All’s Fair When Avoiding Price Wars

As a soldier, what main characteristic did David possess that allowed him to defeat Goliath, who was bigger, stronger and more heavily armed?

Most people will say that it was his agility or speed. Just moments before the battle, David decided against suiting up with King Saul’s armor to maintain his mobility.

More important than these things, though, was his willingness and ability to choose the terms of the fight. Even though he was very confident in his physical strength (he’d beaten wild lions and bears in the past), he picked up stones and decided to take out the giant from a distance. I’m inclined to believe David would still have been victorious over Goliath in hand-to-hand combat, but there was no need for that.

He took a weapon he was skilled with and slew the Philistine champion before the fight even began.

When your small businesses square off against entrenched competitors… ones that are bigger, stronger, better-known and better-equipped than you… you can learn a few things from the young warrior David.

Setting up Battles Where Your Victory Is Inevitable

There is a strong temptation for look at your potential customer base and think, “If I drop my prices, more people will buy from me. That’s what everyone else is doing.” In most businesses, special offers mean discounted prices. Every conceivable holiday is an excuse to offer a sale. And some of your big competitors spend thousands or even millions of dollars broadcasting these discounts.

How can you compete with that?

Make no mistake: low prices are attractive. There will always be a market for cheapness. That’s probably the biggest reason why a huge percentage of startups open their doors with plans to become the low-cost provider for the customers they’d like to serve.

But unless you have the buying power of Walmart or its equivalent in your industry, that’s a tough fight to win.

Take a page out of David’s book. Pick your battles strategically. What do you offer that’s better than everyone else who is competing for the customers you want?

Your lunch menu is healthier than McDonald’s.

Your plumbing work is guaranteed for twice as long as anyone else in town.

Your T-shirt brand has been worn by more rock musicians in concert than any other brand this year.

Force The Comparison

In general, you don’t want a potential customer to be able to make an “apples to apples” comparison between your product or service and that of the guy who insists on cutting his prices to the bone. All other things being equal, the customer will buy the less expensive option.

You can’t allow other things to be equal.

It’s essential that you create some differentiator that forces the consumer to make an “apples to orange” comparison.

Your marketing and your sales people force the comparison between your product and the competition at the point of differentiation.

“Look how healthy our lunch menu is!”

“No one guarantees their pipework for as long as we do.”

“If you’ve been to any concerts this year, you’ve noticed how popular our brand is with your favorite rock stars.”

Juxta-position your product in a way that appears unique, especially if your product or service is seen as a commodity.

Create Your Own Category

Have you ever noticed how many different choices are available for chicken eggs at your local grocery store? There are probably dozen options (yes, I thought that was funny).

What’s really interesting is the price difference between some of the choices. For example, your “average” large eggs sell for $1.79/dozen at this particular store. Eggland’s Best Vegetarian eggs normally sell for $3.79/dozen. That’s more than double the price of your “commodity” eggs.

egglands price wars

How does that happen?

Eggland’s Best has capitalized on a key differentiator. This type of egg is in a distinct category: cage-free, vegetarian brown chicken egg.

This destroys the “apples to apples” comparison and forces the customer to consider whether it’s more important for them to save a couple bucks or treat himself to this special kind of egg.

Dutch Farms (the Goliath in this example) probably sells a lot more eggs at the much lower price. But Eggland’s Best (David) is carving out a nice corner of the market to dominate.

Can you think of a way to create a special category for what you sell? 


The Low Cost Leader’s Precarious Position

Competing on price is almost always a dumb idea. In every case I can think of, it makes more sense to differentiate in ways other than being the cheapest place in town.

I was given the opportunity to share some of my thoughts on the futility and danger of price competition (and the fear that causes business owners to adopt that kind of pricing strategy) over at the One Hour Startup blog. There are 3 articles; I hope you check them out. The feedback has been excellent.

[[ Update: The One Hour Startup blog is being merged with NinjaHobo. These articles are no longer hosted there. ]]

3 Alternatives to Competing on Price – What Dominoes Pizza, Babiators and iPhone lovers can teach us about staying out of the Bermuda Triangle of commoditization, where the only way to win is to be slash prices.

The Wife-Approved Pricing Strategy – If price is the main way to convince a would-be customer to buy, why do people regularly pay premium prices for some products? Here’s an example from my own wife. Oh, and Aston Martin.

Pick Your Battles Strategically, or All’s Fair When Avoiding Price Wars“…what main characteristic did David possess that allowed him to defeat Goliath, who was bigger, stronger and more heavily armed? Most people will say that it was his agility or speed…More important than these things, though, was his willingness and ability to choose the terms of the fight…When your small businesses square off against entrenched competitors… ones that are bigger, stronger, better-known and better-equipped than you… you can learn a few things from the young warrior David.”

While we’re on the subject, observe Chuck McKay as he destroys the low-cost leader’s argument in 33 seconds:



Marketing Wisdom Hidden in Christmas Movies

We watch a lot of Christmas movies at my house. A lot, like the DVR is 78% full just from Christmas movies.

