Tool Box
Issue No. 18 - August/September 2004
Price Advantage
Advice on getting your price right
by Dr David Corkindale
By price advantage, I mean having higher prices than your competitors but not suffering lower sales and, indeed, make the company more successful. How can we work this magic?
A while ago I did an assignment for an Adelaide-based supplier to the retail trade of what might be thought of as a commodity. They are the largest supplier in Australia and have a 40% market share. As part of the project I visited some of their major customers in Sydney and Melbourne to discuss their experience with this supplier.
Those I talked to always started by complaining at length about the prices they were having to pay. I was very concerned by this and started off my verbal report to the owner and managing director about the complaints about their prices I experienced.
“Good,” said the MD. “ That means we have got the prices just about right.”
And, he was right, I realised. His customers were not leaving for the competition; everyone complains about price, given the invitation to comment upon a supplier. His business is nicely profitable because he has got the price he charges right – not too high and, certainly, not too low.
The reason this company has a 40% share of a near commodity market is that their products are good but they offer a unique way of doing business that saves their clients money.
Essentially, they provide a way in which their retailer-clients can display and offer a range of products and sizes without holding stocks of it. It is a high value item but a very small one; one that can be delivered inexpensively overnight to anywhere in Australia.
So, one lesson is that you have to support a higher price with some other value-adding offer. If this costs you little to provide, then everyone wins. Ideally, you look inside your organization at the skills and capabilities you already have and use these to provide the extra.
A mining company was finding that its customers around the world were starting to ...
