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Friday, 31st May 2019 | Sales,Marketing

What to do When Competitors Undercut Your Prices

When competitors undercut your prices, it’s tempting to engage in a price war. Here are some reasons why that strategy might backfire, and a look at some alternate battle methods.

What if a new player enters the market and starts charging a fraction of your price? When competitors undercut industry prices, it’s impossible to know what the impact on your business will be. But if your knee-jerk reaction is to lower your price, keep reading!

Before you engage in a battle with low-ballers, follow the steps below to understand why competitors undercut your prices, and devise a plan for combat.

Understanding The Pros and Cons of Setting Prices Low

Pricing is part of marketing strategy. It is something you establish intentionally. In order to understand why a company would go with a low-price strategy, it’s helpful to understand the alternatives. Here are the four basic pricing strategies:

Economy: Ideal for low price, low-quality products and services where the goal is to profit by selling a high volume.

Premium: In premium pricing, a high-quality product/service is set at a high price point. Sales volume will be lower, but profit margin higher. A good example is a luxury brand where the product or service is sold at a premium thanks in part to perceived value.

Skimming: Skimming refers to selling a low- to mid-quality product/service for a high price. This may seem counterintuitive because over time the brand’s credibility will suffer and sales will decline. The goal of a skimming strategy is to have a burst of initial sales.

Penetration: When a high-quality product/service is priced low, it’s referred to as penetration pricing. The idea is to gain market share by tempting people. Over time, the price would be raised. It’s a good strategy for a new entrant to a saturated market where you want someone to try your brand in the hope that they’ll remain loyal to you after you raise the price.

Hopefully, now it’s more obvious why a company would adopt a low-price strategy and your knee-jerk reaction to compete on price will be lessened. While buyers may flock to a business when prices drop below the competition, this won’t necessarily make them the victor. In some instances, a flurry of sales means quality cannot be maintained, and the reputation will suffer. The perception of the brand could also take a hit (a luxury brand competing on price is an oxymoron).

Before you engage in battle, be sure to revisit your marketing—and specifically your pricing—strategy (or establish if you don’t have one). There are many ways other than discounting to attract and retain customers. Here are four ways to do this:

Highlight the value: Instead of showcasing prices, bring your product or service’s value back into the spotlight to edge out your competitors. Focus on reframing your marketing and communications tactics to divert any attention from costs to value propositions instead. You could even go so far as to publish a comparison chart on your website to explicitly show how your offerings stack up in the marketplace.
Focus on the customer experience: Nothing beats exceptional customer service. Instead of reacting to predatory pricing, evaluate your customer service efforts by taking strides to improve every touch point and ensuring your customers’ journey is optimized end to end. More so than pricing, customers are likely to share stories about brands that go the extra mile.
Offer free resources: To build added trust in your brand, put more effort into content creation when competitors undercut your prices. By offering tip sheets, helpful videos, blogs, infographics, and other resources – for free – on your website and social channels, customers will come to view your brand as an authoritative one.
Modify your offering: If your competitors are all offering identical products and services, you can set yourself apart with a new type of inventory. Even the slightest variation can make you more visible in the marketplace by appealing to consumers who are looking for variety or stand-out products and services. You can even consider bundling your offerings for a slight discount without directly undercutting any competitors, but adding value and convenience for buyers.

If you focus on pricing alone when competitors undercut your prices, it’s likely that you’ll never win the undercutting war. Instead, differentiate using one or more of the tactics above. It is more effective and far less risky to stand above the competition by highlighting your business’s uniqueness and addressing customers’ pain points.

Navigating the Holiday Season: 7 Effective Strategies for Small Business Owners to Avoid Burnout

The holiday season, marked by festivities and increased demands, can present unique challenges for small business owners like you. Effectively managing the responsibilities of business operations alongside the personal and professional obligations of the holiday requires thoughtful planning and a dedicated commitment to self-care. Amidst the heightened demands, it is crucial for small business owners to adopt strategic approaches to prevent burnout.

Here are seven effective strategies tailored to help you navigate the holiday season with resilience and success:

Prioritize Self-Care:

Lay the groundwork for a successful and fulfilling holiday season by prioritizing self-care. It is common for business owners to prioritize their business needs over personal well-being. However, neglecting self-care can lead to burnout, impacting both personal and professional realms. Allocate time for breaks, ensure adequate sleep, and engage in activities promoting joy and relaxation. By attending to your physical and mental health, you fortify yourself to handle the additional stress accompanying the holiday rush.

Delegate Responsibilities:

Acknowledge the transformative power of delegation in averting burnout during the holiday season. Recognize that you need not shoulder every responsibility single-handedly. Delegate tasks to capable team members or contemplate hiring temporary assistance during peak periods. Effective delegation not only prevents burnout but also empowers the team, fostering a collaborative work environment where collective contributions drive shared success.