Most of the time I’m too much of a tough guy (in my own mind) to admit that I like them, but it’s one of the ways my wife and I spend quality time together during the holidays.

Something interesting happened while we were working our way through hours of these movies this year. Some prominent themes jumped out at me as particularly helpful in terms of marketing and business growth. As you’re thinking about resolutions and goals for the new year, these ideas could very well impact how you move forward in 2014. Even if you’re too tough to watch Christmas movies.

1) If It Ain’t Broke…
How many versions of Dickens’ A Christmas Carol have been turned into movies (not to mention plays and books)? Dozens.

How many spoofs of the “I wish I’d never been born” motif from It’s a Wonderful Life have you seen?

And I don’t think I can stand to see even one more fake holiday relationship that ends in a marriage proposal on Christmas Eve, followed by the falling of winter’s first snowflakes.

These films are produced year after year after year. And we keep watching them.

One thing that becomes eminently clear as you pay attention what Hollywood is cranking out is that when something works, keep doing it. Too often, entrepreneurs and marketers feel the need to be original and creative. There’s nothing wrong with that desire, but why reinvent the proverbial wheel? The legendary David Ogilvy noted that most marketers “worship at the altar of creativity, which really means originality — the most dangerous word in the lexicon of advertising.” When you have a message that keeps generating the results you want, don’t throw it away until you find something even better. If a marketing channel is producing high return on investment, don’t abandon it to chase after the hot new fad. Always feel free to test, but don’t give up on anything that hasn’t stopped delivering.

Remember, business owners often get bored with their own marketing before their audience does.

Also, consider taking inspiration from what is working for other successful people and businesses. Modeling is one of the fastest ways to create effective systems, products, services and messages. Sometimes taking a shortcut is the smartest thing you can do.

Those who do not want to imitate anything, produce nothing.” ~ Salvador Dali

2) Envision The Alternative
I can’t tell you how many Christmas films I watched over the past month used the aforementioned motif from It’s A Wonderful Life (or the more recent Family Man). The protagonist has some sort of character flaw or they’re about to make a bad decision when they’re magically transported to an parallel dimension where they’re married instead of single, middle class instead of wealthy, etc. They’re “blessed” with the opportunity to see things how they should/could/would be if they did things differently.

This is precisely the purpose of your marketing. You need to create a vision in the mind of your prospect, showing him how much better his life will be when he starts using your product…how much he’ll miss out on if he will be if he procrastinates…the danger he puts himself in if he trusts the “low cost provider.”

Don’t hand out brochures or send emails or make webpages that simply state cold facts about your business, product, service or founder. Tell stories that paint a picture of the better future that comes along with what you have to offer. Answer the question “what’s in it for me?” thoroughly and vividly, from the perspective of the would-be customer.

“We did this” and “we have that” and “BUY NOW” probably won’t get the job done, especially if you haven’t already established a solid base of happy customers.

3) Don’t Buck Tradition
Christmas has more tradition associated with it than most other holidays, and many of the people who uphold them are borderline fanatical about keeping them. In several of the movies I’ve seen recently, commitment to these traditions often drive the plot forward and add structure, silliness or some other significant element to the story.

Roman poet Ovid noted thousands of years ago that “Nothing is stronger than habit.” Traditions are probably a close second.

Pay attention to your customers’ traditions and habits.

Attach yourself and your products to their currently-existing traditions; take a cue from Maxwell House’s Haggadah.

Make it easy to form a habit of buying from you.

4) It’s More Blessed to Give than to Receive
When you were a child, the holidays, including your birthday, were all about the presents you were about to get. In adulthood, most of us (especially parents) find that giving is much more satisfying than receiving ever was.

This concept doesn’t always translate easily into the business realm. We operate our businesses to gain a profit. That’s not just the way it is, it’s the way it should be.

But we should not base our decisions primarily on how we can extract the most money from the people we do business with. Rather, we should commit to giving as much value as possible to the other party. Then we set our prices accordingly. Always give more than you plan to get.

On Christmas day, a terrific story about giving was posted online. You really should listen to The Big Give, a 15-minute story by Jim Signorelli. A lot of things come into perspective as you listen to Jim describe one particularly memorable Christmas.


Why Money Matters Less Than You Think

What if I told you that marketing is not about money?

You may be tempted to call me a heretic. You might think there was a hole in my bag of marbles. Or you might call me a hypocrite, because the service I provide my clients (and hopefully the information I freely share with people like you) helps people make money through marketing.

But I’m neither crazy nor hypocritical. Maybe I’m a heretic, since I believe some things about business that a lot of people disagree with. If you can stand a few moments of marketing heresy, please read on. I think you’ll learn a few significant lessons.

