Money blocks and competitors

[Nigel]

Hi,
Ive been reading about money blocks through links on some threads here. From what I can gather it says you should charge what you feel a product is worth to someone else not just by adding 20% to the cost of producing it. It give the example of a £50.000 car not costing that much to make but still people buy them.
But, I can't help question what about your competitors. How do you go about charging if your price is much higher than your competitors?
I do picture framing and I charge what I consider a good price with a good mark up for me, but I have heard that a competitor is cheaper than me. So, should I lower my cost to compete with him or stick to my original pricing structure?

[RT Wolf]

Heya Nigel,

I just answered your question on my blog here:

Mind-Manual » Musings about Intending Money

And thought of something else. You see, that's where perceived value comes in and that's where marketing comes in. You have to convince people that your product is worth more, however you do that.

From a business perspective, you can have higher margins than your competitors if you have some sort of competitive advantage. A sustainable competitive advantage is even more important.
Competitive advantage - Wikipedia, the free encyclopedia

A competitive advantage allows charging more for what you make and if you can convince enough people that its also worth more, then you're laughin. An example I gave of a competitive advantage was distribution channels (which is a huge competitive advantage of Coca-cola--in sip taste-tests people prefer Pepsi). Another way to create a competitive advantage is to differentiate your products in some way and have customers recognize that. I dunno how you can do that in picture frames other than try out a whole bunch of stuff.

Commodities = problem, they don't really have have a competitive advantage other than price, and the problem with that, like I said, is a that its a race to the bottom, unless you can differeniate your product. For example, wood is pretty much a commodity, but you can actually find speciality woods serving niche markets that are moving at a premium. So I'd imagine it is possible.

HTH. I need sleep, so excuse any rambling parts of what i said.

[aaronmp2003]

In addition, one thing to consider is that the value in a product does not just come from the product itself, but from the seller. Don't forget the time proven fact that people buy from people who they know, like, and trust.

Things like friendly service, proper follow-up, and just a genuine caring about your customers can go a long way towards making them repeat customers, and also towards them sending you referral business.

I would gladly pay more for a product from someone that I genuinely trusted and liked than to save a few bucks by going to a competitor whose only competitive edge was that they undercut a price.

[cdn2wheeler]

Originally Posted by aaronmp2003

I would gladly pay more for a product from someone that I genuinely trusted and liked than to save a few bucks by going to a competitor whose only competitive edge was that they undercut a price.

Is that really the case, though? I'm not exactly sure it is.

I spent some years working in the photographic industry, selling professional camera and related equipment. It was extremely common for clients to come to me & my people to get their questions answered, then to scamper off to the local bargain basement camera shop and purchase the gear there because it was a bit less expensive.

Pi$$ed me off too.

From what I've seen and experienced, loyalty, whether it's from employees to businesses, or from businesses to employees, or from customers to businesses, has gone the way of the dodo.

[Brutha]

Let's say you sell water. You could say water is very valuable to people because it's essientatial to life. On the other hand people have the other of getting their water elsewhere for a cheap price. That leads to less valuaing your product.

I do picture framing and I charge what I consider a good price with a good mark up for me, but I have heard that a competitor is cheaper than me. So, should I lower my cost to compete with him or stick to my original pricing structure?

You can also compete with him by giving the customer a better product.

[Mags]

Originally Posted by cdn2wheeler

Is that really the case, though? I'm not exactly sure it is.

I spent some years working in the photographic industry, selling professional camera and related equipment. It was extremely common for clients to come to me & my people to get their questions answered, then to scamper off to the local bargain basement camera shop and purchase the gear there because it was a bit less expensive.

Pi$$ed me off too.

From what I've seen and experienced, loyalty, whether it's from employees to businesses, or from businesses to employees, or from customers to businesses, has gone the way of the dodo.

I was just about to agree with you (and pi$$ you off in equal measure), but then I realised that there was a "but" to my story

My husband and I have just bought new cameras. We went into the camera shop down the road to have a look at them and ask questions, found out the price, then went back home and saw we could get them on Amazon for about GBP100 cheaper - quite a significant difference. So on the face of it, it would seem that all we care about is price.

