Cheap Prices Do NOT Create Loyalty
This offer from a local business made my teeth hurt–and not because of the sweetness of the product:
“50% off all cakes from December -May. Order and pay now, and get all the cakes of your dreams for 50% off.”
This bakery not only sacrificed 50% of its cake revenue for 6 months, it sent the message that the cakes are not worth the full price. Instead of increasing its roster of loyal customers it has created a group of discount seekers. When these buyers have to pay full price in the future, they’ll go elsewhere.
Cheap prices may attract attention but they do NOT create loyal customers for your business. Cheap prices create loyalty only to cheap prices, and those buyers will go wherever the cheapest prices are.
I assume that this bakery was looking to generate quick cash but sacrificing 6 months worth of revenue is hugely shortsighted and mistaken. The cash infusion will be spent now and they’ll have a debt to pay to those customers all the way into May.
The revenue lost can never be recouped. This is true for every business, yours included.
Here are my three proven methods to generate revenue quickly and increase loyalty to your business (not to cheap prices):
1) Provide amazing value for the full price. Much value can be created with offerings that don’t carry a heavy cost to generate. Think of better design, more convenience, appealing to the pride and reputation of the buyer and special access to the owner or a star player in the company.
2) Understand the needs of a new market segment and customize your offerings to meet those needs. You’ll be able to use your existing infrastructure and you’ll only have to invest in the marketing. You’ll be marketing high value at full price, so new buyers become customers who appreciate the value you offer and that’s what creates loyalty.
3) Create new value for your loyal buyers. Too often companies think they have to create something entirely new for a new segment of buyers. Instead, use your extensive knowledge of your current buyers to create new offerings just for them. These are buyers who are already loyal and who have confidence in you which makes their buying decision for the new offerings much easier.
The key here is that you’re meeting their deepest needs, rather than ‘thinking outside the box’ or ‘disrupting’ anything. No one knows them like you know them, and that gives you a huge competitive advantage.
No matter how many ‘experts’ recommend sales and discounts for limited times, do NOT offer them. You’ll dig yourself a hole you can’t get out of. Cheap prices only create buyers of cheap offerings and those buyers will run to a competitor of yours the moment that competitor offers a cheaper price.
Take pride in the quality and value of your offerings. That’s how you create loyalty and steady reliable revenue growth.