Home Forums Marketing mastery Down, Down, the prices are down!!!

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  • #978204
    Rowan@quaotic
    Participant
    • Total posts: 712

    Whenever I see all the ads on TV by the ‘big’ guys like Coles etc I get a sinking feeling in my stomach. I have always been taught in business courses and mentors, as well as just common sense, that undercutting and bare bones selling is unprofessional and hurtful in the long run to everyone, yourself as well as your competitors but this ‘lower than low’ marketing must be working or their shareholders and accountants wouldn’t approve of it.

    This type of marketing just trains your customers to expecting the lowest possible prices at all times (for the original business and its competitors) and must make it harder to plan for future price increases. Customers will be trained to not question quality and business viability. Surely it isn’t viable and will wreck things for everyone, especially workers in low paid countries.

    It makes me cringe. How can anyone think a $8 power drill can be good quality and worth buying, even to do a single project in the home? Maybe they want their customers to turn into unthinking sheep.

    It is so sad when I see people who actually think it is a good thing that they can buy so much more for their money.

    Rant over *sigh*

    #1105379
    bridiej
    Member
    • Total posts: 1,097

    I know exactly what you mean.

    I saw a tweet last week where someone was bragging that they’d found someone to do 35 minutes of transcription for them for $5 (that’s around 1.5-2 hours work).

    I don’t know when it became acceptable to exploit people AND openly brag about it. :(

    #1105380
    BrettM33
    Member
    • Total posts: 1,372

    One thing I hate about these practices is them SQUEEZING their suppliers, farmers, contractors (truckies) etc because THEY wanna lower THEIR prices.

    Hey, you wanna lower YOUR prices, YOU take the loss, don’t try and put it onto others.

    They know they can get away with it because they are so big.

    #1105381
    King
    Member
    • Total posts: 2,212

    Sadly it is the new paradigm that we have all been benefiting from for a few years but is now really starting to bite.

    Who hasn’t bough from Harvey Norman rather than the now (closed) local supplier…

    We all shop for best deals, but the real issue has emerged that discounting and sales are now the norm and people are also expecting reductions on sale prices…..

    Who knows where it will end, but it is a factor of being part of a global economy where some people will work for low pay, or production costs are lower etc

    The other side of the coin is we have been gouged with pricing in the past. Remember 20 years ago when a Pizza Hut Pizza cost $20!!

    #1105382
    Uncomplicating
    Member
    • Total posts: 731

    Stella Artois beer used to be sold as “Reassuringly expensive”.

    I liked that.

    The supermarkets want to get people in the door, so they advertise low prices. If the customer is dumb enough to think that an $8 drill is worth having, good luck to all concerned. And maybe it is…who’s to say? If it works occasionally as required for a couple of years, that’s pretty good value.

    The real problem here is that there are winners and losers in every race and it’s not always clear as to who is doing what. Worse, we tend to feel sorry for the loser, so we focus on them rather than taking a more holistic view.

    The supermarkets squeeze suppliers, so the suppliers hurt, but they do get to sell lots of produce that they might not otherwise sell and the supermarkets do provide a lot of employment. The customer benefits with comparatively cheap prices and perhaps because they have a dollar or two more in their pocket they can afford to buy other poducts, thus giving jobs to others and so on.

    Without that $8 drill some people in China may have starved because there wasn’t a job and thus no money.

    Whether that in the scheme of things is a god thing or not, I wouldn’t like to say.

    And as Pizza Hut pizza for $20, you used to get a reasonably nice place to sit, half decent service and a pizza made with good ingredients. Now you get a round bit of dough with very little but highly questionable stuff sprinkled on top.

    #1105383
    nominal
    Member
    • Total posts: 504

    Lowest prices is just one (successful) strategy, there are other pricing/marketing/differentiation like quality, prestige, community, values and so on.

    Lowest prices is a great strategy if you can sustain a real low price advantage. By squeezing suppliers, increasing efficiency, innovations and so on.
    Having a battle for the lowest price is WRONG if you cannot support it – “there is always going to be someone who is willing to go out of business quicker than you are”

    I hate what Coles is doing to Apple growers and what happened to alcohol stores (not that I think Australians need any more alcohol), but I still think we STILL have it pretty good here.

    People and businesses are still willing to pay higher than in other countries and the competition causes some blood drops. Our oceans have not turned completely bloody as it happens in the US (Blue/Red ocean strategy)

    Look at WallMart with 445 billion and 2.5 million employees – this is low price strategy execution. I say always look at the glass half full :-)

    #1105384
    bluepenguin
    Member
    • Total posts: 1,026

    Being the provider of premium goods and services, I actually don’t mind it.

    5 years ago, I used to deal with so many more stingy, dodgy people. These days, most of them are weeded out by cheap and nasty companies before they make it to me.

    There are still, and will always be people who value quality and will be willing to pay for it.

    The thing that worries me is that to get your discounts at supermarkets now, you need to swipe your loyalty card. They then keep records of everything you buy, what time you buy it, what items you buy together, etc. It’s not long before they start using this data to create scarily targeted marketing.

    #1105385
    AgentMail
    Member
    • Total posts: 1,741

    Agree with all of the comments on here. My personal feeling is that with technological advances and the globalisation we are experiencing in every field, prices coming down will only continue. It just means we have to find ways to work smarter and carve better niches for ourselves. As BP pointed out, there will always be people willing to pay a premium for a quality product – but that same person may not buy quality in every single area of their life. Someone who values organic, locally grown veggies and shops at their local grocer, might be the same person that does not see value in quality business cards and buys the cheapest they can find.

