Price War – How Not to Compete on Price

Care to share?

To attract customers, small and medium e-stores start with low margins. After not more than a few months, however, they realize that it is a dead-end. Of course, there are others who follow their footsteps and the price war noose tightens around the necks of everybody in the market. Some online companies manage to escape this repeating pattern. How to do it?

Just a few ideas of mine:

1. Offer a product along with a service.
Services have high-profit margins and are more difficult to copy. A service could be, for example, an assembly of the equipment purchased.

2. Offer a value-added.
Free delivery, or an extended warranty period (the latter often does not impress the customer, though.)

3. Offer consulting and help to choose an optimal offer.
Your expert knowledge will matter even more if you specialize in a narrow area. A niche coffee shop is a more trustworthy advisor than an online food supermarket.

4. Create your own line of products.
You can start with the simplest products. Your own line of products means higher margins and a unique value. Amazon has just launched its own line of diapers and is announcing new products to come.

5. Create a sense of security.
A lot of customers are still afraid of buying online. The comfort of online shopping, however, is attractive. If you convince the customers afraid of buying elsewhere that it is safe to buy with you, even the price will become less important. You can create the sense of security with: certificates, a number of ways to get in touch, and the pictures of the company premises and of the employees.

6. Solve problems.
A lot of purchases involve further costs, procedures, and other possible obstacles. Have you ever bought a TV set only to discover that you do not have the cable you need? Show your customer that, buying with you, they will get everything they need to start using the product. For example, a telescope shop may include a product description stressing that THE TELESCOPE HAS ALL THE ESSENTIAL PARTS FOR YOU TO START OBSERVING THE SKY IMMEDIATELY – THE NEXT CLOUDLESS NIGHT.

7. Invest in positive opinions.
The easiest way to do that is of course a good customer service, as well as adding some simple gifts and free samples to the orders. It is also a good idea to actively collect references from your clients.

8. Send a newsletter.
This will help you build long-lasting relationships with customers, and navigate sales. Imagine the scenario: After receiving an order for a product, you send personalised product recommendations (for complementary or similar products). If you manage to attract the customers’ attention, you have a win-win situation. On the one hand, you stimulate shopping, on the other hand, the customer receives an interesting offer and can make informed shopping choices.

9. Sell discounts.
You can sell them just like any other product. This is what does, for exmple. Selling a membership, you sell discounts and encourage the customers to shop more in this way.

10. Interest vs. purchase.
In your sector, there are probably products that attract customers more than others. During the selling process, you can encourage the customers to buy another, similar products that are more attractive for both sides. To do that, bring the customers to the landing site of the products A and there offer them more advanced versions of those products, with higher profit margin. In this case, both sides are satisfied with the deal – you earn more, selling the advanced products, and your clients have made a far better purchase.

11. Save your customers’ time.
Whenever you can, offer the client time efficiency.

12. Offer accessories.
Very often the profit margin on accessories is higher than the one on the main products (which simply drive sales). If you cannot compete on price, the accessories will compensate for the low margin. Selling the accessories will be easier if you use the recommendation systems.

Would you like to improve your online store? Let us help.

Published March 30, 2015