Compete on Value, Never on Price

Four-letter words…good or bad?  There are some that I love and some that are quite dangerous.  Marketing maven Sarah Petty shares her disdain for a certain four-letter word…


SP:  There’s a four-letter word killing small businesses in America today: S-A-L-E.

Small businesses can never compete on price with the low-price focused big box retailers. Yet many small businesses have a knee-jerk reaction when business gets slow and announce a sale to drive traffic into their location. Here’s why having a sale can HURT small businesses more than it can help…

1.    Devaluing Your Brand: Sales devalue your brand in the long term, cheapening your reputation and the value of your products. Once you sell a $100 item for $80, it becomes difficult to convince consumers that at a later date your product is again worth $100. When you are having a sale, you are sacrificing the short-term revenue for long-term profits.

2.    No Loyalty: Sales attract the non-loyal, price sensitive buyer to your business – not the type of customer you want. Shoppers who  are making their decision based on price are going to be fickle and leave you for a better price next time.

3.    Patience is Not Always a Virtue: Sales teach your best clients to wait for a sale and therefore cut into your profit margin. The next time your favorite client considers spending money with you, you don’t want them deciding not to because they know you have a sale coming up down the road. Many businesses at the end of the year show a net profit of less than 20% so when you take that right off the top, it will become more and more difficult to run a profitable business.

In a slow economy, people still have money to spend and due to the added stress in their lives, they want MORE for their money, not less. If you are constantly discounting, you won’t have any budget to do all of the extra things that keep your clients coming back for more. So, instead of discounting, think about how you can add value for your clients and attract non-price sensitive buyers.

1.    Add Value:Use value added incentives to drive traffic into your business. The folks at Clinique makeup do this well. They train us that several times a year, when we come in and invest a certain amount on makeup (usually around $30), we will receive a goody bag of product samples. This not only creates loyalty but it cross promotes their other products through the use of sampling. Think about how you can offer a free gift when your customers invest a certain amount with you!

2.    Be Charitable: Be sure to work with local charities to expose your business to highly qualified prospects. Have an event or sales promotion and invite the charity’s database to come. For example, during one day, when someone purchases a photography session, $50 will be donated to the charity. All of the people who give to the charity will be moved to invest with your business because you are community-minded and you are giving back to the charity they love.

3.    Partner: Partner with other local businesses. This is the best way to create a demand and get people excited about you and your products and services.

It is painful to sit by a phone that doesn’t ring. The key is to focus on using value-added incentives and partnering with charities and other local businesses, you can not only survive in this economy but strengthen your long-term foothold in your market.