April 2, 2020
Price Wars What to Do If Your Competitors Reduce the Price | Ecwid Audio Article

Price Wars What to Do If Your Competitors Reduce the Price | Ecwid Audio Article


Hi this is Daniella from Daniella.io with
a Podcast for Ecwid’s blog. The following podcast is an adapted version of the article
called: Price Wars: What to Do If Your Competitors Reduce the Price by Jesse Ness. What do you say to people who tell you they
have no competitors? If there is no competition, there is no business. Every business has competition, no matter
how innovative it may be. Google, Facebook and even the all mighty Apple have competition. And where there is competition, there are
price wars. But how exactly do you deal with a price war?
Should you double down and match your competitor’s reduced prices? Or should you take the high
road and slowly watch your competitor steal your business? In this podcast, we’re going to show you
how to win when competitors drop their prices. Step #1: Don’t engage in a price war The history of business is filled with companies
that lost price wars. Before you drop prices to beat your competitors, ask yourself a couple
of questions: How much money do you have saved? Do you have
easy access to funding? Are there any efficiency gains you could put
in place to offset lower prices (such as a more streamlined supply chain or lowering
manufacturing costs)? How much estimated cash reserves do your competitors
have? Do they have access to cheap funding sources (such as a well-funded angel investor)? It can be tempting to simply lower prices
until you match or beat your competitors. Short-term, you might even succeed if you
have some cash saved up. In the long-term, however, a price war will
only end up hurting your finances and your brand. There are few survivors in an all-out
battle for lower prices. Unless you have an extra revenue stream to count on, there is
a good chance you will run dry before your competitors. Therefore, the first step, is to not engage
in a price war until it is absolutely necessary. The next step consists of a few strategies
to battle lower competitor prices. Step #2: Use these strategies to battle lower
prices There are plenty of ways to fight off a price
war without lowering your prices. Let’s take a look at some of these strategies. Figure out whether price reductions even impact
your business. Does your competitor really serve the same
customers as you? Depending on your product, customers, or industry,
price reductions might not be as important to your target audience. There’s also a good chance most of your
customers won’t even know about your competitor’s lower prices. Have a close look at your percentage of returning
customers and your Net Promoter Score (or NPS). If you have very loyal customers, they
might stick with you even if your competitors offer lower prices. The first strategy, therefore, is to figure
out whether lower prices actually impact your business. There are four ways to do this: The first way is to Calculate your Net Promoter
Score (NPS) to evaluate your customer loyalty Have you ever liked a company so much that
you wrote a review about it or told your friends how awesome it was? Net Promoter Score is a survey system that’s
designed to measure such customer satisfaction and loyalty. Developed by Bain, this system
gives a simple but highly accurate measure of your business’ referral or word-of-mouth
growth. The basic question asked in a NPS surveys
is this: “How likely are you to recommend our organisation
to a friend or colleague?” Customers are then asked to score this likelihood
on a scale of 0-10. The number on the scale that a customer chooses is then classified
into following categories: Detractors,i.e. customers who are unlikely
to recommend your company to anyone (and might do the opposite instead). Passives, i.e. customers who are ambiguous
about your business — they neither love nor hate it. Promoters, i.e. loyal customers who will actively
recommend your company to friends and family, and thus help you grow. In some surveys, customers are also asked
a one sentence reason for their choice. Your Net Promoter Score can then be calculated
with a simple formula: NPS=(% of Promoters) — (% of Detractors) A high NPS score is a strong indicator of
customer loyalty and satisfaction. Among tablet computers, for instance, Apple has a NPS of
66, showing high customer satisfaction. Suppose, for example, you sent out a customer
survey and received 100 responses: 10 responses were in the 0–6 range (Detractors)
20 responses were in the 7–8 range (Passives) 70 responses were in the 9–10 range (Promoters)
When you calculate the percentages for each group, you get 10%, 20% and 70% respectively. To finish up, subtract 10% (Detractors) from
70% (Promoters), which equals 60%. Since NPS is always mentioned as an integer, your score
would be simply 60. To calculate NPS of your Ecwid store, you
can use Stamped.io Product Reviews application from the Ecwid App Market. The second strategy to know whether lower
prices actually impact your business is to Interview your customers. The best way to understand your customers
is to pick up the phone and talk to them. Make sure your conversation feels as little
like an interview as possible. Instead, it should feel like a genuine conversation. The idea here is to ask your customers how
they would feel if you raise prices on some of your products and how aware they are of
your competitors pricing. You are essentially borrowing a B2B sales tactic to understand
