So, today I was perusing the Internet when I came across the story of a man trying to buy a bicycle for his son for Christmas.
He talked with the employee of a bicycle shop who took him through all of the different options, gave advice and spent about half an hour of his time making sure that the customer was making the right decision.
Well, before making the purchase, the customer wanted to go away and do a little bit more research. Upon searching the Internet he found that the same bike was available for £80 less through Amazon. Wanting to support his local bike shop, he went back and asked if it would be possible to price match the offer on the Internet.
He was turned down with a stern "no" from the attendant.
Now, I know everybody with a bricks-and-mortar business reading this will be aghast. The local shop obviously has much higher overheads and what about all of the time they spent helping the customer make his decision? Isn't the service that the shop supplies worth the higher fee for the initial product?
The fact is if you are a service provider you intrinsically think that the value that the shop is giving them in terms of that time and expertise is worth money. The problem is, most customers don't have to deal with working in the information economy. They don't need to hire consultants and the few services they come across tend to be for physical things (gardening, hairdressing, vehicle repair etc.). That means there is little or no impetus for them to see the value that the salespeople might be giving them. They have likely never had to have a consultancy outside the realms of dealing with people like lawyers or personal trainers. When they do, they are likely to have been given them for free, as loss leaders to gain further business. They are used to the situation that we might get in larger retail outlets where the salespeople are not experts in their products and the final price is the deciding factor.
Retailers need to understand this. In fact, everybody needs to understand this, especially if you're working in the digital world and using the online space to sell your products or services.
What would have convinced the customer to purchase from the shop he got all of his information from is simple...
£80 is a lot of money, even when you are purchasing presents for the most special people in your life. The value of the product is not determined by the location is purchased from. It's determined by the lowest price that any customer can find for it. This is often why people choose a lower-priced product even when the higher priced ones outperform them in leaps and bounds. It's because the value of the higher priced product cannot be seen.
For example, if you want to buy an android phone you can get one for as little as $25. All of the smart money is being spent on items like the Samsung Galaxy because the increase in performance and specifications make a real "quality-of-life" difference to those in the know. But, if you just compare the two side-by-side (feature for feature) there is very little separating the models. The fact is, both of them will be able to do pretty much the same thing, even if the more expensive Samsung does it so better. So, the main difference people see and can focus on when making their purchasing decision is price and that is how they make their decision.
The question then becomes, how does a shop (or service provider) deal with having prices that are substantially higher than their competitors? Of course, they have to add more value but if people don't see the value in the service they are providing and the information they are giving, how do they do that?
A good way to start is by knocking at least some money off the final price. Even a 5% discount is a discount and your customer will at least feel like you are listening to them.
You can also add value by giving things away that will not adversely affect your business. The bike shop, for example, could have told the customer that, because of the overheads that business has, they can't come down on price but what they would do is provide them with their building and setup service free of charge. The benefit to the customer is that he won't be delivered a bike that he has to set up himself.
Of course, a bicycle being a vehicle means that it will need repairs and maintenance over the years. They could also have offered an extended warranty and maybe free servicing for the first year (parts not included, of course).
As well as that, they could just ask for the upsell. Every biker needs accessories like a helmet or kneepads, perhaps.
The fact is, and the customer told me as much, the bricks and mortar shop lost the sale because they didn't fight for it. They didn't make themselves or their offer valuable enough outside the comparison of features, benefits and price.
This is incredibly important for every business person to understand. You can't compete on features and benefits anymore because every marketplace is saturated. You need to have something that sets you apart from your competitors. It's no good just listing everything you do in assuming that people are going to buy into that. It is far too easy for people to pick up Google (hey, it's in everybody's pocket nowadays) and check what you do against your competitors and find that they do exactly the same... sometimes for far less!