Pressure on prices - are you driving to the bottom?

The Alternative Board

Competitors forcing you to reduce your prices? Your own sales team constantly pushing you to offer bigger discounts?

I hear this a lot on my TAB Boards and I question whether this is simply a slippery slope to the bottom and not actually the answer that customers are looking for.

On the high street where I live there are 2 independent butchers. I have been going to one of them, Roger, for years.

About 6 months ago I went into the shop and found Roger altering all the prices on his chalkboard.

I made a joke about him putting his prices up and got a very grumpy response that he was reducing his prices because Dave down the road had reduced his and he was worried that he would lose customers if he didn’t.

I told him about a TAB member I had and the work that I had done with them following the advice they had received from their TAB Board.

They were a company who sold spectacle frames to opticians. I had done some work with them helping them define their strategy and vision and they then wanted to look at why their turnover was static and their margin was dropping.

I started by interviewing their 12 sales people to try and understand what they thought the issues were.

11 of the 12 said that they needed lower prices and better discount structures to offer both existing clients and to attract new ones.

The last salesperson I interviewed said she never discussed prices with customers until they came to order.

Interestingly, she was the only salesperson who hit her targets every month.

She sold by finding out what her customers wanted most, she identified their pain points and solved those.

Invariably price was not on their list. As a result of this the Company surveyed everybody on their database (existing, lapsed and potential clients) and asked what they wanted most from a supplier. When they collated the results, they found that price only came in 4th on the list.

Top of the list was the ability to order smaller quantities, followed by the ability to swap out frames that did not sell with frames that were selling better.

Solving these 2 issues meant that it gave a reason for a salesperson to visit more often (building relationship and trust) and increased turnover by ensuring the right products were in the right locations.

The Company changed their approach by finding what the pain points were, solving them and not “guessing” it was all about price. As a result they attracted new customers, increased the turnover from existing customers and increased their margin.

Happy customers, happy salespeople and a very happy business owner! After a few months, their competitors copied their approach but instead of relying again on discounts they asked their database again.

They got another list of pain points (price came 5th this time) and they tweaked their offer again. Roger then asked me why I went to him rather than Dave. I told him it was about quality and provenance not price.

Roger stopped changing his chalkboard and started speaking to his customers about what they wanted.

I went into Roger’s shop yesterday. On his walls were awards for his meat and full details on where the meat came from……

I had plenty of time to read them, the shop was packed!