Sunday, June 2, 2013

Why the Low-Price Model Isn’t for Everyone

Why the Low-Price Model Isn’t for Everyone

The tradeoffs may be deadly

One thing an economic recession does is challenge a business owner’s belief about pricing and competitiveness. Fear often causes people to make questionable decisions. I’ve seen companies with a long-time history of quality work and profitability reduced to ashes because management changed pricing models in an attempt to survive. With thoughts of protecting jobs, they accept unprofitable work that may throw the company into an unrecoverable tailspin. The result? Everyone in the company, even the owners and managers, ends up on the unemployment line.

The problem with the low-price model is that unless a company does huge volumes, such as Wal-Mart, it may struggle to generate adequate cash flow to stay afloat. Small businesses attempting to follow this model often die of financial starvation.

The quality model works for us
Admittedly, I have a bias toward the quality model. For most of my career, I’ve worked for companies focused on providing a superior product or service at a fair price. My experience is that an exceptional product attains a greater level of customer satisfaction, thus making price less of a factor. I’d rather work in the quality category any day.

At Brand Acceleration, a full-service marketing communications and public relations firm, we’ve built our reputation around our marketing expertise in economic development, architecture, engineering, and construction. From day one, we have chosen not to attempt to be the low-cost leader. Instead, we provide superior solutions by effectively helping our clients tell their stories. We believe they don’t want cheap work. They want results!

Sure, we occasionally bump up against companies or individuals insisting they can produce a brochure, logo, or web site cheaper than any other firm, including Brand Acceleration. The results however, are often disastrous. The design work may (repeat may!) be pretty, but the required strategy, copywriting, programming, and final production are often amateur, resulting in a watered down or failed effort. The moral to the story? You get what you pay for.

Help me, please!
A few years ago, I received a phone call from an economic developer who was in a panic. She had apparently contracted a “web designer” who had promised a beautiful new web site at a great price. She was thrilled to have found such a deal. When she called me, she had just taken delivery of her newly-designed web site. To her horror, it was completely devoid of copy, photos, and other crucial content. In her ignorance, she had signed a contract for web “design,” thinking it was an all-inclusive package. What she received was a designed template, and not a good one at that.

When she called me, she was in a panic, hoping we could fix her problem. The challenge though, was that she had spent her entire budget on what was essentially a quarter of the work needed for a fully-functional web site. She was certain she would lose her job, and probably did.

Half-price haircuts!
A lifelong friend of mine is a professional hair stylist. She and her co-workers have built a reputation for excellent work. They follow the quality model. Recently, she mentioned that one of those low-priced hair cutting chains was advertising a special deal, “Half-Price Haircuts!” She joked about the poor quality of such a cut, a bit sympathetic for unsuspecting customers. I suggested she run an add stating, “We fix half-price haircuts!”

For the Brand Acceleration team, it’s exciting to always be exploring ways to be better at what we do, always seeking to be a better resource for our clients. We strive to achieve a deep understanding of their audiences, becoming even more effective at telling their stories. To that end, we recently announced two Boards of Advisors, one for the economic development side of our business and one for the AEC side. Their purpose is not for these experts to be on call on behalf of our clients. Instead, it is to help us to grow our knowledge of our selected industries, thus better serving our clients. Do those following the low-ball, discount pricing model bring such depth to the relationship?

No way!

I’d love to hear from you. Feel free to share your thoughts and personal experiences below.

Have a great week,

Jim Walton
Brand Acceleration, Inc.
Branding // Marketing Communications // Public Relations
Indianapolis: 317.536.6255
Charlotte: 704:230:0394
Atlanta: 404.474.7980
Fax: 317.222.1425
Cell: 317.523.7380

Brand Acceleration is a full-service marketing communications, brand management and public relations firm with a focus on economic development, architecture, engineering and construction.


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