Should your e-commerce business compete with other companies with price or focus on sustainability by competing by value? This article speaks about the disadvantages of competing on price and why brands should switch to value instead.
Customers are willing to pay more for a product if they believe it has significant value and it is sold to them in the right way. By selling your products based on value not price, customer service becomes the forefront of the business.
There’s an increasingly competitive marketplace within eCommerce hence the importance of highlighting the product value to consumers.
This article will talk about the disadvantages of competing on price and why brands should switch to value instead.
The article will cover
- Defining value
- The advantages of competing on value
- Why you should not just compete on price
- Why it’s better to win on value
- How to compete on value
Value selling is a technique orientated around how the customer’s life will be improved with the product or service, rather than the opposed price selling. This can involve anything from customer service, the value of the physical product or the commodity of the product.
Brian Tracy defines value selling as the “anticipation of enjoying the benefits of the items for a sale,” suggesting that their life will be further improved with the implemented item or service.
With value selling, you are selling everything that your brand represents and the customer service to go with it. This is crucial in making and maintaining emotional relationships with your consumers.
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The advantages of competing on value
- Easier for start-ups: as a start-up, you don’t have the facilities or volume to compete on price. Your profit margins will be small and your numbers will match. With value, you are more likely to build your company around a proper, trusted identity.
- Customer loyalty: with selling your products through value not price, you are also trading customer loyalty. Customers are shown to be willing to pay more for extra value and top customer service. By selling your product by value instead of price, you are providing the customer with a product or service that the customer will come back for.
- Value can be translated in a variety of ways to different customers: you can change this through product, branding, marketing, customer service etc. The value does not have to be tangible, the company just needs to know how to get their customers to see and feel it.
Matthew Stevenson for the Landscape Company states:
“If you are to win contracts when you are not the cheapest quote, you need to explain to people that if they get three quotes, they aren’t likely to all be for the same job in terms of the quality of materials and workmanship. Best price isn’t the same as the best value.”
Customers are willing to pay more for a product or service that works. Competing on price shows the market that you and your brand are a commodity and are worth the money they invest. Selling value is the only way to deliver long-term quality and quality.
Why you should not just compete on price
By competing on price is pretty clear that you lower the price of your service or your products. This is either through various discounts, sales and different marketing opportunities. All business costs must now be kept at a minimum, and any cost factors contribute to this.
Why you should not focus on just price
- Difficult customer relationships: Clients who shop for the lowest sales tend not to stop even once the sale is complete. These clients are stereotypically known to negotiate every sale and conversation.
- The customers are loyal to the price, not the product or the company: they are attracted by the price and stay for the price. If your price was to change, so would your audience. In addition, customers also demand the same level of customer service, if not more, when competing on price. The customers are not committed to the brand and will not recommend and review.
Why is it better to win on value instead of price?
As customers start to see your companies values, the price will no longer be a factor. What you are selling through your value is everything that encompasses the business, the product and the service.
From the second the customer enters the site, the branding, the marketing, customer service, quality of the products and the service, receiving the product or service – all add up to make what is called value.
Instead of dropping the prices in hope that the customers will be lured in, compete on value, ensuring that the quality of your products will leave the customers coming back for more. The more you focus on these company values, the less the price matters to the customers.
How to compete on value
As stated above, there are a variety of ways that a company or a brand can compete with other similar brands through value, instead of price. Competing on value allows your brand customer stability and predictability.
Here are a few ways to develop these values and ensure customer satisfaction:
Put your customers at the forefront of the business
By putting your customers central to your business, you are ensuring that they will receive the best service. As a brand you also ensure that the customer knows that they are the priority – and rightly so.
This includes everything from customer service, to brand engagement with customers, interaction, communication, contact, and branding. Every step of the way your customer will perceive your business in a particular way, based on the quality of your values.
Here are a few factors to consider when competing on value.
Building a relationship
Through your experiences with customers, you will inevitably develop a relationship with them – good and bad. The aim is to produce a relationship that the customer would like to invest in again, and would like to experience again.
Building this relationship between the company and the customer is vital for customer satisfaction and engagement.
A brand that has no relationship with the customer will struggle to ensure this emotional investment. A customer that has no emotional attachment to a brand will not be tempted to return, recommend or want to experience the same thing again.
Customer satisfaction and engagement
Customer satisfaction and engagement is just as important as selling the products. It fits under building a relationship with the customer, however, it requires different things.
Customer satisfaction ensures that the customer is happy with every part of the process of purchasing your product or your service. As a brand, it is your responsibility to ensure that the customer’s experience is a good one.
Customer engagement requires the customer’s to actively engage in your brand’s doings. This involves social media and communication of all varieties.
It is now more important than ever to stabilise your brand’s positioning in the digital world, where customers can engage – look you up, comment, like, share and get involved in lives and streams. Video commerce can encourage engagement and further customer satisfaction.
Convenience and service
A major reason why most people shop online is for convenience – there is no travel cost, and they don’t have to take time out of their day to do it. Online shopping is supposed to be easy, quick and convenient.
If your customer’s find it hard to communicate, navigate or understand your digital space it is unlikely that they will see the value in your brand, and therefore won’t be as willing to pay the price you are suggesting.
By making your service, quick, easy and convenient for the customer you are justifying the price they are paying and further reinforcing the value of your brand.
There are two possibilities when selling a product or a service in the commercial world – either competing through price or competing on value.
When competing by price, you attract an audience that is only interested in price, yet their expectations for customer service is still the same.
As a company, there is pressure not to withdraw too much of the margin to sustain these prices and the success of your business. Through pricing, you create an unstable relationship, both within the company and between the customer and the expert.
When competing on the price you are validating that your product is worth the amount the customer is spending.
By investing in the product, the customer should also invest in the customer service, branding, marketing and the overall perception of the brand.
Without value, there is little to no hope of the customer returning, regardless of whether your prices are low or not.
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Confer With specialises in transforming eCommerce stores with live video shopping. If you want to compete on value, come talk with us today.