Plan and Set Boundaries:

Creating a comprehensive plan for the holiday season is crucial. Outline key deadlines, events, and promotions well in advance. Clearly communicate operating hours, response times, and any alterations to policies during the holiday season. Setting boundaries manages expectations for both you and your team, fostering an organized and controlled work environment. Meticulous planning reduces stress and minimizes the risk of burnout, providing a structured roadmap for surmounting festive challenges.

Embrace Technology and Automation:

Leveraging technology is a strategic approach to streamline processes and minimize the risk of burnout. Explore tools such as e-commerce platforms, CRM systems, and social media scheduling tools. Automation of routine tasks not only saves time but also diminishes the likelihood of errors. Embracing technology allows you to redirect focus towards strategic facets of operations, ensuring a smoother and more efficient holiday season.

Celebrate Achievements:

Recognize the combined hard work and dedication invested by both you and your team. This acknowledgment serves as a catalyst for cultivating a positive and motivated work environment. Embracing the celebration of milestones, no matter how modest, acts as a powerful remedy against burnout by reaffirming the positive influence of collaborative endeavors.

Establish Realistic Goals:

Setting realistic goals stands as a pivotal component of successful holiday season navigation. Extend goal-setting beyond financial targets to encompass metrics like customer engagement and social media following. Align goals with seasonal milestones, enhancing strategic planning. Learning from experiences during the holiday season contributes to more informed and effective planning for future festive periods.

Foster a Supportive Work Environment:

Cultivate a work environment characterized by support and collaboration to ward off burnout. Prioritize open communication, ensuring team members feel valued and heard. Emphasize teamwork and mutual support, especially during bustling periods. A positive workplace culture enhances resilience, enabling you and your team to navigate challenges with a sense of camaraderie.

By implementing these strategies, you'll not only navigate the holiday season successfully but also maintain a healthy work-life equilibrium for yourself and your business.

Management

Using Word of Mouth Marketing to Propel Your Small Business

In the dynamic world of small business, where success often relies on innovative approaches, one old strategy continues to stand out: word-of-mouth marketing. It's the practice of satisfied customers recommending your business to friends and family, igniting conversations that spread like wildfire. Word of mouth has the unique ability to not only drive attention to your small business but also build trust and loyalty among your customer base. In this blog, we'll explore how word-of-mouth marketing can be a game-changer for small businesses, unveiling the secrets to leveraging its full potential.

Create Unforgettable Customer Experiences

At the heart of word-of-mouth marketing is the exceptional experience you provide to your customers. For small businesses, it's all about going the extra mile. Offer personalized service, remarkable products, and a unique touch that leaves customers raving about their visit.

Encourage and Reward Customer Reviews

In today's digital age, customer reviews have become the modern version of word-of-mouth recommendations. Encourage your satisfied customers to share their experiences on platforms like Google, Yelp, or your business's social media profiles. To sweeten the deal, consider providing incentives such as discounts or exclusive offers in exchange for their reviews. Positive online testimonials not only boost your reputation but also attract new customers.

Build a Customer Referral Program

Your small business can turn loyal customers into your most effective word-of-mouth marketers. Establish a customer referral program to motivate them to introduce your business to their network. Reward them with discounts, freebies, or early access to promotions as a token of appreciation.

Cultivate a Strong Online Presence

In today's digitally connected world, maintaining a robust online presence is essential for small businesses. Keep your website and social media profiles up-to-date with engaging content. Share success stories, customer testimonials, and promotions tailored to your target audience. Be active in responding to comments and messages to foster a sense of community.

Collaborate with Local Influencers

In the world of word-of-mouth marketing, local influencers can play a significant role. Identify influencers in your community or niche who resonate with your brand, and partner with them. Their endorsements can introduce your small business to a broader audience and enhance your credibility.

Create Shareable Content

To encourage word-of-mouth sharing, craft engaging content that your audience will want to share with their friends. Whether it's blog posts, compelling videos, eye-catching infographics, or interactive social media challenges, shareable content can help your message spread like wildfire.

Small businesses thrive on word-of-mouth recommendations. By focusing on delivering extraordinary customer experiences, encouraging reviews, building referral programs, maintaining an active online presence, collaborating with local influencers, and creating shareable content, you can tap into the full potential of word-of-mouth marketing to elevate your small business to new heights.

Marketing

Navigating Cash Flow and Profitability

The Basics: Cash Flow vs. Profit

Before we dive into the debate over which is more important, let's clarify what cash flow and profit mean.

Cash Flow: Cash flow represents the movement of money in and out of your business during a specific period. It encompasses the cash your business generates from its operations, such as sales and expenses.

Profit: Profit, on the other hand, is a measure of your business's financial performance over a certain period. It's calculated by subtracting your total expenses from your total revenue. Profit can be categorized into different types, such as gross profit, operating profit, and net profit.

