Most of us go through a right of passage when we first get interested in using our laser to try and make some extra money.
You start making some cool stuff and think, “I could sell these, right?” So you go to Google or probably the biggest offender, Etsy, and you start searching for what other people are charging for a similar product.
The results pop up on your screen, and your heart sinks. Because the top results for the product you wanted to sell, there’s a company selling something similar for 5 dollars shipped. But buying the materials alone would cost you double or triple that. So you’re thinking, “How could I compete with those prices?” And the answer is…you don’t.
Today, I want to discuss one important thing to remember when starting your laser business journey: never compete on price. You are not Walmart, Michael’s, or some big overseas Etsy seller. You are playing an entirely different game.
First, let’s discuss why you should refrain from competing on price.
#1 – It is a race to the bottom
When you compete on price, you’ll usually end up in a pricing war where it’s a battle of who will take the lowest percentage of profit to acquire a sale. You see this often on Amazon, where different companies selling the same product are battling to win the “Buy Box.” They do this by undercutting each other’s prices until one company just gives up.
This comes with the territory when you’re selling the same mass-manufactured product that everyone else is to a mass audience. But this is an awful strategy when you’re a small laser business, like we are, doing custom and personalized products. You end up burnt out doing jobs where you don’t make any money, and the only person who benefits is the customer. But in this case, we can’t blame them because it was a self-inflicted wound. We set the prices too low just because we saw someone else doing it for less and assumed we had to do the same thing.
#2 – Attracts the worst kind of customers
Number 2, it attracts the worst kind of customers. I don’t know if this is an immutable law of the universe, but the customers who are only interested in your lowest prices or getting you to discount everything are ALWAYS more work than those who buy the higher-priced items. I see this a lot in my business because I sell products that range from cheap to reasonably expensive for my niche. And it’s always the lowest price products where I deal with the most customer issues.
This customer is usually only interested in getting what they want at the cheapest possible price, or they’ll move on. When you are a massive company like Target, this is fine, but again, we’re not playing that game. Customers who only shop on price can never be nurtured into loyal or repeat customers because they don’t care about you…at all. And developing that kind of relationship with your customers is extremely important to surviving as a small business. It’s easier to sell to repeat customers than to acquire new ones all the time.
#3 – Lower Perceived Product Value
Number 3, you’ll fall into the lower perceived product value trap. Translation – people will think your products are crappy.
For example, let’s say you’re shopping for a new home on Zillow. You know what kind of house you want 4bedroom, 3 bathrooms, backyard for the kids, driveway – you have your budget and see the average going rate of a home in your desired area. Lo and behold, a home that meets all of your criteria pops up, but for some reason, it’s priced significantly less than all the other homes you’ve bookmarked.
What’s the first thing that comes to mind? “What’s wrong with it?”
Perceived value is – the value customers are willing to pay for a particular product or service based on their perception.
Often, when you price a product that customers perceive as too low, they will equate it with less value. “Why is everyone else selling that item for $50, but this guy is selling it for $15…. There must be something wrong with it”. It might seem like a good idea to undercut your competitors, but you are only hurting yourself in the long run.
How to Position Yourself For Higher Value
Now, let’s talk about things you can do to ensure you create a product or service with high perceived value in your customers’ minds. Because when you have a higher perception of value, you can charge the price you need to make a good profit.
#1 – Turn down Unreasonable Customers
First, you need to turn down unreasonable customers. This sounds like an obvious first step, but you’ll be surprised how hard it is to do when the situation arises. Getting customers to reach out can be challenging, especially when you’re first getting started, so once you get one, you’ll sacrifice more than you think to keep them around. And I do put emphasis on the word unreasonable. Many customers are meticulous and particular and take a little more communication than others, but I wouldn’t call them unreasonable.
Unreasonable usually means demanding, just looking for discounts, maybe even angry and demeaning. A big clue you are about to deal with an unreasonable customer is if they reach out to you, and the first thing they mention is being able to get your product or service cheaper elsewhere. I advise being polite, but it’s in your best interest to not do business with this type of customer.
#2 – Focus on brand and content
Number 2, focus on your brand and your content marketing. People love to skip over this topic once they hear it for some reason, but your story and your brand are your superpowers here. Again, we are not Target or some other faceless mega-corporation; we are tiny businesses, and it only benefits us to put a face to the name.
People prefer to do business with people they either know or have an affinity towards. Since it’s impossible to know every potential customer on a personal level, this is where creating and displaying your brand story comes into play. You should have a website or Facebook Business page with a section letting people know a little about you. At the very least!
Now, this goes hand in hand with your approach to content marketing. Making content can take on many different forms, but for most of us, that means photos and videos of the stuff we are cutting and engraving. A big mistake many newbies make is setting up an Instagram or Facebook page for their business and spamming pictures of products saying “Buy now! Buy now”. And then they wonder why no one is ordering their stuff. That topic requires its own article, so I’ll do that in the future, but the short version is that this doesn’t work.
Be honest – When you’re casually browsing on Facebook or Instagram, and a random product pops up in your feed from a company you’ve never heard of – how often do you just bust out your credit card and order it on the spot? Probably close to never, right?
We focus on our brand and create content to hopefully convince customers to go from making a purely logical purchasing decision (i.e., just wanting the lowest price possible) to a more nuanced emotional purchasing decision (i.e., wanting to order specifically from you). And when you make that case effectively, you’re free from having to compete on price.
To wrap up, competing on price is the worst thing you can do as a small business. Especially when you might be competing against much larger companies with more resources than you. Commit to finding ways to create connections between you and your potential customers through good content, then offer them a solution to their problem, whether custom engraved tumblers or an awesome product you created yourself. Connection first, then you sell the product or service. Not the other way around.
