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.
Start your holiday planning now: How to make the most of the 2021 season
Even in the best of times, the winter holiday season is a key earning period for small businesses but this goes double in 2021. After more than a year of uncertainty and lost sales due to the COVID-19 pandemic, Canadian small businesses will need a prosperous holiday season this year to recoup some lost revenue. Take action towards your end-of-year success by putting the wheels in motion—now. With more than half the year gone by, now’s the time to trade your thoughts of sunscreen and sandals for stockings and snowmen and get your seasonal plans in place. Read on for three key areas small businesses should attend to now for a stellar holiday season.
Inventory is a constant task for retailers. You’ve got to make sure you have enough stock (empty shelves are a terrible look) but not too much that you take a loss on clearance markdowns. This problem can be compounded with seasonal stock—ask anyone who’s tried to sell an Elf on the Shelf in April.
You can avoid the major inventory pitfalls by having a plan.
- Start an inventory document. You’ll have enough on your plate without trying to remember whether you ordered 100 or 1,000 units of tinsel.
- Review last year’s sales data to refresh yourself on the tactics that worked and those that didn’t, and use that data to anticipate your sales for the upcoming season. Take note of the hot items and remove slow sellers from the list.
- Survey existing inventory to avoid repurchasing items you’ve already got.
- Analyze the current year’s trends to prevent overbuying and overstock, then make a list of what you need. Remember: frequent re-ordering is a better strategy than massive one-time buys to keep your shelves full and your cash flow, well, flowing.
- Reach out to your suppliers as soon as possible to take advantage of early-order price incentives.
eCommerce vs bricks-and-mortar
Some stores that were originally bricks-and-mortar found new markets online during the pandemic and in the coming year it’s likely that many retailers will be offering an eCommerce and bricks-and-mortar hybrid model. Plan now for how your holiday online shopping and in-store experiences will work.
Consider the following:
- Will you provide the option to buy-online-pick-up-in-store (BOPUS), in addition to in-store shopping?
- Will you offer delivery or shipping?
- What about curbside pick-up?
- How will you handle exchanges and returns?
- What restrictions will be in place in-store, and how will you enforce them?
- Do you plan to offer your customers sanitizer and masks? And if so, you’ll need to order them, now!
Create a logistics plan far in advance to account for the eventualities of your 2021 holiday shopping experience.
Marketing is always a key component for retailers going into the holidays and the 2021 season will be no different. One change, perhaps, is that social media will likely play an even greater role than in past years. During the pandemic, many retailers relied on social media to communicate with customers and sell merchandise. In fact, according to business consulting firm Grand View Research, the global social commerce market was valued at US$474.8 billion in 2020. If you plan on developing a social media content and advertising plan, consider what products or services you will be promoting on social media ahead of time.
Aside from your social media concerns, there are also countless other marketing tactics to consider:
- You could run ads in print or online.
- Direct mailings like flyers or brochures can attract new customers, as can digital mailings through email.
- A partnership with another company might allow you to tap into their customer base.
- Special offers, discounts, and coupons can bring in new leads.
- A contest or other special event is effective at raising brand awareness and stimulating sales.
- Use your data to create holiday-themed promotions.
- Branch out thematically and increase sales opportunities by keeping alternative holidays like Black Friday, Small Business Saturday, and Cyber Monday in mind.
There’s no shortage of holiday preparation tasks but advance prep in these three areas will get you off on the right foot and on the way to a prosperous 2021 season.
Customer retention best practices for your small business
It’s common knowledge that it costs less to keep customers than to acquire them, but have you ever put a price on it? According to research from Bain & Company, “a 5% increase in customer retention produces more than a 25% increase in profit.” This, they say, is because repeat customers are likely to spend more money with your brand over time. They are also likely to refer you new business. Put simply, investing in customer service to make sure your customers have consistently positive interactions is good for your bottom line. Read on for top tips on retaining your customers.
Maintain consistent business hours
One of the joys of owning your own small business is the flexibility and ability to manage your own schedule. However, unpredictable operating hours could be costing you. Your customers are busy too and wasting their time is a quick way to lose their business. Be consistent with your business hours so customers can plan to visit with confidence that you’re open.
Keep your website and Google My Business listing up to date
If your website lists out-of-stock merchandise, last year’s pricing, or services you no longer offer, your customers may well feel like they can’t trust your business. Make sure everything is up to date, including your hours or location, across platforms.
Offer online shopping or other options
Even though retail is reopening, many customers have become accustomed to shopping online. This doesn’t necessarily mean you have to sell your services or products online, but offering the flexibility of custom orders in cases where customers don’t feel comfortable returning in-store shows respect and thoughtfulness. Also, consider offering phone and email ordering with the option to pick it up or have it delivered. Seamless transactions that suit your customers' needs will go a long way to ensuring you get repeat business.
Communicate with your customers
Your website, social media, email, and even newsletters are all ways to communicate with your customers. Figure out which works best for your industry and reach out. Regular communication keeps your business top-of-mind, but make sure you don’t flood your base with overly frequent messages.
Train your employees around customer service
Think of your team as brand ambassadors—because that’s what they are. Your employees are the face of your business and how they interact with your customers will inform your reputation. Make sure your employees are trained to provide top-notch customer service.
Nobody likes to feel like they’re just a number. Take the time to learn your customers’ names and a little about their lives. Encourage your employees to take time with your customers rather than rushing them to the till. A little human interaction goes a long way.
Loyalty programs can be as simple as a punch card or as complex as a multinational campaign. Giving your customers a little extra when they return is an effective way to keep them coming back, while showing your gratitude for their business. Points programs and discounts are easy-to-implement strategies that will make your customers feel valued.