    In my industry, I am priced at the lower end for some of my services, and at the higher end for others. I price my services based on the effeciencies I can achieve – so if I have a job that suits my processes, and makes it easier for me to make a profit on, I can afford to be cheaper. If something is time consuming and labour intensive, I will put a higher price on it.

    Overall, I think there is a need for budget and premium in every area of life. Just remember, there are still people out there who can’t afford $2 for a carton of milk, so to them, prices might be down, but still out of their reach :(

    #1105386
    Cats
    Member
    • Total posts: 85
    Uncomplicating, post: 116978 wrote:
    Worse, we tend to feel sorry for the loser, so we focus on them rather than taking a more holistic view.

    Without that $8 drill some people in China may have starved because there wasn’t a job and thus no money.

    True.

    I can only speak for my own company and the squeeze coming from overseas, especially from the UK when the financial situation worsened over there a few years back. (Certainly, it is not the same story with all overseas areas). So, what do you do – sell something or sell nothing? You have to do what you have to do to keep it flowing and keep the name out there. And I am not sure that there is a way to find complete balance at the moment; all I can say is that on my companies online store there are products ranging from the low end right the way through to the higher end. I did only have the higher end products available but not everyone understands the concept of super concentrates, plus it broadens the net and in the current financial situation, this is something we all need to think about. I also supply to some supermarkets which means those products need to be at a completely different price point. So, although the squeeze is on for many businesses and companies, we need to stand back and look at the overall picture and be prepared to be fluid – go with the flow and make the most of it or risk falling.
    Instead of letting it get to you in a negative way, try to view things differently, such as one of the other posts suggested that without the $8 drill, the people manufacturing it may have starved.
    Just my thoughts that I wanted to share with you.;)

    #1105387
    Shaukat Adam (Khalid)
    Member
    • Total posts: 1,528

    imo, lowest price is the worst strategy bcos it attracts the kind of clients you do not want and sets the tone. also gives you alot of unnecessary work.

    IT’s better to do a two for 1 than half price. ask any daily deal or groupon business client.

    the only time lowest price works is when you target based on income. for example, you approach a high end hair dresser and do a deal where any client who spends more than $x amount gets a half price offer.

    Even then, it’s better to give a buy one and get one free or a 100% money back guarantee and charge a higher price to that select market.

    one of the biggest mindset challenges that solos and micros have to overcome is that your client’s financial situation is not the same is yours and neither is their motivation to purchase.

    business booms when you start thinking like your customer – assuming you’re targeting people who are “hungry” buyers.

    #1105388
    cd04
    Member
    • Total posts: 1

    This is just a sign of the times. Some fancy bankers in New York made huge losses, banks made people redundant, people panicked and stopped spending, so now retailers are luring them with cheap prices.

    Soon enough, the low prices will eat into profitability, so more people will lose their jobs, so prices will go even lower, and so on. The deflationary cycle will continue until the recession ends, maybe in another 3-5yrs, assuming the Eurozone does not completely implode.

    At times like this, you appreciate inflation of 2-3% actually being a good thing.

    #1105389
    marketingweb
    Member
    • Total posts: 625

    In some cases (like food I suspect) it’s a case of stores gouging in Australia suppliers. In other cases it’s the retailers eating into their own margins due to different business structures having an effect as well.

    The aim of almost all big retailers is to kill off the competition so completely that there is a duopoly (or, rarely, a monopoly), rather than healthy competition.

    The philosophy for these retailers is basically to have a big building, fill it with more stock than an independent operator could ever afford, put on less staff (or cheaper staff) than an independant operator would ever dare, make everything self service, and operate on a combination of buying power and low margin.

    Say a small business operates on a 35% gross profit margin (this will vary depending on industry/business model). Now lets say the big retailer is buying at 20% better than you can. With their lower fixed costs contribution per sales dollar, they may say operate at 25% gross margin. 25% margin – 20% better buying = 5% above your sell price and still being profitable.

    This (plus online) is the reason that it’s so difficult to set up a successful bricks and mortar business these days, and why most solo entrepreneurs are working in service / consulting / creative industries, not as new retailers.

    Matt

    #1105390
    King
    Member
    • Total posts: 2,212

    about 18 months ago I double the prices on my caricature site.

    Yes I get people who blanche at it. But despite a 20% drop in activity, I have have a much bigger increase in profitability.

    It is all in demonstrating value. This can be as simple as selling a product, but your customer service is so good people will pay for that. I had one customer just this week. They paid 80% more but were happy because I was there to answer questions etc (email and live chat) rather than be waiting for days for a response to an email.

    #1105391
    JamesMillar
    Participant
    • Total posts: 1,675

    There isn’t really anything new with price competition as a core business strategy. Low cost strategy is one of the cornerstones of Michael Porters theories and these are still widely taught (and applied) today. It can be effective if executed correctly but it falls down when used as a short term tactic in a business that isn’t correctly setup to survive in that environment. His alternative generic strategy – the differentiation model probably makes more sense for the average small business. Greater margin for error and requires less resources.

    #1105392
    calebmarshall
    Member
    • Total posts: 29

    Coles and Woolworths are typically the same, so there’s really no way they can differentiate themselves, especially when it comes to a value proposition.

    I suppose you either differentiate yourself as a provider of value or you differentiate yourself as a low-cost provider.

    And really the market does not see Coles or Woolworths as fundamentally any different. So that causes them to market their business on price. It’s also easy for them to do that when they have fantastic contractual terms with suppliers (60 days from memory) so their low-margins, turn into something significant when they have that 60 days of liquidity to invest it elsewhere for a short term return.

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