The Easiest Place To Compete Is Price.

In the trades, and specifically our trade of towing and repair, price is too often the chosen place to differentiate.  Of course, it is critical to differentiate our businesses from one another to allow the customer a choice.  However, choosing to differentiate on price, and specifically being the lowest price is the easy route.  This easy route is littered with businesses in the ditch and nobody enroute to recover them from the pain involved.

I will admit, being the lowest price can, and often times will, provide a solid stream of work.  This solid stream of work can be all encompassing and creates its own pains–not excluding finding employees, maintaining quality, and meeting expectations of what is often the most difficult customer to please.  Yes, the customer choosing the lowest price is very often the hardest to please or very critical of your business’ efforts.

I have experienced time after time, a new entrant into our marketplace so very critical of our pricing and very specifically criticizing us for charging too high prices.  Therefore, I would assume they feel that they can improve on the marketplace by providing a product either more efficiently or they instead feel their personal value is not as high as others in the marketplace.

It is very dangerous to compete on price, not impossible, but a risky strategy with as high or higher risk than choosing another differentiating factor like speed or quality.

What I recommend is understanding a few simple metrics.  Lead indicators or key results that will ensure you are making a profit on your cycle.  Your cycle of per call, per hour, or per shift for example.  Not knowing per cycle of whether or not you are profitable will end up having the great myth of the lowest price put you in the ditch.  The great myth of making it up on volume doesn’t work.

If you would like to discuss this further, as always, I would love to hear from you.

Respectfully,

Keith

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Categories Business startups, Pricing Strategy, Repair business pricing, tow business consultingTags , , ,

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