Resolve issues quickly
Perhaps a product doesn’t work as intended or a service doesn’t meet expectations. Sometimes, despite your best efforts, things go wrong. These occasions are opportunities to deepen customer loyalty. If you can resolve the issue quickly to your customer’s satisfaction you’ll build trust with your customer so they feel confident enough to return next time.
Many consumers have demonstrated their willingness to support small businesses, especially right now. Acknowledge that you appreciate them. A simple thank-you goes a long way and a grateful approach will help ensure your customers keep coming back.
So much of customer retention comes down to simple customer service. Follow these guidelines to give your customers a positive experience every time they interact with you. Your reputation and your bottom line will thank you for it.
4 winning strategies to make your loyalty program a success
We’ve all heard about job loss, missed school, and the overtaxed health care system, but a surprising consequence of COVID-19 comes from the business sector. Pre-pandemic customer loyalty is all but a faint memory. According to a McKinsey & Company report, consumers around the world have changed their shopping practices during the crisis, including trying out new brands. The result? Changes in brand preference. The communications firm Ketchum found that nearly half (45%) of consumers surveyed changed their preference for at least one brand, and a majority (62%) anticipated that these shifts would be permanent.
All this upheaval creates yet another challenge for Canadian small businesses, but planning—and a solid loyalty program—will encourage more devotion from your customers. If you’re looking for ways to incentivize your customers, you’ve come to the right place. Read on for four winning strategies to encourage customer loyalty.
What is a loyalty program?
If you’ve ever used a buy-ten-get-one-free card, a coupon, or referral link, you’ve taken part in a loyalty program. Simply put, these are incentives designed to attract and keep customers by offering something back in return for their patronage. Implemented properly, loyalty programs can not only attract new and repeat customers but also foster positive associations with your brand and even your staff.
Like anything else in business, there are best practices for loyalty programs. These four strategies will help you design a winner.
Loyalty program best practices
1. Make it simple to use
Your loyalty program will not work if it’s too complicated. Make sign-up easy (or non-existent). Avoid multi-step ideas that may cause customers to abandon the program. Be flexible to accommodate real-life situations. For example, if a customer has forgotten their loyalty card, issue them another and allow them to combine stamps for redemption. The simpler your loyalty program is to use, the better.
2. Make it easy to redeem
Customers use loyalty programs for the rewards, so make sure they can easily redeem. Don’t make them jump through hoops. If they earn it, they deserve it. Simplify the process by asking for customer information upon sign-up, not when they want to redeem. Nothing turns a customer off like feeling they’ve been duped so make sure your redemption process has no nasty surprises.
3. Have few to no restrictions
Don’t complicate your rewards program with too many restrictions. For example, if you have a points program, don’t limit what they can be used to redeem. This kind of “small print” will only erode the goodwill you’re trying to foster.
4. Keep time to reward short
Your customers want to realize the benefits of your program as quickly as possible. Your program will never get off the ground if it takes too long for customers to be able to redeem. Make it easy for your loyal customers to start earning points right away and be reasonable about the amount a customer is required to spend or the number of times they have to visit before they have accumulated enough points for a reward.
A customer loyalty program can be the right strategy to bring customers back to your brand—and to attract new ones. These four simple best practices will guide you toward a program that works for you and your target market.
Get noticed: Key elements of a great business sign
Small businesses need to take advantage of every chance they have to get their message across, and their storefront signage is an often-overlooked opportunity. Displaying your business name is just one job for your business sign. It can also communicate your brand identity, advertise specials or promotions, and create an inviting entryway to your storefront. But creating the right sign isn’t as simple as you might think. In this article, we sat down with Todd Hovey, owner of Pure Image Signs in British Columbia, to find out what, exactly, makes a great business sign.
When you’re planning out your business sign, one of the first things to consider is how big it will be. Too small, and you risk going unnoticed but a sign that’s too large can appear clownish. “Your signage company will follow distance charts to ensure the sizing is good,” Hovey says. “Of course, you’ll have to follow your city’s guidelines or restrictions for the sizing.” As a general rule, your sign should be large enough to for your customers to read easily, even from a distance.
Choosing your materials may seem like a design decision, and to some extent it is, but it’s also (and perhaps more importantly) a choice that will dictate the longevity of your sign. “You don’t want it to start to deteriorate and detract from how good your business looks,” Hovey notes. “This is worth the investment.” Your choice will depend to some degree on your storefront. You may be limited to an application on the front window, or maybe you have an awning or banners. If you have a flat façade, you have many options. “If you want to add dimension to your sign, try a three-dimensional sign,” Hovey suggests. “It stands out so much more than something flat.” Another 3D option is a blade sign that hangs perpendicular to the outside wall. “Most signage is painted or made with vinyl or another material that will deteriorate over time,” Hovey says. “A good quality sign should last over a decade or longer and interior signage can last forever.”
If your storefront is not in a well-lit area, you’re liable to miss the mark with your customers after dark. If you are open past dark, the increased business a lit sign may bring in may mean it pays for itself in no time. It may surprise you to hear that adding light to your signage can also catch your customers’ notice in the daytime. Lighted signs require an investment upfront but the LED technology they use is energy efficient and the design choices are nearly limitless. Look into illuminated lightboxes, externally lit sign boxes, halo-lit letters, and front or back (or both) lit channel letters.
Your sign is the first thing your customers see so its design should be impeccable. Make sure that your design elements like colours, logo, tagline, and business name are exact and match the rest of your business collateral. Pay attention to the spacing and lettering, bearing in mind that the eye can detect even slightly imperfect kerning (that’s the space between each character). And ensure that your sign is legible, even from far away.
By choosing the right style, size, materials, and design, can you improve the appearance of your business and attract new customers? According to our sources, all signs point to yes.