Stop Moaning About Cheap Price Competitors…and RAISE Yours!

By: Dan Kennedy on: November 24th, 2009 7 Comments

In the 1930’s, immediately post-Depression, small grocers believed it impossible to compete with the giant A&P chain, so they sued, and ultimately got The Robinson-Pittman Act Of 1936 passed by Congress – and it’s still in law today.

It says that volume discounts given by manufacturers cannot exceed the cost savings gained by the manufacturer by delivering the large volume order. And now a group of 160 tire store owners have filed an anti-trust complaint in federal court against Wal-Mart, Sam’s Club, AutoZone and thirteen manufacturers, based on this law, claiming the manufacturers are selling to these chains too cheaply.

See, and you thought if you owned your own business you could sell or not sell to anybody you darn well pleased at whatever prices you chose.

Ha! I hear business owners complaining about Wal-Mart specifically, big competitors and price cutters in general, all the time. Their woe-is-me whine that they can’t compete on price. And they’re right.

So, dunderheads, compete on some basis other than price. Sadly, we’ve nationally sanctioned the idea that losers who can’t compete should get to drag the winners into court and just steal the money. Hey, you: do NOT let yourself get sucked into this kind of Loser Thinking. It’s a dead-end.

So, an instructive story about Price. The hottest ticket in Cleveland this past holiday season was on the Cuyahoga Valley Scenic Railroad Ride. You can ride this train all year. But in the freezing cold winter, at night when you can’t see much of the scenery, they jacked their prices up higher – and wound up selling most of the tickets via lottery, months in advance, at $17.50 each, $70.00 for a family of four!!!

Resellers got as much as $520.00 for four on Ebay. How? They turned the ride into The Polar Express, capitalizing on the movie, and added a conductor dressed like the guy in the movie, a reading of the story, an appearance by Santa. And promoted. Making price irrelevant. What does this have to do with competing with some cheap price discounter? EVERYTHING!

The lesson is: in the face of tough price competition, change what you are selling. No, I don’t mean board up the windows on your place of business and walk away. I mean re-invent. Create an ‘experience.’

People don’t just want to go and do something ordinary, shop someplace ordinary, attend another ordinary seminar – they want new and different and exciting experiences.

‘Disneyfy’ your business. They get it. They tilted supply and demand in their favor. So many marketers stubbornly refuse to get this.

Look, you don’t compete with a price cutter by cutting prices. It’s a path to extinction. And if you cannot sell at the lowest price, having the next lowest price is no advantage, so you might as well have a juicy high price.

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    ABOUT THE AUTHOR:

    Dan Kennedy is internationally recognized as the 'Millionaire Maker,' helping people in just about every category of business turn their ideas into fortunes. Dan's "No B.S." approach is refreshing amidst a world of small business marketing hype and enriches those who act on his advice. For more money-making marketing tips, tactics and strategies, go to www.GKIC.com

    7 Responses

    1. Charles says:

      Dan this takes a lot of rethinking n change of mind
      will hard to create new n different exciting experiences. thanks a lot

      I mean re-invent. Create an ‘experience.’
      People don’t just want to go and do something ordinary, shop someplace ordinary, attend another ordinary seminar – they want new and different and exciting experiences.

    2. Rob Anspach says:

      … a great book to read is “How to sell at prices higher than your competitors” by Dr Lawrence Steinmetz

      …just because we are living through a recession doesnt mean you have to lower your prices to sell your product or service.

      …lower your prices and you will have to work 2x as hard for the same profit…
      …raise your prices and you will work 2x less for more profit.

    3. This is easy for me to say in that I completley agree, there is no need ever to compete price.

      The offer, the quality, the level or service, how you answer the phone anything that makes you a little different. Price competition is the quickest way to the poorhouse.

      Richard Smith (UK)

    4. Tom Raistrick says:

      There was a large department store in San Diego’s Mission Valley Mall that received a good price on a large quantity of perfume. Valentine’s Day was on the horizon and the perfume was not selling as anticipated. They dropped their price. No effect. They dropped it more. No effect. V-Day was a week away! What to do? Put it on the closeout table for pennies, or jack the price through the roof?

      They jacked it through the roof and sold it all. The logic came from a friend of mine who was a director with Proctor & Gamble. Men, who don’t know squat about perfume, were out of their element when buying it for their wives, girlfriends and mothers. All they knew was that if it was expensive it must be good. That’s why the lower prices did not work.

      The initial price, if I recall correctly, was $29.99. It had been eventually reduced to $3.99. When the price went through the roof it crested at $129 per bottle and it went out the door with free gift wrapping and a Valentine’s Day card included. Remember also that men cannot wrap.

    5. Garth "South Beach' Gibson says:

      Dan,

      Here’s article about company ramping up marketing during a recession.

      Also check out interesting stat in second to last paragraph.
      Kind of like ….”Build It And They Will Come”

      http://www.specialtyretail.com/news/2009/11/malls_holiday_marketing_reaches_new_heights

    6. Tom, great story!

      Sometimes the comments here have gems that make it worthwhile even besides Dan Kennedy and Bill Glazer’s great advice!

      :-)

    7. Jim Rowe says:

      Just raised my prices again and this year I’m selling thousand dollar gift cards to my guest. Last year I sold almost 9k in holiday gift cards to a ton of people, this year 7k to seven people with very little effort. Here is where it gets better, these guest love spending the bigger money and they tell their friends. The more people spend eating in my restaurant the better the review and feedback I get.

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