We can't imagine why anyone would start a business if their objective was to deliver low quality. Lot's of entrepreneurs tell us that by offering a low price, "we'll have them where we want them. We can raise the price as soon as we have a lock on the market." We're not sure which is lower quality, the output of these services or their marketing plan.

The only customers you can acquire with a low price strategy are the customers who don't mind spending internal resources to capitalize on the next low price offering. We know who they are and, as a class, they have less business sense than any real partner you'd want to develop a relationship with.

By definition, customers who clamor for low price are the same group who treat their employees shabbily in other areas. After all, the basic operating assumption in these customers is "our employees learning curves are less valuable than a couple of hundred bucks a month for a quality offering." When you troll the market with a low price, you get these customers. Anyone who has had them is glad that they're going to lose them to the next low price competitor. They cost too much to maintain.

The central paradox of a low price strategy for acquiring market share is that customers who buy on price alone are precisely too expensive to maintain at that price point. This means that any company trying to make a believable case that cost and quality are not interlinked is going to attract the dogs who will prove the point.

In simple English, you get what you pay for.

The companies that are dropping their prices in the downturn are putting themselves out of business. In our offices, we've finally discovered a four letter word that is unacceptable in polite company: Free.

- John Sumser © TwoColorHat. All Rights Reserved.

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Materials written
by John Sumser
© TwoColorHat.
All Rights Reserved.

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