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Competing on Price is Bad for Small Businesses
Don’t Compete on Price
When I ask many of our clients how they tend to compete in the market – many are quick to respond that they will be cheaper than the competitors. The pained look on my face usually gives me away. I am not fond of this strategy for small business ventures.
Economies of Scale
Most small business enterprises (SBE’s) don’t enjoy the economies of scale of a Fortune 500 company. They can’t spread their overhead over thousands of sales a day. They don’t enjoy the buying power of large corporations. The per unit costs of a small business tends to much higher than the 800 lb gorilla in the market, thus offering lower pricing will dramatically cut in to their margins and ultimately the bottom line.
Loss Leaders
A viable marketing approach is to offer low prices on staples with the knowledge that once you are in the store, the buyer is likely to buy additional products at standard prices. We go to the local supermarket because they offer lower prices on milk, but while there we add another 20 or so items to our cart, more than making up for the merchant’s costs of the reduced offer.
If you only offer a handful of SKUs to your customers – offering one as a loss leader – there aren’t enough additional items to make up the difference.
Value Associated with Quality
Put the emphasis on quality and service and the experience. Explore pricing that is based on the value delivered to clients. That gives you an incentive to become more efficient for your clients without constantly eroding your own income. Move to a healthy environment in which your interests and your clients’ interests are completely aligned. And make sure you are creating happy customer, not encouraging clients to ask why you billed 15 minutes doing one thing or another . . .
Understanding eCommerce
Understanding eCommerce is intended to help you understand what an eBusiness is as well as all the various components of Internet Marketing, Web Design, Search Engine Optimization and eCommerce.
We show you the products and ideas that we have used on our own web sites as well as some of the tips and tricks for other independent sources. We will introduce to you some of our services and how we can help you develop your successful online business should you require.
Related articles
- Ecommerce Sales Grow in 2010 as Inbound Marketing Adoption Increases (hubspot.com)
- Facebook is Great, But Does It Make Businesses Any Money? (readwriteweb.com)
- Small businesses look across borders to add markets – USATODAY.com (bjconquest.com)
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