No one is successful without a sales strategy, and a strategy for failure is one that is based on low price. Recently, I spent 11 days in China speaking at several conferences and meeting with numerous business leaders. I was amazed at how every business in China is afraid of Vietnam. The reason is simple: Vietnam can produce anything China can for less and that has the Chinese paranoid. The rest of the world may find this ironic, considering how Americans and people from many other countries view China as the ultimate low-cost producer.
Yes, China can produce things less than most other countries can. However, this isn’t a platform upon which they can build their companies long term. Low price is simply not a sustainable competitive advantage, as there will always be someone, somewhere who can produce it a little bit faster, a little bit better and a little bit cheaper, leaving the low-price model obsolete. The problem they’re having now in China is trying to figure a way to wean themselves off the low-price model, when everything they’ve done from a manufacturing process and a marketing perspective has been built on that model.
I firmly believe China’s challenge comes not in having to change their manufacturing processes to produce a higher quality product — they can and will figure out a way to do that. The real challenge comes in changing the perception people have of China. China will be successful in the long-run, no doubt about it. In the short run, though, they will have to forgo a tremendous amount of profit, as they try to change the perception of the customer. The reason is simple: They will need to produce a high-quality product for years, but won’t be able to charge a premium price, because the customer will remain skeptical of their quality. After the long haul of switching to high-quality products, not to mention pouring tremendous effort and money into advertising and marketing, they will then see people’s perception of their businesses change. Like I said, though… it will take time and a lot of money, which obviously will curtail their profit for quite awhile.
The reason I’m sharing this with you is to drive home why I am not a proponent of a low-price strategy. It is not the foundation on which you build a long-term business proposition. Quality combined with marketing is how you build a business plan, and this applies regardless of the product or service you’re selling.
Some of you, I’m sure, are skeptical and you’re going to yell out something like Southwest Airlines or Walmart as examples of “low-price strategy.” I’ll argue both of these are not the absolute low-price leader (full disclosure: I’m writing this while at 33,000 feet on a Southwest flight, and yes, I do love Southwest). Most people have only the perception of these companies being the low-price leader. I can give you countless examples where I can buy what both of these companies offer for less from others, but because of how they’ve marketed themselves, they are seen as the low-price leader. Yes, both of these companies did start out with low-pricing as a key attribute, but as time has moved along and they’ve grown, both have developed strong positioning statements around things other than price.
So when you are looking closely at your sales strategy and you think low price is your best option, I encourage you to think again. Your long-term sales success depends upon it.