24 Pricing 3: Be the cheapest

24

PRICING 3: BE THE CHEAPEST

It’s generally recognised in the world of business that adopting the brand position of the cheapest in your market can never be a longterm strategy.

There is always someone who can fi nd a way to come into your market and undercut you; even if they don’t stay in the business long, they could be there long enough to damage your reputation and force you to reduce your prices.

The idea John Lewis has been using the slogan “Never Knowingly Undersold” since 1925. It completely baffl ed me when I was a child. It means: “As far as we are aware, no one gives better value than we do.” In these days of Internet price comparison, John Lewis had to reconsider what to do with this line. Competitors deliberately targeted the items they sold, and reduced their own prices forcing John Lewis to do the same in order to keep their decades old promise.

John Lewis would have had to restrict their stock to obscure brands that none of their competitors sold, their own brand and undiscounted products like upmarket cosmetics, or to change their decades-old strategy. They chose to tweak their principle of pricing their products. Their slogan now refers to the total value and quality they give, not just the price.

If you want to build a reputation for having the lowest prices in the market, then something’s got to give. It’s either quality,

margins or range or all three. Or you bump up your prices by selling insurance at the checkout. Although very few customers will state out loud that fi nding the cheapest price is not important to them, the reality is that they will shop where they feel comfortable, and price is only one factor in anyone’s buying decision.

In practice • Bear in mind that although people will say that price strongly infl uences what they decide to buy, they won’t buy something they don’t like no matter how cheap it is. • You can earn a reputation for being the cheapest, just by telling people that you are. Some supermarkets choose to discount a small range of products and kick up a huge fuss about this, giving the impression of offering good value. One option is to have a discounted range, but not the entire stock. • There will always be someone who will come in and undercut you, and undermine your brand positioning. Unless you are certain you’ll be able to hold your position, being the cheapest in the market is a really bad idea. (But it’s in this book because despite the risks it’s still popular.)