Day 5

Be different – and better!

 

Okay – you can improve your gross margin by increasing your selling price. The big question is – how can you justify doing this?

I’d now like to make a really important point – and it’s this; don’t try and compete on price. Why? Because you’ll almost certainly lose – your margins will be tiny and so you’ll be unattractive to buyers; bigger competitors will almost certainly be able to undercut you on price so it’s a fight you’re always going to lose – they’re buying in bulk and often operating on lower unit costs than you.

Don’t try and be all things to all people – that’s a recipe for disaster. Hone in on a well-defined target market and provide a package of solutions and benefits that solves your target customers’ problems better than any of your competitors – and because you’re doing this, customers will be prepared to pay more; you’d be much better off aiming for a large share of a niche market than a small share of a highly populated market. Be a big fish in a small pond rather than a small fish in a big one as it’s much more profitable.

Note here that I referred to a ‘package of solutions and benefits’ – that’s what you’re selling. Nobody buys products and services – they buy solutions and benefits – you’re making your customers’ lives easier or more pleasurable, making them feel safer or better in some way; most customers aren’t bothered about the technicalities of what you’re selling – they want to know what it will do for them.

A small business is more likely to be attractive to a large buyer (and that’s the type of buyer you ideally want to appeal to, as I’ll mention again later) if it adopts a niche strategy.