It doesn’t matter if you’re selling sofas, soft drinks, or software—conventional wisdom often states that the easiest way to stand out and gain customers is to make your product offering cheaper than the rest. In a sense, this is the oldest marketing tactic in the book. All it takes is simply figuring out what your competitors charge, and offering the same product for slightly less, provided you can still scrape by on a small profit margin.

I’ve noticed through the years that this marketing tactic is very often favoured by firms or companies that have not gone through the diligent work of understanding who their customer is, what problems they’re looking to solve, and where they’re looking for answers. They don’t feel the need to go through the work of building a conversation and sense of trust with their prospective customer because they blithely assume that their customer doesn’t care—they just want the cheapest option on offer.

The trouble with this method is that as soon as you do it, it’s a trip to the bottom. All that’s going to occur is a downward spiral on pricing and eventual cannibalisation of the industry, until you reach the lowest product price and lowest product quality.

As the often-quoted Seth Godin writes, “There's always the opportunity to cut a corner, sacrifice lifestyle quality and suck it up as we race to grab a little more market share. But the problem with the race to the bottom is that you might win. You might make a few more bucks for now, but not for long and not with pride. Someone will always find a way to be cheaper or more brutal than you.”

For reasons similar to Godin’s, I urge you to not go down this route. In the end, it doesn’t end up serving anyone—not your competitors, not your industry, and least of all, not you. Think about the kind of business you want to run and the customer you want to court. It’s hard to grow, scale, and build a sustainable business model with longevity if your customers don’t care enough about you to invest and evangelise on your behalf. And equally, it’s hard to get your customers to evangelise for you if you’re constantly cutting corners and figuring out ways to minimise your output for the small amount they’re paying you.

In this instance, I think a fine example of someone who is competing in what is a consumer marketplace— the very ‘cut-throat’ (no pun intended) price-based market of razor blades—is an organisation that has sprung up on the web called the Dollar Shave Club. Now, the Dollar Shave Club does not set out to be the least expensive; it is selling a commodity product that has managed to differentiate itself on the basis of convenience, speedy delivery and engagement with the customer.

The Dollar Shave Club unsurprisingly sells razor blades. In fact, it sells a subscription service which delivers razor blades to the customer on an ongoing rolling basis for a monthly subscription fee.

The individual price of the razor blade has almost become inconsequential - it is certainly more expensive than purchasing a competitor product from a discount store, but it is directly appealing to a sector of the marketplace who are time poor and convenience biased.
For example, young execs who need to shave every day see this as a daily requirement but are perhaps fed up with running out of razor blades and the inconvenience of having to run to the chemist or store to buy more of them.

The concept that they have adopted, is to engage with the customers, take regular feedback from the customer and include the customer in the razor and blade development process - so that new products are created based upon feedback from their customers - who are actively encouraged, via social media, to interact with the brand. It’s an extraordinary piece of marketing. It is inherently a ‘club’ - and to Seth Godin’s approach - involves very much creating a group of ‘people like us’, who then talk to others and word of mouth & referrals spread the program, based around massive customer satisfaction. In this ‘club’, each customer is not treated as an individual purchaser, but is treated on the lifetime customer value of those razor blades being delivered week in week out over the life of the individual - a fundamentally different way of thinking about the consumer purchase proposition.

Please take a look at this example start-up as an inspiration, I urge you to consider a change of tactic, embrace the genius of these individuals’ approach, and look at your product and try to find the key differentiators that will put you in a position to charge a fair and realistic price for your product, rather than simply engaging in the downward spiral that many face.

I will discuss the concept of marketing differentiation and differentiation strategy further in next week’s blog. 

Tip #46: Don’t be tempted to run your business on the basis of offering the lowest price; find a way to differentiate, engage with your prospects and look for value, not least price!

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