Startups have a lot in common with small business and ecommerce sellers. The advice below from my friend Flavio Martins can be applied universally to all business in the 21st century.
You can’t compete in price when you’re starting out. The big players, already established, have greater leverage on pricing. They undercut, lower prices, offer discounts, offer freebies. They can afford it. You can’t. That doesn’t mean you can’t compete.
If there’s one thing successful startups have shown us is that you don’t have to come out of the gates with the lowest price in order to succeed. You have to add value to what’s already available to customers.
From the customer’s point of view, your company or brand exists only to create value for them and to provide them with results.
Having the LOWEST PRICE is the sacrifice you have to make for not having the HIGHEST VALUE.If your service or product offering adds value to what is already available in the marketplace or if the value is added by offering something that’s not found anywhere, you don’t need to be a low price leader. The lowest price is the last place you want to be in to compete because it’s too vulnerable to too many variables. Supplier costs, shipping costs, and competitor pricing, are dangers lurking and could potentially knock you out of your lowest price leader in a split second. If you’re focused on the greatest value, your main concern isn’t managing the external variables that could affect price, but are focused on adding what matters to your customers to your offering. There’s little to be concerned with price as long as you set it at fair market value.
Loyal customers want value because your offering is an investment to them.One of the arguments in pricing strategies is that if you don’t have the lowest price, people won’t buy. It’s false. If you don’t have the lowest price SOME people won’t buy. But in the end, who are those customers? Customers who shop solely based on the lowest price can never be loyal to brand customers, because they’re loyal to price first. In the end, there’s always someone out there willing to make some crazy deal, even if it’s just temporary, and when there’s that possibility, those price-only focused customers will always leave for the lower price.
Value-based customers are your prime group for creating long-term loyal customers because value customers realize the potential in your offering. To value customers, your offering is an investment, one that they want to see mature because there’s benefit for them. They’re the ones who take time to give good feedback, work with you on product enhancements, and evangelize for you my marketing through word-of-mouth, one of the greatest (and cheapest) marketing tools startups have available.