The Cash Flow Argument

Cash flow is often considered the lifeblood of any business, and for good reason. Here's why cash flow deserves your attention:

Short-Term Viability: Cash flow directly impacts your ability to pay bills, cover payroll, and invest essential resources. Without adequate cash flow, your business may struggle to meet its immediate financial obligations, which can lead to severe consequences.

Flexibility: A healthy cash flow provides flexibility. It enables you to seize opportunities, whether investing in new equipment, expanding your product line, or taking advantage of vendor discounts.

Risk Mitigation: Cash flow can buffer against unexpected financial shocks, such as economic downturns or unforeseen expenses. A solid cash reserve can help weather storms that might otherwise jeopardize your business's survival.

The Profit Perspective

While cash flow is undoubtedly crucial, profit remains a fundamental metric. Here's why profit should not be overlooked:

Long-Term Sustainability: Profitability is a long-term indicator of your business's health. Consistently generating profit is essential for reinvesting in the business, repaying debt, and providing a return on investment to stakeholders.

Attracting Investors: Investors and lenders often scrutinize your profit margins when deciding whether to support your business. A history of profitability can make your business more appealing to potential partners and financiers.

Valuation: When it comes to selling your business or attracting potential buyers, profit plays a significant role in determining its value. Higher profits generally translate to a higher selling price.

Striking a Balance

So, which is more important: cash flow or profit? The answer lies in striking a balance between the two. Both metrics are essential, and they are interconnected. A profitable business can generate cash, and strong cash flow can result from effective management of profits.

To strike the right balance:

Cash Flow Management: Implement strategies to manage your cash flow effectively. This includes monitoring your accounts receivable and payable, optimizing inventory, and establishing a financial cushion for emergencies.

Profit Maximization: Focus on improving profitability by controlling expenses, increasing sales, and optimizing your pricing strategy. Consistently generating profit is a sign of a healthy and sustainable business.

Financial Planning: Create a robust financial plan that accounts for cash flow and profit goals. This will help you align your short-term cash needs with long-term profitability objectives.

Small business financing Canada

Three Effective Small-Business Growth Strategies

If you're a small business owner looking to make a mark in the competitive world of big business, it's important to consider which growth strategies will work best for you. While strategies for growth are not one size fits all, these three key approaches offer valuable insights and fast-track the growth of your small business. Explore these strategies and see how they can propel your business forward.

Market Segmentation: Narrow Your Focus

Market segmentation involves identifying a small niche within the broader marketplace to target your sales efforts. Instead of trying to cater to everyone, be specific about your ideal customers and direct all your marketing and sales efforts toward them. The key to successful market segmentation is overcoming the fear of eliminating potential customers. Targeting the entire world and expecting profits from all areas is impossible. Focusing on a specific segment can forge a stronger connection with your core customers, resulting in more profitable growth.

To implement market segmentation effectively, start by conducting thorough market research to identify your target audience's characteristics, needs, and preferences. Tailor your products, services, and marketing messages to resonate with their desires and pain points. By understanding your niche market intimately, you can position your business as the go to solution for their needs, fostering customer loyalty and driving growth.

Become an Industry Leader: Set Yourself Apart

Becoming an industry leader is a long-term strategy that requires consistent effort, a clear goal, and a willingness to take calculated risks. It's crucial to continually enhance your business model, roll out strategic marketing campaigns, and always keep your target market in mind. While your competitors may follow a similar path, feel free to differentiate yourself by taking a unique approach. By standing out from the crowd, you can gain a competitive advantage and reach your destination more quickly.

To become an industry leader, focus on these key areas:

Innovation: Invest in research and development to create new, improved products or services that address your customers' evolving needs. Stay ahead of industry trends and constantly seek ways to differentiate yourself.
Thought Leadership: Position yourself as an expert in your field by sharing valuable insights and knowledge through content marketing, industry events, and public speaking engagements. By establishing yourself as a trusted authority, you can attract attention, build credibility, and attract new customers.
Networking: Build strategic partnerships and alliances with other businesses in your industry. Look for opportunities to collaborate on projects, share resources, and tap into each other's expertise. This synergy can lead to increased profitability for all parties involved.

Leverage Partnerships: Strength in Collaboration

While big businesses often have the financial means to establish partnerships, small businesses can still leverage the power of collaboration. Don't be discouraged by potential negotiation challenges. There are businesses out there that can benefit from what you offer, and vice versa. Focus on building strategic partnerships and joint ventures that allow you to share knowledge, expertise, and resources, leading to mutual growth and increased profits.

To make partnerships successful:

Mutual Benefit: Ensure that any partnership aligns with the goals and values of both parties. Look for opportunities where each business can bring unique strengths, creating a win-win situation.
Clear Agreements: Clearly define each party's terms, expectations, and responsibilities. Establish transparent commission or payment structures to avoid misunderstandings down the road.
Collaboration Tools: Utilize technology and collaboration tools to streamline communication, project management, and resource sharing. This can enhance efficiency and foster a seamless partnership experience.

Small business financing Canada ,Marketing