your customers’ “Price Tolerance Ratio”. These conversations can often yield powerful
insights that go beyond price changes. For example, Groove, a customer service tool,
did in-depth customer interviews to get a better understanding of their customers’
objections, challenges and fears. The new copy helped them boost conversions on the
website from 2.3% to 4.3%. In case you don’t have enough resources
to talk to every customer, you could use an online service like Survey Monkey to conduct
high quality surveys as an alternative. Another strategy to know whether lower prices
actually impact your business is to audit internal marketing materials Work out how often you have emphasized price
in your marketing. For example, if most of your marketing campaign
is focused on how affordable your products are, you might not be able to get away with
inflated prices (compared to the competition). Audit all your recent marketing campaigns
and make note of their messaging. This should include: Digital ad copy (like AdWords, Facebook ads,
etc.) Landing page copy
Print, radio and television ads And Ad creatives If you see an overwhelming focus on “affordability”
instead of product features or benefits, you’ll have to either lower your prices, or find
a different marketing angle. Emphasize your product’s features and benefits
instead of price. One way to differentiate your offerings from
your competitors is to emphasize the results your target market wants from your business. Focus on selling the value and benefits of
your products instead of its affordability. For example, take a look at how Amazon markets
its premium Kindle Voyage eBook reader: Nowhere in the product description will you
see book prices. You’ll have to scroll all the way to the bottom of the page to see Amazon
mention Kindle book prices. Instead, Amazon focuses on the design, battery life and screen
quality. In contrast, for Amazon’s cheapest priced
Kindle, the product description clearly mentions the affordability of Kindle books — starting
at just $2.99. While by itself this might not be enough — at
least in the short-term — changing your marketing to focus on your product’s quality
can offset lower competitor prices. Over time, as customers get used to thinking
of your products in terms of their features instead of their prices, you’ll be able
carve a niche that’s protected from price wars. Change your product’s positioning Steve Job’s vision for Apple was always
to create premier products and charge a premium price. Instead of engaging in a price war, you’d
be better off following Jobs’ lead and positioning your products for a premium audience. This may represent a big change, so before
you go about it, make sure to figure out the following:
Is your existing market interested in premium product?
Is there a new market you can tap into to sell premium products?
What are the costs and resources associated with a position change? Remember you may need
to change your logo, packaging design, product quality marketing material, website design,
etc. — all of which can be substantially expensive… You could take an approach similar to the
Apple vs Samsung battle for smartphone domination. Apple positions its products for premium customers
and usually doesn’t mention product prices on their website. Have you ever seen any Apple ads? Apple doesn’t
bore you with product specifications. Instead, they create emotion by associating their products
with your daily life to give it a deeper meaning. In fact, Samsung has taken after Apple. For
example, for its flagship phone — the S7 – you won’t find any mention of price
until the end of the page. In contrast, for a budget phone such as Moto
G, Motorola mentions the price as soon as you land on the site Focus on your product’s quality and craftsmanship Your customers perception of your product’s
value is often swayed by their perception of its quality and craftsmanship. This is the reason why “handmade” products
on Etsy frequently go for much higher than their retail store counterparts. In your marketing material and product description,
focus on the superior quality of your product. Show off its production process, its history
and the care that went into making it. Here are a few ways to do so: A. Focus on endorsements from influencers
and celebrities Endorsements from influencers or celebrities
are a powerful form of social proof. For example, Honest.com features one of its
founders — actor Jessica Alba — prominently on its homepage. The celebrity presence comes
off as an endorsement, which greatly improves your brand’s perceived value. B. Show off the manufacturing process SaddleBackLeather shows off the craftsmanship
of their products through an in-depth brand story to show that each product is unique,
“handmade” and is manufactured by “real” people instead of a factory line. C. Use high quality photos The quality of your photos goes a long way
towards establishing your product’s image. Large, well-lit photographs capture your product’s
best qualities and the attention to detail that went into designing it. Use high resolution pictures of each product
that zoom in on every single detail to make it stand out. Check out Ecwid’s blog for an indepth article
on how to take 360º photos of your products to really impress your website visitors and
possibly increase sales. Also think about improving your customer experience Your customer-experience is arguably your
greatest marketing tool: According to a study, customers are 5.2 x
more likely to purchase from companies with a great user experience.
