care of the clients you currently have and spend less time worrying about the one’s that you don’t! Do you know their birthdays’? Do you know when they have a major life event? Do you reward them for being a loyal customer and sticking with you, even when you had some growing pains? Or do you rely on ads to bring in new people you have to convince should be using your product?
If you take care of your current members and clients, they do the selling for you. They bring in people that are already wanting to buy your services. You do not have to convince them, you simply have to continue to be you. They expect the same treatment and service that you are giving the person who referred them. And since you are already crushing that relationship, it should not be that hard!
But we do not do that. We focus on the other fish out there in the sea and neglect the ones that we have already caught. We neglect the one’s that are already putting food on the table and keeping the lights on. So we work harder than we have to…dropping prices so that we have to have more clients to reach the same goals.
And I will not even touch on what happens when existing clients hear about the cheaper rates…because we all know they love paying more for the same thing.
Start thinking about your business from the perspective of the value you provide and charge accordingly. Be able to back that cost up and own it. The people who get it and understand that are the people you want. Take care of them and your business will grow. Be patient, and enjoy the ride. It is worth it!