Competing on Price, Quality, and Service: Can You Have Your Cake and Eat it Too?

Share this article

In my last article, Price, Quality, or Service: Pick Two, I said that that no business can successfully or consistently provide the best service and the highest quality at the lowest price. Companies must choose which two on which to compete. I also hazarded a guess that most of us here have chosen quality and service—whether unconsciously or by deliberate choice. What I’m about to suggest is controversial. But suppose, in addition to targeting relational buyers with quality and service, you could also target transactional buyers by removing either quality or service from your sales process and competing on price? Here are a couple of thoughts.

Competing on Quality and Price

Much of the expense in web development is the time it takes to meet with the client, spec out their requirements, wait for the content, and revise the content. Suppose you stripped that out of the sales process by automating this process with a do-it-yourself questionnaire the client completes on his own time. There would be no on-site meetings. Updates and changes are charged extra. The challenge here is to completely automate the service process and not get sucked into any consultation. Getting caught into a consultative sales process with price-driven clients is a losing proposition, so your questionnaire must be thorough and include FAQ’s and so forth. Communication and support would be limited to email. You may also consider offering templates rather than a custom design, so long as your customer is aware of this. This could work well with clients who are looking for a basic, entry-level site, for whom the consultative sales process would be overkill. This may appeal to those concerned with getting a quality product at a good price and are willing to sacrifice the personal attention generally associated with a service like web design and development. I found myself in this position on more than one occasion—usually with someone who was recommended to me but didn’t have the budget or the need for my typical custom-built site. Rather than lose the deal, I’d offer a lower-priced, template site that didn’t require significant up-front consultation. Keep in mind that these clients, if satisfied, can turn into a higher-end client in a few years as their needs evolve. You also have the opportunity to “drip market” to them through your newsletter or blog, educating then on what else is possible beyond having a basic website, and how you can provide these services when they’re ready to take the next step.

Competing on Service and Price

Do-it-yourself online website builders have become the bane of the modern web professional. If you haven’t lost a potential client to one of these services, don’t worry … you will. These companies compete on service and price. What suffers is the quality—because the client, not you the professional, is the one creating the site. (Don’t get me started on the code the software writes.) What these companies do excel at is customer service. The few I’ve dealt with have courteous, professional customer service reps willing and able to walk you through any problem you encounter. This appeals to the type of transactional buyer who’s willing to sacrifice his time in order to get the best possible price. That’s because he doesn’t consider the time spent building the site himself as part of the overall purchase price. I seriously considered adding this to my offering at one point. As I pointed out in a previous article, you will often get inquiries from people who have no clue what’s involved in web development and assume a website should cost “around $300.” I think it’s perfectly okay to pass on these types of prospects. But suppose you could bring them into the fold and make them a customer, with a minimum amount of effort on your part? Why turn them over to a build-it-yourself website company when you
could be that company? (Can you say “residual income”?) There are plenty of companies that provide private label website builders that you can re-brand with your look and your domain. Imagine having 50 or 100 of these customers at $6 a month. Keep in mind that, if you choose to do either or both of these, you’ll be somewhat of a commodity in the markets you’re targeting. If your quality or service is merely equal to that of your competitors’, your customers’ primary buying criteria will be price. The challenge is, how can you set yourself apart by providing superior service or quality? The good news is, you’re probably already doing so now, with the clients you already have.

Frequently Asked Questions (FAQs) on Competing on Price, Quality, and Service

How can a business compete on price without compromising on quality?

A business can compete on price without compromising on quality by focusing on cost efficiency. This involves streamlining operations, reducing waste, and improving productivity. Businesses can also leverage economies of scale by increasing production volumes to lower per-unit costs. Additionally, strategic sourcing and negotiation with suppliers can help reduce input costs. However, it’s important to ensure that these cost-cutting measures do not negatively impact the quality of the product or service.

What is the role of service in competitive pricing?

Service plays a crucial role in competitive pricing. It adds value to the product or service and can differentiate a business from its competitors. Excellent customer service can lead to customer loyalty, repeat business, and positive word-of-mouth, which can indirectly contribute to a competitive pricing strategy. Businesses can compete on service by offering superior customer support, after-sales service, or unique service features that competitors do not offer.

How can a business balance between price, quality, and service?

Balancing between price, quality, and service requires a strategic approach. Businesses need to understand their target market, customer expectations, and what their competitors are offering. They should aim to offer a product or service that meets or exceeds customer expectations at a price that customers are willing to pay, while also providing excellent service. This may involve making trade-offs, for example, charging a slightly higher price for superior quality or service.

What is competitor-based pricing and how does it work?

Competitor-based pricing is a pricing strategy where a business sets its prices based on what its competitors are charging. This strategy is commonly used in highly competitive markets where products or services are similar. It involves monitoring competitor prices and adjusting your prices accordingly. However, businesses need to ensure that they are still covering their costs and making a profit.

How can a business differentiate itself when competing on the eight dimensions of quality?

A business can differentiate itself by excelling in one or more of the eight dimensions of quality: performance, features, reliability, conformance, durability, serviceability, aesthetics, and perceived quality. For example, a business may choose to focus on reliability and offer a product that is more reliable than its competitors. Alternatively, a business may differentiate itself through superior aesthetics or by offering a product with unique features.

What are the risks of competitive pricing?

The risks of competitive pricing include the possibility of price wars, which can erode profit margins. There’s also the risk that customers may perceive the product or service as low quality if the price is too low. Additionally, if a business relies solely on competitive pricing, it may struggle to differentiate itself from competitors.

How can a business use competitive pricing to its advantage?

A business can use competitive pricing to its advantage by positioning itself as a cost leader or by offering better value for money. This can attract price-sensitive customers and increase market share. However, it’s important for businesses to combine competitive pricing with other strategies, such as product differentiation or superior service, to create a unique value proposition.

What factors should a business consider when setting prices?

When setting prices, a business should consider factors such as cost of production, desired profit margin, market demand, customer expectations, and competitor prices. It’s also important to consider the business’s overall strategic objectives, such as market penetration, revenue maximization, or profit maximization.

How can a business compete on service?

A business can compete on service by offering superior customer service, after-sales support, or unique service features. This can involve providing personalized service, responding quickly to customer inquiries, resolving issues promptly, or offering convenient service options. Businesses can also use technology to enhance service delivery, for example, through online customer portals or mobile apps.

How can a business maintain quality while competing on price?

Maintaining quality while competing on price requires a focus on cost efficiency and process improvement. This can involve streamlining operations, reducing waste, improving productivity, and negotiating with suppliers for lower input costs. Businesses can also invest in technology or equipment that improves efficiency or quality. However, it’s important to ensure that these measures do not compromise the quality of the product or service.

John TabitaJohn Tabita
View Author

Former owner and partner of web firm Jenesis Technologies, John is currently Director of Digital Strategy at Haines Local Search, a company providing local search marketing solutions to SMBs, including print and Internet Yellow Pages, web design, and local SEO. When not working or spending time with his family, John offers great sales and marketing advice on his blog, Small Business Marketing Sucks. When not working or spending time with his family, John offers great sales and marketing advice on his blog, Small Business Marketing Sucks.

freelanceMarketingsalessmall business
Share this article
Read Next
Get the freshest news and resources for developers, designers and digital creators in your inbox each week