Does your business compete on price? Maybe it shouldn’t.

Competing on price is one of many different strategies a business can use to attract more business. The challenge presented by cost cutting is that the type of customer you generally attract may not be willing to keep doing business with you if someone else comes along with a lower price. Every business has a percentage of customers that fit this description but the key is to find strategies that generate the kind of customer your business wants. A customer that is receiving more perceived value than another provider of the same product or service is prepared to pay a higher price.

The mobile phone business is a competitive business that recently saw T-Mobile not only increase its customers by 1 million subscribers last quarter, but also saw its revenue and net income increase 4% and 17% respectively. T-Mobile ranks third in the marketplace but was able to rely on its history of promotions and bundles to preserve its margins and bottom line profits. COO Mike Sievert was quoted as saying “We’ve had a long history of understanding promotions and learning what it takes to win real customers that stick with you,” which produced a better result for T-Mobile compared to its competitors.

What would your business do if you couldn’t drop your prices but needed to attract new business? How would you repackage or bundle your services/products to provide more value to customers without sacrificing your margin? It’s easier to compete on price compared to adding value and protecting your margin but your bottom line suffers. Can you find ways to protect your margin and increase your revenue?

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