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30 June 2022

Can you beat the pricing battle

Can you beat the pricing battle - The Value Engine

Do you want to compete on price?

Balance scale for price

No, I thought not.

Yet, this is ground zero for so many companies. Despite their best efforts, they end up fighting on price, not value.

We all know where this finishes: tight margins, low investment and stressed-out owners.

I get that this is a hard nut to crack – but it’s worth it.

At its heart, it’s about optimising your offering and business model around your customers’ needs.

Here are a few examples of firms that have beaten the price trap.

1. Sell the result, not the input

A man giving a presentation

Not sure what I mean? 

Here’s an example. What did high-end tool maker Hilti do when people wanted cheaper tools? Make them cheaper? No.

Hilti figured that users wanted working tools in the right time at the right place and moved to a subscription model where users were guaranteed a certain level of tool availability. 

This move aligned the needs of customers and the competencies of the business, and it reframed the story away from price. 

2. Optimise for low cost

Business

Lidl and Aldi have upset the UK grocery market. How? By being laser-focused on cost.

Think about it: 

They have smaller stores and turn stock much faster

They offer a slimmed down range focused on big sellers

No one sits idle on checkouts – if it’s quiet, they redeploy

As a result, they have a far lower cost base, and this wins the cost-conscious customers.

3. Build a must-have offering 

Present an idea

The new Range Rover is about £20k more expensive than the old one, yet used models are selling well above the list price.

Why? A heady mix of a desirable brand, and a hugely capable and competitive product targeted at affluent customers means the conversation is all about value and the price is the price!

4. Let others take the strain

Delegate what you can

Does a hotel chain need hotels? Not if your name is Airbnb. 

Think about it; one of the biggest costs for hotel chains is building and maintaining hotels. Airbnb connects travellers and hosts to cut out these huge costs. As a result, Airbnb competes on the quality and variety of places to stay without having to shoulder the costs.

5. Up the barriers to exit

Car with a barrier

Thinking of changing from Apple to Android? Think of all those apps you might lose – your i-cloud access and so on. Apple offers an ecosystem and it’s hard to leave. The end result is customers compare apples with apples and buy from Apple!

The big win & how to leapfrog the competition

From these examples, you probably figured that the magic comes when you combine the ingredients: 

For example >> Apple = brand + must-have products + exit barriers = super high profits

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