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Why Do Small Businesses Downplay Being Competitive?

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The hottest marketing idea in the news was the recent Amazon PRIME sale, where, for a day, prices were dramatically lowered for new and existing PRIME members. Advertised as “Better than Black Friday,” this was simply an online version of the “one-day” sale that your local department store would hold now and then; it’s been around for years. However, it’s hot, because it is perceived as being “new,” but also for showing a 200-300% increase in sales and generating a lot of new traffic for internet retailers.

In contrast to that, I have had small business and startup clients ignore the notion of a “discounted price” and “competitiveness” as critical factors in operating their business. For example:

  • One designed a new apparel product with small volumes and numerous special, but insignificant, details that brought the retail price to $30. But the general market price is $15-$20.
  • Another designer produces luxury accessory items made of beautiful fabrics for over $200 retail. The rationale is there are plenty items in that category that sell for over $200, however ignoring that most of those expensive items are from high-end names, and that the key prices for the item even in better retailers are $35-$100.
  • A third client, who is in the home textile industry, has specialized in printing small volumes of multiple styles in the United States. However, he is needs significant more growth to afford marketing programs to support his business. His real issue may be he is priced 30-40% higher than volume imports.
     

The excuse that these are a function of being small and just starting out doesn’t totally wash. I have another client who markets one of the same items as above. He sells direct, imports, and then prints blanks, has virtually no overhead or shipping costs, and has not even developed any internet effort .

However, focusing on word of mouth and low costs, in a few months he has built a $200,000 annualized business that returns 10-15% profits. We are helping him to manage his growth by helping to develop operational and marketing support.

The message here is you must be competitive, and be aware of opportunities. Some suggestions include:

  • Understand your competitor’s total offer, including product, service, shipping, and warranties as well as you understand your own.
  • Research Google and Amazon (at least!) for price comparisons.
  • Costs and costing can be as important as pricing. Volume discounts, packaging sourcing, and direct shipping can all dramatically reduce costs and, thus, prices without affecting margins.
     

In summary, be aware of the market place and don’t let your ego believe you can charge any price for anything. You need to be profitable, but you also need to be competitive. And, your price needs to be justified, not in your own mind, but rooted in reality. The internet has made prices for every conceivable item and service available for comparison to shoppers everywhere – so, you can’t hide your prices from your competition.

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