Money Is Not the Issue

Last summer, I learned something profound from a brilliant business coach who was my client. Well, I was already familiar with the principle she was teaching, but the way she explained it had a big impact on me. She told me that when prospects don’t buy from you, or clients won’t pay the kind of fees you deserve, it’s not because of a lack of money. Money is not the issue. Rather, the issue is one of priority. The client has money, but you don’t get it because he sees more value in spending it on something else.

When it’s decision making time, priorities run the show. People will always find ways to pay for what’s most important to them. If customers aren’t buying or clients are hiring, your product or service is not a major priority for them.

Eugene Schwartz taught us that you don’t create desire in your audience. What you want to do is channel their pre-existing desire toward your product. The same is true for priorities. In general, you cannot establish the priorities of your market. They are self-generated. Marketing can’t change the priorities they’ve already set. At best, you can communicate how your product will help them take care of what matters most deeply to them.

That means that your message will, by default, not appeal to everyone, as not everyone has the same priorities.

For example, Olay products and Proactiv are both designed to help people feel better about the skin on their faces. But they appeal to different groups. Olay is big on anti-aging, something most teenagers aren’t worried about yet. Proactiv helps with acne, a problem that usually becomes less common with age.

Different audiences. Different priorities. Different marketing messages. Also note that people would hate pimples and wrinkles with or without million dollar advertising campaigns.

Price Matters Less Than You Think

When there’s been a bad car accident, no one is thinking about how much the ambulance company will charge. They’re first thoughts aren’t about insurance deductibles. When life is hanging in the balance, they call 911 as fast as they can.

This is an extreme example, but it makes the point very clear. The importance of price is inversely proportional to the strength of the desire or need. The only thing that matters about the ambulance is the speed with which it can bring medical attention to the people in the car accident. This one benefit outweighs every other factor.

When your product or service fills a need that strong, price doesn’t matter much.

If one ambulance can arrive on the scene even a few minutes sooner than the next “competitor,” would you complain that their price is two times higher? Would you ask the 911 operator to send the cheapest ambulance?

If you’re having difficulty selling your product or service, it’s probably because
1) you’re not selling something people want
2) you’re not giving them a good enough reason to buy from you (showing them how your product can fulfill one or more of their priorities), or
3) you haven’t built up trust. People won’t buy from anyone they don’t trust.

Price may not be to blame. And if you are selling what people want, helping them envision their top priorities satisfied by your product, and demonstrated your trustworthiness, price may matter very little.

Marketing Is NOT About Money

Marketing and selling are not essentially about money; they are points of connection.

You have something to give to the world in terms of talents, expertise, products and/or service. Everyone has multiple needs and desires. Marketing and selling are ways you connect people in need with solutions. Everybody comes out a winner.

If you do it right, marketing has profitable results. But money should not be the cause. The difference may seem insignificant, but I assure you that it’s not.

When money is the end goal, you may be tempted to resort to deception, hype, high-pressure techniques. You could fall into desperation. You may even consider selling products that suck in order to drive revenue up.

When your goal is connecting, you focus on showing your audience that you can help them get the things they want and need in life. You can show them how your strengths can be applied to areas where they need assistance. When your customers are what really matters to you, magic happens.

Make no mistake: marketing should make money. If it doesn’t, you’re doing something wrong, and you need to fix it. But when money becomes the driving force behind it, fear and greed have a tendency to creep in.

Remember what Peter Drucker said: “The purpose of a business is to create a customer.” He didn’t say the purpose is to make money. The truth is that if you make happy customers, you’ll be in the best possible position to earn profits.


You Need Help

I think my fees are very reasonable, but from time to time potential clients have accused me of charging too much for my copywriting services.

Yes, it’s true; you can hire a writer on Elance to write your sales page for $20. But chances are, you’ll get what you pay for.

Price is what you pay; value is what you get.

This morning my buddy John Breese sent me an example of someone who should have put more thought into who they put in charge of writing their copy.

This is a real example taken from a real website:

Can Everyone Take Creatine?

It appears so. I have seen no major problems with creatine reported in the literature, even in long-term studies. Yet, just to be safe, anyone with diabetes or kidney dysfunction should probably avoid creatine until further long-term studies are done. Some people do experience bad breath, flatulence, cramping or an upset stomach with high doses. If cramping occurs, just drink more water; for an upset stomach just ingest less creatine. Bad breath and flatulence are babyboomers’ companions anyway, so big deal. Take some mints and stay out of crowded rooms.

Here’s the real truth: no matter how much this copy cost (even if the site owner wrote it himself for $0), it was too expensive.

If your marketing or website copy looks like this, please get some professional help, before you lose anymore customers.


Arthur’s Advertising Wars, or Why You Don’t Want to Compete on Price

You can learn a lot from cartoons. I have 4 kids in the house, so I know.

Marc Brown’s classic cartoon Arthur teaches us a business lesson we should all heed. Competing on price is a losing proposition.

The entire episode is enjoyable, but the business fun starts about 5 minutes in.

So, do you still want to be the low price leader in your field?