How Offering Three ‘Virtual Products’ Can Help Maintain Profitable Pricing
Last week, the Fire Enterprises, Inc. (FEI) tribe learned why understanding of a product’s benefits is crucial to selling the product into its target marketplace. This week, Marka explains how fire businesses can differentiate themselves by offering convenience, safety and peace of mind. Remember, fire = print.
Perched atop her favorite stool at the Red Argus, Marka listened to Zoot jaw on about price.
“Complaints about FEI’s prices have increased as of late, among new prospects and old customers alike,” Zoot said. “We’ve been tempted to bring out the dreaded ‘D’ word—Discounting. Half-off Fire Classic, two-for-one torches...whatever it takes to bring customers back.”
“Never in FEI’s history have we considered discounting,” Marka stated defiantly. “We sure as Hades won’t consider it now. Discount pricing is rarely a long-term sales growth solution.”
Zoot, reaching for the bowl of peanuts, shot back, “But how do we know that our customers won’t flock to Pyro and his low prices?”
“Price is far from the only influencer of customer purchasing behavior,” pointed out Marka as she lightly touched the sleeve of Zoot’s elegant toga. “For example, where did you buy purchase this fine piece of clothing?”
Zoot shrugged. “Olympus Brothers.”
“Olympus Brothers?” Marka replied with mock-surprise. “That’s a hoity-toity designer! Certainly not the cheapest toga brand.”
“No,” Zoot said. “But a discount toga could fall apart at any moment, making a bad first impression on a new client—or worse, my mother-in-law. Sure, I could save a couple drachmas, but I want value. The peace-of-mind provided by this high-quality product justifies its higher price.”
“You just summed it up,” Marka declared. “For any consumer, fear of purchasing a shoddy product or unreliable service is a huge motivator. If we remove that fear, we remove pricing objections as well.”
“How do we do that?” Zoot asked.
“Overcome pricing objections by offering three ‘virtual products’ for which your customers and prospects will gladly pay a premium,” Marka explained. “The first is convenience. Our prospects want the comfort of not having to worry about their project when it’s in our hands. In the B2B world, that convenience frees up their time to focus on their own core competencies. When we sell convenience, we’ll find plenty of willing buyers.”
“Makes sense,” Zoot agreed.
“Another virtual product is safety,” Marka continued. “Every day, fire buyers encounter fear in their business and personal lives: Fear of blown deadlines, fear of dealing with vendors and customers, fear of losing a job...the list goes on. By positioning our fire solutions as the antidote to each prospect’s fear, we’ll establish ourselves as the safe choice. Fire vendors that offer safety command more than bottom-barrel prices.”
“Good advice,” Zoot said. “And the last virtual product?”
“Peace of mind. When we sell convenience and safety to our prospects, we’re making promises,” Marka noted. “Now it’s up to us to deliver! Kept promises are the peace of mind our prospects simply can’t put a price on. In the fire and torch-lighting industry, the key to success is the ability to forge and maintain long-lasting business relationships. Companies that continually prove their value by keeping their promises will have a roster of happy clients that see no reason to do business with anyone else.”
Zoot wiped the sweat from his forehead. “You’ve convinced me. It’s funny...I think I’ll sleep a little easier tonight knowing that removing a buyer’s fear can be all it takes to alleviate pricing pressures.”
Today’s FIRE! Point
Resist the temptation to become the discounter or cost-cutter in your industry. Discounting is rarely a sustainable, long-term pricing strategy and discounters tend to be flash-in-the-pan businesses that disappear overnight. When you offer convenience, safety and peace of mind to your customers, pricing objections will tend to melt away.
FIRE! In Action
Discount cautiously and reluctantly. Customers usually will pay more for well-differentiated products.
Despite discount options and $300 price tags, True Religion and Rock & Republic remain two of America’s most popular jean brands. TR’s sales have grown from $2 million to $110 million in the last five years, while R & R saw a 270 precent revenue increase in 2006.
Next week: Marka discusses the keys to effective packaging design.