One of the most common mistakes made by new business owners, entrepreneurs and managers is underselling their products. You figure if you offer the cheapest product everyone will buy from you, period. This may be the case for a one time customer, but to build a lifelong relationship with a customer you're going to need more than that.
Let's say you are selling your product on-line and you see that if you cut your profit to 5% you can sell cheaper than Joe Schmo, and try to woo his customers away by advertising cheaper than he is.
Now, Joe Schmo has already undercut his profit to 7%, and he's already taking a huge risk at that price. What about advertising? And the inevitable returns you get from customers? It does not have to be any reason for the return, some customers just change their minds after seeing their credit card bill that month. And guess who has to absorb the cost of the return? Nine out of ten times it's you!
You want to leave yourself room to offer a money-back guarantee, which is a huge selling point. You also want to be able to get some repeat customers and generate some word of mouth about your product and store. It may cost to return that product, but if even half the time that customer told another person interested in the product that you accepted the return and were honest, they will pay a few dollars more just for the peace of mind your guarantee brings them. You are also in this to support yourself and your family, so undercutting so much that you're barely making ends meet is business suicide.
To be fair in any business, if you are in it for the long haul, you have to treat your customers right, and honestly. So check out your competition, see what the average price is they are charging and go from there. Certainly do not be the cheapest, as most of those guys are in it for the short term and don't really stick around long enough to be a real threat. As soon as they burn enough people, they will be on to the next “hot thing" and you can reap the rewards by promoting your longevity and your happy customers testimonials, which by the way, word of mouth is your best salesman.
So remember, don't sell yourself short by being “Cheap Charlie, " because it's only a matter of time before customers equate Cheap Charlie with Cheap Junk.
Chris W James
Author of “Music. . . In my Head and out of my Mind"
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An experiment in music and life.
Chris is a musician with credits to over 40 recorded songs, ranging from movie soundtracks to wrestler Big Poppa Pump, Scott Steiners’ workout DVD. Chris has written numerous articles and and a book titled, “Music. . In my Head and Out of my Mind. " A book of depression, working through it by writing, and how to keep yourself sane in a crazy world. He travels the country performing and public speaking.