One study suggests, by 2016, 89% of the companies expect to compete mostly on the basis of customer
experience. Better user experience almost always results
in user convenience. People often don’t mind paying more for something that is convenient
to them. Nyman defines user experience as an equation
that is equal to: Convenience + Design — Cost=User Experience Customer are more than willing to use a higher
prices product if it provides a significantly better user experience. This is one reason
why Apple is able to charge higher prices for its Macs — everything from the software
to the shopping experience is better than their competitors. That being said, good customer experience
does not stop at design. Pre and post sale customer service counts as well. Here are some ways you can achieve this: A. Analyse competitors Look out what your competitors are up when
it comes to customer service. Do they have 24/7 phone support? How quick are they to
reply to emails? Do they have an on-site chat for users? Does the website have detailed
guides and article to help customers make most of their product? A competitive analysis is usually a part of
the company’s marketing plan. You can learn a lot from your competitors
and split test those techniques to see which one works for you audience. B. Improve checkout process It isn’t a great feeling when customers
leave your website from the checkout page. On an average 68.63% shopping carts are abandoned.
That means that for every 100 potential customers, 68 of them leave without purchasing. Your
revenue would increase drastically if you were to capture these customers instead of
losing them. C. You could also Introduce customer-friendly
policies Customer friendly policies such as 30 day
free returns, quick refunds, etc. have a huge impact on customer experience. One great example of this is Zappos, which
won against Amazon for shoes by focusing on free shipping and returns — and, in turn
creating, a customer focused company. D. Streamline operations Finally, streamlining your operations can
result in substantial savings. This, in turn, means that you have higher profitability and
better chances at outlasting a price war. While improving operational efficiency is
beyond the scope of this blog post, here are a few things you can do to streamline your
operations: Map out your logistics. Chart every single
partner/carrier involved in getting products from the factory to your warehouse, and from
the warehouse to your customers. Focus on productivity. Find out if your employees
are wasting time on activities that can be easily automated or outsourced. Are they sending
emails manually instead of using marketing automation? Is your marketing team updating
your social channels manually instead of scheduling posts? Organize for efficiency. Are your warehouse
workers spending too much time finding the right products? Could you change the layout
to improve your operational efficiency? Outsource non-core tasks. Figure out what
your business is not good at (design, marketing copy, etc.) and outsource it. Instead, focus
on your key strengths. This isn’t easy of course, but you must
understand that price wars won’t last long. Your objective is not just to last longer
than your competitors, but to build a long term profitable business. And for this, streamlining
your operations will go a long way. Conclusion The best way to win a price war is to avoid
it altogether. By constantly dropping prices, you’ll hurt your business and your brand
in the long run. Instead, focus on improving your marketing, changing your positioning,
and streamlining your operations. Here’s what you can takeaway from this post: Avoid price wars as much as possible.
Before you worry about price wars, figure out whether they even impact your business.
Focus on the quality of your products and their benefits in your marketing, instead
of the prices. Improve your user-experience to fight back
higher prices. Streamline operations to improve profitability. If you would like more incredible advice for
small businesses, check out Ecwids blog and their guides at ecwid.com. Please subscribe to my Youtube channel that
contains many other Ecwid tips and tricks. This is Daniella from Daniella.io, thanks
for watching.

1 thought on “Price Wars What to Do If Your Competitors Reduce the Price | Ecwid Audio Article

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