What You Signal When You Move Price in the Wrong Direction

Lowering your price to compete with your competitor’s pricing sends a strong signal to your prospective clients. Unfortunately, that signal isn’t what you might believe it to be.

A Question of Value

You believe lowering your price will signal that you are a greater value, and that your dream client will believe they can have what they really want while paying less. You believe that a lower price will position you as an alternative to your competitor’s price, which some people will surely feel is too high. You know that some people will in fact buy based on your lower price.

But the lower price is a different signal to other people. Even though you may not like this, your lower price may be perceived as an admission that your offering isn’t as good or complete as your competitor’s offering. Some of your dream clients will see this as your capitulation, your surrendering the higher value play to your competitor. Those prospects who want the very best will often believe that something with a lower price is inferior.

Price is a Shortcut

Pricing is a heuristic; it’s something that lets us learn something for ourselves. When you buy something that you believe is a bargain and it fails to deliver value, you have learned that lower price often means  you are making concessions when it comes to value. When you pay more, you learn that things of higher quality tend to cost more, and they also tend to outperform similar items that cost less.

Like much else we do in sales, we project our beliefs about what we sell, sometimes unknowingly. A lower price can make it easier for you to acquire clients who care deeply about price. Many of these same clients believe price and cost are the same thing. A higher price can make it easier for you to acquire clients who care deeply about value, and who recognize that paying more delivers that greater value.

Pricing isn’t easy. But moving prices down may not accomplish what you hope it does, and it may cause longer term damage to your overall strategy. Moving prices up is a show of confidence, that you are flexing your value creation muscles, proving that you are in the same category as what might have been a higher priced competitor.

Make sure you move pricing in the direction that helps you accomplish your strategic goals.

 

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