Marketing mistake #1 – Selling on price

Selling only on price might be the biggest mistake in marketing your business. People do not buy solely on price – if they did there would not be companies named Armani, Montblanc, Bentley, Rolex or Dell. 

If price is the only reason people buy, salespeople would not have existed. Now, how many businesses can there be in the same neighborhood, if they all solely compete on price alone? The answer is – just one. Ask yourself this: why have businesses like Dion, Builders Warehouse and Makro joined with Walmart? 

It’s because they all compete on price. Now if Walmart does come to town (which seems like a real possibility) those businesses would struggle, because they are all fighting for the only life jacket on the titanic.

So what happens when you cut your price? Gross margin goes down, employee cost goes up and sales volume might increase or decrease. Most people think that the increase in volume will make up for the lost sales. It may or it may not. In fact you may sell even less, because of the lower price. There is no evidence, statistic or fact to suggest that your sales volume will increase by lowering price. 

However, one thing is certain: By increasing sales volume you have created more work and expense for yourself. Enough doom and gloom. What happens when you raise your price? One of three things. 

Your sales go up, your sales stay the same or your sales go down. If your sales go up you are making more more margin and profit on more sales. If your sales stay the same your bottom line increases. If your sales go down your bottom line may still move upwards, because of your better margin.

What if you can’t raise your price? Then your business will slowly start to bleed until you find a way to differentiate yourself. As a Harvard professor once said: “even toothpaste can be differentiated.”