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You’ll Always Lose the Pricing War
Over the weekend Aaron, Weston, and I took a little trip down to one of my favorite local cafes in St. Louis, Companion. And while we were down there, we decided to take a little stroll through all of the cute, one of a kind shops linked to it. The last shop we visited was one we never frequent, a toy store. We buy Weston a toy maybe a few times a year not counting his birthday or Christmas. Because well he, like every other kid he knows, obtains a million toys from everyone he knows during each one of these times. So there’s no need for more. But, with the sunny day upon us, and us enjoying our stroll, we decided to go in.
We were immediately welcomed by a lovely and chatty employee who asked if we had ever been to the store before, explained its setup, answered any questions, and pointed out some of the highlights of what they had. And as we strolled along, Aaron and Weston came upon an ice cream cart and grocery store checkout stand and fell in love. They kept playing and playing, and playing…, as I continued to remind them that it was nap time. But, Aaron having found his new found love for these toys, inquired about the pricing. $200 for each. Ouch, but, understandable as these were some really big toys. So we said thank you, good to know, we’ll be keeping them in mind for Christmas and went on.
But me being me and in the business I’m in, I was interested in the pricing elsewhere. Not just from a consumer standpoint, but from a business owner standpoint. Knowing that a small business like this, would not be able to 1) get the pricing that stores like Wal Mart, Target, or Amazon does and 2) could not survive on the margins that Wal Mart, Target, or Amazon does.
So when we went home, I was intrigued, I looked up the pricing on Amazon. The ice cream cart was $175 on Amazon, the grocery store checkout stand was $150, and the Duplo set that we ended up caving on and bought for Weston was $23 at Target instead of the $33 we paid at the store. Those are some really big price differences.
Always Be a Service Based Business, Even If You Sell Products
I shared the price differences with Aaron. And mentioned that not only are the prices significantly lower at the big box store, but buying from them also means they’re delivered directly to your door, rather than you having to drive to the store. Which is not only a savings in time, but also money in terms of the cost of gas. I told him, “I don’t know how this kind of business could survive in times like these.” When Aaron sweetly replied, “But they said they would wrap everything for free.”
And therein lies the point, they will wrap everything for free. Whereas Target and Wal Mart have no wrapping option in store, and Amazon will charge a fee to throw it in a fairly unattractive bag for you. But, is that one service enough to encourage people to pay significantly more AND have to drive there? Now since that store is still there, and has been for some time, I’m guessing that for now it is at least surviving. Which may at least partially be due to the fact that it’s in one of the wealthiest areas in all of St. Louis, so their most frequent customers are probably less price sensitive than the average population. But, still, that may not always be the case. Even highly wealthy people start to notice price differences, and definitely notice time savings.
Small businesses like these, and design firms like yours, are different of course in that this toy store is selling a product, and your design firm is selling a service. So, that does give your design firm, a service based business, a huge advantage. As comparing service based businesses is much more difficult than googling the pricing of a Duplo set to find the difference in pricing between this small store and Amazon.
But both businesses can increase their profit margins, and their competitive advantage, by increasing the amount of services they offer. For this toy business, maybe they offer toy delivery within a 10 mile radius for free, or to put together the toy (as this is often the biggest headache of any large toy purchase) for an extra fee, or offer personalization on toys, or maybe they offer special play dates for the kids to come and explore the toys, or maybe they offer a service to create party favor bags full of children’s favorite toys. Whatever it is, the more services they can affordably add, the less likely they are to be placed in an apples to apples comparison with Amazon, Wall-Mart, or Target. It moves from a product based business, to really a service based business, as they do provide so many services. And the same goes with your design firm.
Become an Apples to Apple Pie Comparison, Not an Apples to Oranges One
With more and more large e-design services businesses popping up everyday, and more and more high end furniture companies giving the public access to purchase their pieces directly, your design firm can start to easily look like (to some of the public at least) that you’re a product based business. And that your product or design is much more expensive than those they can find elsewhere. But if you focus on the service, and services, that you provide, then you take yourself out of that category and comparison altogether. It not only becomes an apples to oranges comparison, it becomes an apples to apple pie comparison. One is a good tasting, satisfying raw product, but the other is a delicious, hard to create, rare to find an amazing one, treat that can definitely be sold for a premium price.
While I was reading through a kid’s magazine with Weston awhile back, they actually had this exact business principle displayed in a comic strip. A group of animals were trying to sell oranges. Just, oranges. But to no avail. So they conversed and discussed why their product wasn’t moving, and decided to switch things up a bit. They decided to turn their oranges, into orange juice. So they changed their sign, upped their price a bit, squeezed some oranges, and voila, they had a line forming. Because they added a service to their product, freshly squeezing the oranges, they turned themselves into a service based business and became that much more desirable. The same goes with your design firm.
You’re So Much More than Someone to Buy a Sofa From
Clients do need a sofa. They do need chairs. And they do need end tables. But what you provide at your design form is so much more than that. You transform basic pieces, into something magnificent, that’s completely customized to your client. You’re adding a series of services to your products and to your experience, that allow your client to really see how much value add you’re bringing.
So as you see the design industry changing, and companies trying to out price each other, and you, remember that you’re not in the product business. You’re in the service business, and the more you can focus on providing those extra services that truly add up to an experience, the more likely clients are to say, well, there really is no reason for me to buy any place else. Comparing buying our items from the internet versus from our designer, well, there’s just no way to do that. Because what she does goes far, far beyond that. What we’re paying for isn’t really the sofa, it’s all of the knowledge, experience, expertise, connections, resources, etc. that she has. And we would never have access to any of that if we just started looking for who sells this chandelier at the lowest price.
Share Your Story
So share in the comments below, what services have you added to really differentiate yourself in the extremely competitive world of interior design? What services have worked for you, and what haven’t? I would love to know and hear from all of you! And not just this time, but every time!
And in the meantime, make it a great week!
And if you’d like to join us for even more ideas on how to provide the kind of client experience that gets you greater loyalty, efficiency, and profits, register for “The Exceptional Experience” before the Early Bird Special ends on August 21st!