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Stop Selling! E-Zine - Issue No. 41 /July 2008

Dear Reader,

Do you like things for free? If you are like most people, you probably get curious when something is offered without any charge.

Is there really something like a 'free lunch'?

What about the impact of going from fee to free on your company's image? There is a famous recent case with one of Hong Kong's newspapers who went into that direction.

William's article below describes another case where a competitor suddenly offered a service for free and shows what's the adequate response.

I trust you'll find it interesting and relevant.

Let’s keep progressing!

Charlie Lang
Executive Coach, Trainer and Founder of Progress-U Ltd.
Author of The Groupness Factor

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It is a sweaty August morning, and the first thing you notice when you walk into your sales office is the newspaper lying on your desk with a full-page advertisement saying, “FREE FOR THE REST OF YOUR LIFE, FOREVER.”

Unfortunately, this ad was posted by your smaller competitor, not your company.  You also notice that the phones in your customer service department are ringing off the hook - your customers are asking to cancel your service.  Your secretary has left a note on your monitor: “Urgent meeting 9:30 a.m. – in the board room.”  Your company’s directors would all be there, ready to throw everything to you.

It’s like a nightmare, and you panic and think: “What should we do when they are offering it free?”

Back in 1999, the dot com was not yet in the dog house.  Everything with an “e” caught eye balls and raised eye brows.  Market share was the key, not revenues.  That was then.  All those traditional bits of wisdom seem to be outdated, or are they?

Seemingly, your smaller competitor has become very aggressive.  They want to capture the market share by one of the oldest tactics: penetrating through price.  They think that the customers would switch to use their services simply because they are almost free.  Even in the dot com era, this is happening, and the so-called “Fire Sale” has re-appeared, right in front of you.

Nevertheless, you remain calm. 

You read all the newspapers.  You call your largest and number one service provider in your business.  They are unmoved.  They did not change their service price.

You are number two.  Your price has always been slightly lower than theirs.  You have always considered them as your role model.  You even put that in your mission statement.  Although you are not there yet, you want to be number one someday.  This is reflected on your pricing scheme and your service level, too.  You know that the market has been accepting them as number one, and you as number two.

The concept of ‘perception’ pops into your mind all of a sudden.

It has a big influence in customers’ behavior.  It certainly plays a very major role and explained why customers bought from you. Customers do not always buy based on the lowest price, but they do like to feel they are getting a good deal.  VALUE is what customers place on your service and your company. If the price asked for does not feel right in relation to the value delivered, customers would not buy, even if it were almost free.

The key message to communicate was that of VALUE. And you had communicated it so strongly for the past 12 months that the price seemed reasonable in relation to the service you are offering – and matched your company’s position as well.

So could it be that by focusing too much on price, your smaller competitor set up an expectation of a lack of quality in the customers’ mind? And could it be that by focusing too much on price, they created the impression that their service might be suspicious?  You got the answer.

It does not matter what you were charging. Instead, what matters is the customers' perception of your price. If the customers think the price is too high in relation to the value delivered by your service, then they would not buy.  If they think the price is too low, then again they might not buy because they might get suspicious of the quality of such a low-priced service. The price might not feel right.

A customer’s perception of what is a 'reasonable price' is more important than what you want to charge for your service. And the customer decides what is reasonable based on perceived value for money, not price. It is this perception of value that tells the customer if the price is right.  You are a firm believer that, in the long term, it is always better to add perceived value to your service rather than reduce your prices – and that was the strategy you have always been using for the past 12 months in order to meet your mission – beating your real competitor – the number one service provider in your business; and not your smaller competitor.

And you knew why your number one service provider is doing exactly what you have in mind.  Perhaps the old wisdoms stayed for just a bit longer.

Your secretary calls you.  It is 9:30 a.m., and you know exactly what you are going to say in front of those directors.

It would be a matter of delivering the message clearly and with confidence – re-enforcing the positive perception the directors had of you for the past 12 months.

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