Pricing is never to be used as a strategy in gaining a sustainable competitive advantage because even with the perfect price your competitors aren’t far behind in matching it. The products or services in which you supply are the only thing that will set you apart from the competition and hopefully provide you with a sustainable advantage when it comes time for your customer to make a purchasing decision. In turn, your corporate strategy should be focused on the advantageous differences your products and services bring to the market and how you are going to highlight these in an effort to position yourself as a market leader. Entrepreneur.com emphasizes, “The one time that pricing can be a corporate strategy is when the company is positioned as the low-price leader. That’s Walmart. If you adopt low price as your strategy, then your business must continually focus on lowering and controlling costs, like Walmart.” And it’s harder than it seems because once a competitor figures out how to offer a similar product with a lower price, your once “loyal” customers will be out the door.
And while pricing is not a strategy for gaining a sustainable competitive advantage, it is still a key to success. You may not be able to position yourself as a low-price leader, but with the right pricing structure you will keep your customers happy. Entrepreneur.com columnist, Lisa Girard, offers some advice on recognizing a faulty pricing structure, five signs that indicate you may need a change.
1) Competitors are charging more for inferior products.
2) Your storefront is covered with ‘sale’ signs.
3) Your cash on hand at the end of the fiscal year takes a dive from previous years.
4)Your sales staff relies on price cuts to close deals.
5) Your business is attracting bargain hunters.
To learn more about knowing when to change your pricing strategy, click HERE.