Being cheaper at the expense of quality is expensive.
When is it okay to take a pricing strategy of cheaper?
It is NEVER okay, unless you are Wal-Mart or one of the very few business who can be assured of always being at the bottom.
So what does it mean to maintain a marketing position to be cheaper? Cheaper is where you have to go when you are not a very good marketer. Cheaper is not a good marketing/pricing strategy as it only has appeal in the very short term. Even free cannot last very long as an appeal to customers against seeking a position to enhance one’s market share.
If you find yourself competing on price alone, you will never win. Someone will always find a way to do it cheaper. That leaves out customer loyalty, too, because when you build a customer base based on price alone, then your customers will only remain your customers as long as you maintain the cheapest price.
Sometimes, being cheaper is actually funny.
Jeff Foxworthy, in one of his routines, explains his reaction when he saw a billboard touting the “Cheapest Lasik Surgery in Town!” Funny, but also creepy. The idea of taking your eyes under the knife by the one who will do it the cheapest is not one that would have much appeal to most of us. Yet, it is out there. A quick search on an internet search engine would confirm that such advertising is prevalent and intermixed with those promoting quality, safety and accuracy.
We often go shopping for the hottest new item but want to get it for the cheapest possible price. Entire industries are based on providing the cheapest product possible. But we all know how it feels when we have to return the new can opener, or combo VCR/DVD player because it just didn’t hold up or didn’t work in the first place. We know that buying the cheapest product is often not the best idea but we all seem to forget that while we are shopping and making the purchase commitment.
Why do some industries seem to live on being the cheapest?
Some insurance companies often use cheapest as an exclusive marketing feature. Many of us comparison shop the insurance company sites on the internet to see if we can get a better deal on insurance. There is always a market for cheapest insurance. There are two types of insurance purchasers: those who are shopping for the cheapest rate because they have to have insurance and don’t like spending any more than they have to. And there are those who ask friends and acquaintances for the ones with the best service because disaster has already struck and they found out the cheapest insurance was the next best thing to having no insurance at all. Shopping for the cheapest insurance seems like a good idea until you discover that when you need the insurance, the benefits were not provided.
Quality is the opposite of cheap.
The job of marketing, for any product or service, is to persuade the consumer that the quality derived from a product will meet or surpass the intended goals at a justified price.
In health care manufacturing, for example, being the cheapest is not the goal; being the most effective and consistent is – quality. Even at several dollars a day, a medical solution using a pharmaceutical product is more often preferable to a surgical procedure, especially if the risk of life is great for the surgery. A medical device which can run a process at several times the next best product’s best rate is worth far more than just the difference in manufacturing costs plus a normal profit margin. In such cases, there is a price elasticity that can allow a manufacturer to recover its developmental costs, increase profitability, and make it possible to get ahead on the developmental costs of future products. If such a product can reduce operating costs and operator time, it is worth far more to the customer than the incremental difference in manufacturing costs.
Website managers strive to keep websites fresh and click-through rates high for their customers. At some point, click-through inquiries can be factored against sales.
- Let’s say you have a website that earns about one sale per 100 inquiries. Now, let’s say you hire a firm who re-dresses your website and the result is you now get two sales per 100 inquiries. Good decision? Maybe.
- What if you turned down an offer to re-dress your website from a firm who guaranteed to quadruple your traffic and their cost was just twice the amount of the one you hired. Is it a good decision now?
Such things happen and the missing element in the negotiation was simply a lack of sensitivity to the quality of services rendered for the price quoted.
You want to have your customer value you and your company as much as you value them and theirs. Many small firms are made up of former senior executives – people of experience – who have chosen to form new organizations to stay close to customers and close to quality. These companies have made conscious audience and pricing decisions that allow them to remain small yet profitable, servicing a clientele that has a healthy respect for what quality that company can add to profitability. That, of course, is true for both client and servicing company. The prime goal of such a service company would be to be selective about their clientele. The clientele should be made up of companies who appreciate the importance of quality and are convinced that the difference in the quality makes all other efforts more efficient.
The quality of your company needs to be in everything you do from the presentation of your office, to your customer service, and ultimately in the quality of your product, service, or consultancy.
The true heart of American culture
Cheaper is not better. Better quality is better. Although the American way seems to be the desire for something cheaper, the heart of the American culture desires a better product and better productivity. That is the true competitive spirit. We all enjoy the fruits of our collective labor when we can be proud of the efficiency and quality of our products and services.