Specifications

6 ExtroNews 13.2 April – June 2002
less to offer must ALWAYS reciprocate by being
less expensive than you. If you lower your price
to match theirs, you can bet they will lower
theirs to be considerably less because they
simply have nothing else to offer.
The Value of Value
The trick is to know how much the value you
add is worth. There is a buffer that can be
added in light of these services to keep you
profitable and keep your competitor from
dropping prices even lower. It begins by
identifying your competitor’s weaknesses.
There is a section from the famous ancient
Chinese text, The Ar
t of War
by Sun Tzu,
which states:
If you know the enemy and know yourself,
you need not fear the result of a hundred
battles. If you know yourself but not the
enemy, for every victory gained you will also
suffer a defeat. If you know neither the enemy
nor yourself, you will succumb in every battle.
The lesson contained herein lies in
comparing your services and value-added to
that of your competitor. In short, you should
know what you are up against. You must
consider how much your customer is willing to
pay for those extras. Services, experience,
certifications, capacity, turn-around time,
installation skill, inventory, and all other areas
you invest in must carry the kind of value that
customers will seek out and pay for. All you
need is an accurate assessment of the
differences between what you offer and what
your competitor offers. Then, of course, you
need to quantify it and communicate that
message to your customer.
This strategy may not win every sale in a
fierce price war, but if your goal is to stay
profitable and win repeat customers, you will
be on the right track.
P
ricing strategy is often at the heart of every company’s competitive
business plan. It’s a well-known fact that the winner of any looming
price war is usually the customer as prices creep downward.
Occasionally, as the battle intensifies, lower and lower prices translate
into lower profits for all competing parties.
Winning the Pricing War
without Losing it too
by Lee Dodson, Vice President of Marketing
MARKETING MATTERS
Aggressive competitors become so intent on
winning the sale that they lose track of the
bigger picture. On the surface, it may seem like
the customer is the winner. Upon closer
inspection, however, it may become all too
apparent that the so-called “winner” of a sale is
not making enough to even support the
customer after the initial transaction. At that
end, a customer “wins” a low-priced system
that may not be fully engineered, installed
correctly, set up completely, or doesn’t work
from a company that can’t afford to fix it. In our
high-tech A/V industry, this can spark a
disastrous wave of devastating consequences.
Price vs. Value
Continuing cycles of price wars erode a
dealer’s ability to add value to the sale of
products as their margins evaporate. In the
commodities industry where only the slimmest
survive, that may be an effective strategy;
however, the professional A/V industry plays by a
different set of rules. Success is heavily reliant
upon highly trained integrators who sort through
countless options and mix and match the best
combination of products to suit the application.
This sounds simple enough until you are
facing a price war of your own. Often, a price-
aggressive competitor is using his or her
strongest (and possibly only) weapon against
you: price. All too often, this is someone with
far less overhead and very little value to offer to
their customers; their only recourse is a lower
price. If you are facing this threat the last thing
you want to do is lower your prices to the point
of losing money. This practice may work for
strategic projects where you bet on a long term
payoff, but certainly not for day-to-day
operations. If not controlled, it’s a surefire way
to go out of business.
Fighting competitors on their own turf can
take its toll. For all the value your firm may offer
in service and support, your competitor with