By Tommy Mello, owner of A1 Garage Doors, a $100M+ home service business. Sharing what I’ve learned to help other entrepreneurs scale.
A lot of entrepreneurs I know obsess about competing on price.
Here’s why that can be a mistake:
You can’t win on price. Someone else is going to slash their margins or source their stuff from overseas and offer a cheaper price. And even if you can win on price, do you want to be known as the budget brand of your industry? Do you want to be known as the cheapest guy in the market?
There’s a way better and likely way more profitable strategy to win in business.
Compete on value, not price.
In other words, become the best brand in the market.
But why are people still scared of charging more?
I’ve told other entrepreneurs again and again that they should charge more, but a lot of them say things like “My customers don’t want to pay that” or “Someone is going to undercut you.” One guy even questioned me: “How do you sleep at night [when charging so much]?”
Listen. Here’s what they don’t understand:
You can charge the highest prices possible, but you need to give the best service possible.
We charge premium prices at my company, and we’re 100% confident about that. Why? We believe we have the best product in the industry, and we train our employees right from day one to deliver the best customer experience. (In fact, I spent $700,000 on a brand-new training center last year!)
You do quality work. You charge for it. It’s that simple.
Are you charging based on price or value? Here’s the difference…
I got a good deal on a roof in 2012. It was a real discount… but the roof leaked within two years.
That’s when I realized that buying a great product or service—even if it’s not the cheapest—is way better. I get a better experience, I feel happier and I have fewer headaches.
So here’s the question for you:
Are you charging based on price or value?
And in case this isn’t clear already, I recommend that you never compete on price. I mean, how are you going to keep up with Amazon, Walmart or whoever the big guy is in your industry? How are you going to differentiate yourself aside from price? I just don’t understand.
Here are two tips to charge based on value:
• Create an experience around your service or product: Think about the very first moment when your customer comes across your service… to the very last moment. How can you “wow” them at each step of their experience with you? Your customers won’t remember the cost—they will remember the experience.
• Bundle different products or services into one package: By combining different features into one offer, you can easily give your customer much more value than your competitors. This is a common strategy for “super-apps.”
What should you say when your customer says no?
Now, if your customer doesn’t want to pay your prices and they say, “I don’t have the money right now,” you turn that into a sales process. “No” is actually a good thing in sales because that’s when you get to understand the reasons behind your customer’s hesitation.
Here’s what you do: You look them in the eyes, you smile and you say:
“Here’s what I’d do for my mom, and here’s why…”
All you’re doing is simply showing that you want the best for them and that you’re on their side. Then, shut up and listen.
