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Why Being the Lowest Price Doesn't Work

If you've positioned your products or services as being the lowest priced around, then this one's for you. Keep reading.

For small businesses, cheap and free don't work. Consumers do not place value on cheap products or free services. Subsequently, they will treat you and your product with the amount of respect that cheap and free denote, which isn't much. If you want customers of value, ones that will become repeat customers and refer their friends and family, then give them a product or service they hold value to. In other words, apply the simple law of attraction.

Consider the strategy of giving away a free, versus a nominally-priced trial, of your service. The point of a trial is to offer a teaser to get your audience hooked and leave them wanting more of something they are willing to pay for. In this example, Company A offers a one week trial for free, and Company B charges $20. Consumers who pay nothing have no incentive to get the most of their trial. Therefore, it will be hard to turn them into paying customers. Meanwhile, Company B, which collected money ahead of time, has given the consumer motivation to get the most bang for their buck.

Shorter trial periods often perform better, especially when your service is simple to grasp or has a quick learning curve. This is because consumers will not need longer than a week to determine if you are right for them. My advice: collect your $20, and when you've captured the hearts of your audience, immediately start charging what your worth.

When does low pricing work? When you truly have less to offer or when you are a large company in a saturated industry. For example, it makes sense for a product based company like Dove to give away sample size products for free. When doesn't it work? In almost ever other case. It certainly doesn't work when your competitors offer the same thing at a price that makes more sense. Furthermore, when owning a profitable business finally starts becoming appealing to you, you will have to raise your rates. Unless you plan on adding more bells and whistles to your product or service, your rate hike will not be justifiable in consumers' minds because they are getting the same exact service or product they've already been exposed to.

Leave cheap, low quality and little value for the dollar stores of the world. If you can't figure out how to best position your products and services, other than being the lowest price guy or gal in town, the problem lies with your ability to effectively communicate the benefits of your brand through marketing.

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