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Business Pricing Strategy Advantage And Desadvantage

1115 words - 5 pages

1. By charging more than the competition, you pre-empt both your company and merchandise as being something different, something-one-of-a-kind. You can also offer better overall working experience than your competition. You put your firm on an upward spiral of improvement.

2. You can do exponentially higher quality (thus higher value) work for your clients. Think about it. A Ferrari doesn't take 10 times more time and effort to me make than a Ford. Yet, even an entry level Ferrari costs more than 10 times of a Ford. And there is a huge difference in the quality of service.

3. You can retain top-tier talent to provide top-drawer service. Unlike junk food joints that can produce ...view middle of the document...

So, choose now. What will it be for you? Volume or margin? And you can't have both.

7. Your people's morale, enthusiasm and passion will be higher and higher, because they know they are part of a firm that is going somewhere. Your people will be less stressed and more cheerful, which increases their ability to attract perfect clients. No one wants to do business with a miserable company staffed by minimum wage, minimum skill, minimum commitment frustrated people serving anyone with a pulse and a bank account.

8. Premium buyers are loyal and committed to the success of their projects. They also understand that business is a value exchange, not an all-for-nothing deal. They respect your boundaries, and, while they expect you to be responsive, they know you're not on call to them.

Now let's look at what can happen to IT companies that decide to forego the "premium" calibre industrial authority status, and remain "low-budget alternative" calibre replaceable vendors. If you've been there, then you know it's a rather shitty situation. If you've never been there, then avoid it like the plague.

1. Since, often due to financial constraints, these IT companies are forced to do some shortcuts, they attract clients who don't mind some shortcuts to save some pennies. Performing quality work is always undermined by cashflow problems. These substandard clients create bidding frenzy for "lowest bidders", so bidders can get to each other's throats for the pathetic reward. It means they live the rest of their lives from bidding frenzy to bidding frenzy, never achieving even marginal success.

2. Because their quality of work and overall service are constantly undermined by casflow problems, "budget" companies can never create the kind of perception that would attract premium clients who would willingly pay higher fees for the firm's services.

3. Since money is always an issue, these companies are forced to hire minimum wage workers, often the ones whose applications the competition has already rejected. Yes, these people cost less in compensation, but they can create exponentially less value in their performance. In time substandard clients further undermine morale, passion and enthusiasm that gradually lands the firm on a downward spiral.

4. These companies live in constant "client chasing" frenzy because...

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