3 Reasons Not to Implement the Strategy of Being the Cheapest
There is a widespread belief that when starting a new business you have to offer goods or services at a lower price than your competitors do if you want to carve out your niche and build up your customer base. This belief does have some basis in truth and might really work in some cases. Yet there are three things to consider before taking this road.
- It comes as no surprise for your competitors
- Values beat cheap prices
- Beware the ‘cheap’ perception Of course, it’s good to have your products perceived as “affordable”, but do you want to be known as “cheap” actually? Once you take the first step on this path you must be aware that you’re going to be building the reputation which isn’t easily changed. Look at China: its manufacturers have even recently had to stop using "made in China" labels on products sold in some of the countries in an effort to improve sales. Instead, products are being labelled "made in PRC" - the People's Republic of China - because many customers in these countries don't know what this stands for. They only know that “made in China” translates as cheap and low quality.
Your most established competitors have long known the day would come and neophytes would challenge them with lower pricing. Most probably, they do have some kind of strategic reserves to answer with if you come up with the considerable price difference. You will almost inevitably lose the war on pricing with more established competitors. Why starting it then?
Instead, offer something your competitors can’t. Be unique, it will make people spread the word about your products.
Just google "we're not the cheapest but". You’ll see then how many confident brands don’t fear to admit they don’t provide low prices. Instead, they say it straightforward to shift emphasis from price to quality. They know that when customers evaluate competing products and services, they are usually comparing value. Remember last time you paid extra just to get your delivery promptly? On the other hand, people often tend to be suspicious about products offered cheaper than average.
The best thing you can do is to find out what things are important for your customers and focus on them.
Building your MVP yourself might still be a better idea than turning to the cheapest developers.
So, when considering proper placing on the market don’t try to tempt your first customers with low prices. Instead, give them something they value, something they can find nowhere else, and you will be rewarded generously.