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Easy Trick to Avoid a Price War


Don't get stuck slashing prices. Instead, use this consumer-behavior secret to reframe the competition.

Price wars stink. There's nothing more frustrating than being constantly forced to lower your price simply in order to make a sale.

Wouldn't it be great if you could keep your price higher than the competition while actually increasing sales?

It turns out there's a very simple way to do this--by turning your competitor's lower price into a competitive disadvantage.

It turns out that when two products are virtually identical, people will buy the one that costs less. However, if buyers are exposed to a third product that costs more than either of the original two, people will usually pick the mid-priced product, rather than the cheapest one.

Create Another Price Point

Here's how to use this fact strategically.

Let's suppose you're selling a service for $1,000 that's similar to a service that your competitor is selling for $900.  You could offer your service for $890, but that's just playing the price war game.

Instead, offer three versions of your service: one for $900, one for $1,000 and one for $1,200.  The three services don't have to be wildly different as long as you label them appropriately--say, Silver, Gold, and Platinum packages.

Then, if a customer or prospect brings up your competitor's product, you point out that your "Silver" package matches their price.  Bingo!  You've just positioned the competitor as the cheapie alternative.

In most cases, the customer will mentally take the competitor off their list and want either your Gold or (if they're that kind of person) your Platinum level.

Easy, eh?

Know Your Customer

Needless to say, this is best for customers who are not doing a huge amount of research into your product category. For those who are, you'll need to go a more difficult route--identifying something in your product that is so important that the alternatives just aren't viable.

Still, when it comes to competitive pricing, this is about is close to a magic bullet as it comes.

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A Word From LES MILLS Asia Pacific

Lower cost competitors are a reality in any product or service market, in our industry the proliferation of 24-hour, lower service fitness facilities are equivalent to that low-cost rival. Participating in a price-war with lower cost memberships is a lose-lose scenario in the long-term for everyone.

Creating more price points as recommended above is the alternative solution to dropping your price to rock-bottom. The Silver, Gold, Platinum style packages as mentioned above can be transferred beautifully in to fitness business using products you already have (or available to you through LES MILLS). For example, your Silver package could be your Basic package that simply covers the use of your weights facilities. Gold could include your Basic package plus group fitness and Platinum could include all of the above plus small group PT sessions (bootcamp, suspension training, GRIT™ Cardio, GRIT™ Strength).

The beauty of the packages is you don’t have to change what you already do, just how you offer them to members. A starting point is listing all  the services your business offers (such as group fitness, small group PT, towels, lockers, steam room, personalised induction program, clubs within the club etc) and bundle them in to separate packages that will allow you to remain competitive with your low-cost competitors.