Page 36 - Flathead Beacon // 2.26.14

36 | FEBRUARY 26, 2014
BUSINESS MONTHLY FLATHEADBEACON.COM

BUSINESS IS PERSONAL Mark Rifey

Win On Low Price,

Lose On Low Price

D
O YOU DEPEND ON HAVING They know how much it costs to ofer
the best price to win business? If that free service.

so, are you sure that’s really how They know how many of those free-
you want people to choose your compa- bie users will convert to paying custom-
ny?
ers because they want services, features
I ask that because if you cut your and beneits not ofered to freebie cli-
price 10 percent, that 10 percent comes ents.
out of your proit margin. Perhaps obvi- They know their margin on the pay-
ous, but not always something folks pay ing customers is enough to fund the
freebies, plus proit margin, so that more
attention to - particularly when price is
used as an end-all, be-all to close a sale.
paying customers raise their hand and
say, “Yes, I need that.”
Bottom line, they know their num-
“HOW DO YOU BALANCE bers and they never stop recalculating
them, just in case something changes.
BETWEEN BEING TOO EX-
LOW PRICE ISN’T OWNED BY
PENSIVE AND BEING THE
THE INTERNET CROWD
ONE WITH THE PAPER-THIN You can use free or cheap as a lead
generation carrot as long as you too
MARGINS?”
know your numbers, and make sure that
you’re using that ofer with the right
prospect.
That’s where most businesses get

You can tell that’s going on when you started down the wrong road - they make
intentionally keep silent when someone the ofer to the wrong group of people, ie:
names the price of a product or service. people who would never have been their
Stay silent long enough after they react customer in the irst place.
to your “What’s the price?” question and If you make your ofer to the right
the “we’ll win on price at all costs” sales- people, that’s a diferent story altogether
person (particularly the novice) will of- – and that’s the magic formula no matter
ten get nervous and say something like, what your pricing is like.

“Of course, we can go lower.”
The timeshare business has done
this for years by giving away a free night ppy Hour
USE LOW PRICE AS A or two, dinner, etc. – all in order to get Ha
COMPONENT
you to see and enjoy what their facility d
As Amazon Web Services SVP Andy ofers. They know historically what per- Pints an
Jassy is fond of saying, “I’ve never met centage of people will buy if they take
a customer who asked if they could pay the time and make the efort to attract zers
more.”
the right prospects to their ofers.
Appeti

So how do you balance between be-
ing too expensive and being the one with USING LOW PRICE REQUIRES 3-5pm
the paper-thin margins?
WELL-CRAFTED OFFERS
from y!
Don’t get me wrong. Using price as Timeshares don’t make their num- every da
a component of the things you use to bers by giving away all those free nights,
attract customers is ine. Where you golf rounds, lift tickets and meals to
run into trouble is when it’s used as the anyone and everyone. They’re careful

primary decision point. In those cas- to pre-qualify prospects using inan-
es, you’re more than likely going to get cial, behavioral, demographic and psy-
burned and less likely to attract long- chographic measures to make sure they
term customers.
closely match historical buyers.
One common example is using prod- When you attract people with a low
ucts and services as loss leaders. It’s OK price ofer, the goal isn’t simply to make
to leverage price in this way as long as it free or available for a low price, but to
you know your numbers very, very well provide enough of a taste with as little

and you know that once you get that cus- risk as possible to the prospect so that
tomer, there are plenty of opportunities the right person can make a decision to
to provide more value to them – value become your newest client.
that they’ll be happy to pay for.
If you can do this without killing
Fail to do this and you’re headed for your margins during the period between
trouble. This isn’t just about milk at the the time they taste and the time they get
back of the store. You see it frequently serious about buying the real value you

with internet-based services. How do can deliver, then low price can work.
they ofer “free” to so many people, yet Do you know your numbers that
still make a proit?
well?

Want to learn more about Mark or ask him to write about a business, operations or
marketing problem? See Mark’s site, rescuemarketing.com, or contact him via email
at [email protected].