Price War


There used to be an old joke about a man selling eggs. One morning he put a sign outside his door saying “One dozen eggslarge eggs, €2.50.” An hour later, he looked out the door of his shop to see another shopkeeper on the other side of the road had put a sign out saying, “One dozen large eggs, €2.25.” So the first guy changed the price on his sign to €2.00.

An hour later, he looked over to his neighbour’s shop again, to see that the price had gone from €2.25 to €1.75. He scratched his head in puzzlement, the eggs were costing him very nearly €1.75 to buy, let alone all the costs of running the shop. Not to be outdone, however, he again lowered his price, this time to €1.50.

His neighbour responded by bringing the price to €1.25. The first guy thought long and hard about lowering his price further. The eggs were flying out the door, as the locals saw what great value there was to be had. But he couldn’t sustain the lower price, it was costing him more money to sell each box of eggs than he was getting from the customer.

He closed the shop and walked across the road to his neighbour. “Now look here,” he started, “How can you sell your eggs at that price? It costs me more than that to buy them.” His neighbour laughed lightly. “No problem,” he said. “I don’t have any eggs for sale. But the sign gets the customers in the door, and then most of them buy something else.”

more eggsThe moral of the story is, it’s not a great idea to compete solely on price. There will always be someone who, for whatever reason, can afford to charge less than you, either because they have a lower cost structure, or because they’re subsidised, or because they don’t expect to earn a profit.

There are lots of low cost services out there, but maybe that’s not the market you’re in. Decide what your bottom line, fee-wise is, and if someone isn’t willing to pay it, let them go down the road to the low cost service, with your blessing. They’re not an ideal client (or even close to an ideal client) for you if they can’t afford your fee. Pitch your marketing not in competition to the low cost service, (unless that’s what you provide, of course) but at those who can afford to pay your full rate. You probably paid a high price for your training, both in financial terms and in blood, sweat and tears. That was a huge investment, and it’s okay to charge accordingly.

If you struggle to charge enough for your services, perhaps I can help? Contact me here to make an appointment or to arrange your free 20 minute consultation.

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