The "but" is the issue of loyalty... we are actually quite loyal to Amazon. I know many people complain that Amazon takes business away from small retailers. We are loyal to them though not solely because of their prices but mainly because they provide possibly the best customer service I have ever experienced. Ever! In contrast, the staff in the camera shop we went into ignored us for ten minutes while having their own conversation....

In retrospect, I have paid more for items in places where I've felt acknowledged, respected and cared for. The ultimate though is when you find a place where this attitude comes packaged together with prices that are fair (note, not necessarily cheap, but fair to both company and customer).

[wellbeing]

This is a topic that's near and dear to my heart as I'm in the retail business, so please let me add my 2 cents worth.

I agree that one is able to engage in the type of pricing that OP is asking about if you are able to communicate the value of paying that price. It happens every day in the world of luxury or "designer" goods. For instance, someone above mentioned water, something that I (as are the people in my city) am fortunate to get readily, inexpensively and of good quality with a simple turn of a faucet. A good example of a commodity, right? However, just down the road from me is a corner market that sells a simple 750 ml bottle of water for almost $8 and can't keep it in stock! I find this particularly interesting because a) this cormer market is not a luxury market by any means (quite the contrary) and b) they stock almost 2 dozen, similarly-sized, lower-priced, heavily mass-marketed bottled waters. Somehow, because this particular company has convinced its Customes of its values, they are willing to pay its price over the competition. (I don't know if the pricing--by the company--is cost-driven {i.e., a mark-up of their costs} or value-driven {"we think our water is worth $8] but I'd guess it's the latter.)

That's what marketing really is: letting consumers know the value of your product to them.

I am on the front-line of the seachange in retailing that many people have described above. Thanks to the web and other factors, the number of competitors for my retail shop has expanded from those similar stores within driving distance to the entire country, if not the entire world. It's a different way of doing business these days than it was 10 years ago and that's always disruptive to companies. I see on a daily basis Customers who come into our store, "pick our brains" and then decide whether to buy from us or leave. It's our job to provide them with enough reasons to buy from us; sometimes, we're successful, sometimes we're not. I would argue that, by factoring in the broader competition of the web and all, we are now more prepared to provide those reasons to our Customers. I know of many local businesses who have not changed their tactics and are less prepared and experience the increased frustration of Customers going elsewhere. (A perfect example being described above.)

But back to the OP, you're a bit fortunate as you are not in a strict retail business (i.e., selling a good) but in a service business. Web and non-local competition has made fewer in-roads into many service sectors than they have into retail sectors. Another good thing is that service (because it's dependent upon the individuals creating that service) is very difficult to "knock off" so if you can create competitive distinctions other than pricing, you could well retain those distinctions for quite some time.

As you create those distinctions, I would suggest that you realize that those distinctions may "select" some Customers for your service (and some Customers for your compeitors). After all, not everyone wears "designer" clothes or sips $8 bottled water. With value-driven pricing, you just need to convince enough of your target Customer base of your value to fulfill your budget.

(An aside: Somewhere in this forum, I remember reading a story about Joe Vitale charging $25,000 to write a single marketing letter for his client. My take on the story was he structured his business so that he didn't need tens of thousands of clients for his letters. Do a search, read the whole story/thread and see what you take away from it.)

Since we're in the I-M section of the fora, remember the LoA works best from a mindset of abundance; that there is plenty for everyone. So Customers for you and different Customers for your competitors. Create your competitive distinctions to attract the Customers for whom you're best able to provide value.

Oh, and one of the things we've found out is that when a Customer comes into our store, picks our brains and leaves, we may have lost the short-term sale but, in our experience, they invariably refer to us Customers to whom we can provide value. I wish for you a similar or better experience.

Good luck to you. I hope this helps.

[Nigel]

Hi everyone,
All very good stuff and thanks for the advice. Its all been very helpful. A different view on a problem can come up trumps.
Many thanks
Nigel