How to Avoid the Price-Matching Pandemic

 

Here’s the thing about price: matching price is an addiction. When you’re discounting, it has a debilitating future impact on so many different things. It sabotages your ability to recruit, hire, and train the very best. It deteriorates your best customer service efforts, because you can’t invest in the customer service that you have. It doesn’t allow for you to have cutting-edge products and services, because the money’s not there. You have no top-line products, and you are not a salable equity, because your multiple of book is reduced when people are looking at purchasing your bank.

It is a slippery slope. Regulars are ready to pounce. Get and keep those low-cost deposits is what they’re saying. There are some things you can do to protect yourself even if you’ve been on the slippery slope.

Dan Kennedy, a marketing guru, says that there are six things that impact price elasticity. Number one, who is selling—that’s you. Number two, who is buying—hmm, we’ve got to figure out the right prospects. Number three, where are they buying. Four, how are they buying. Five, the urgency of the purchase, and six, how and when are they paying for the purchase. Now, some of these you can manage, and others you cannot, so let’s talk about two.

First of all, you—who is selling. You can impact your pricing significantly by having your brand be worth more value. As I’m saying “brand” I’m not thinking about branding exercises, and please don’t go spend a lot of money creating or hiring a branding firm. Never has more money been spent on something with lesser return. Your brand is the extreme differentiation that you bring to the table. It’s your way of being, it’s your way of going to market. It’s the extreme difference you make for them. It’s your positioning for those right customers, that allows for you to be worth premium pricing. That needs to be fixed.

Number two, who is the right customer you’re calling on? Getting back to the right psychographics, and the right firmographics, those who are willing to pay you more, matters. Kennedy says that there are 5 to 10% of people who will always pay you a premium pricing, no matter what the choice. Given any choice they’ll always take the most expensive. If you think that doesn’t happen in your market, then there better not be a restaurant in your town that doesn’t have golden arches, because if there’s something besides gold arches, it means people are willing to pay more. Figuring out who are the right people who will pay more is imperative for your success.

That combined with your differentiation—those two alone can create a masterful impact on your net interest margin and your ability to remain sustainable and to really advance your profitability—and the fun you have doing this—because you’re not being kicked in the teeth by having to match pricing. I hope you get busy on this tomorrow, perhaps even today, to start to make that change.

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