Business Decision: Sell Low or Sell High?
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This is an article that talks about my personal business experience on pricing strategy for business. I will discuss the reasons why and how you should sell high in your business instead of sell low to win the price war.
In business, there are a lot of decisions that we have to make. Each decision will affect your business directly. So we must learn how to make a good decision so our business can grow faster and bigger. Besides that you also must learn how to overcome your wrong decision without letting it destroys your business. Well, we only human and we will make mistakes in anything. So we have no choice but learn how to overcome our mistakes.
Today I want to discuss one of the big decisions that you must make in business – Selling High or Selling low in your business. In other words, you must decide your pricing strategy. This is a very important decision because it will affect your business profit, marketing strategy and business model. In a nutshell, it will affect your business!
The Pros and Cons of Selling Low
Selling low means you sell your products or services at a low price. You will sell as low as possible to attract or maintain your sales volume. Well, since you are selling low, your profit margin is low and you have to maintain your sales volume in order to survive. In business, especially businesses that involve products, price war may happen. So if your business involves in this price war, you have to keep the price as low as possible to win it. Customers usually compare your products with other competitors and make their buying decision. Since price has some influences on people’s buying decision, so if you sell low, you may boost your sales volume immediately.
The Advantages of Selling Low for your business:
- Because you sell low, your sales volume are usually higher compare to those sell higher than you
- Since your sales volume is high, it is easy for you to collect a big list of customer databases.
- Sometime, it is easy to sell low compare to sell high where your customer will only care about the price instead of other requirement.
The Disadvantages of Selling Low for your business:
- Like what I said, your margin is low. So in order to survive or cover your business expenses, you must maintain your sales volume.
- In order to sell at the lowest price, you may have to purchase your inventory in volume to get a better price. So you can drop down your cost and sell lower.
- Since you are selling low, sometime it is hard for you to provide extra service to your customers as your margin is low.
The Pros and Cons of Selling High
Selling high, on the other hands, means you sell your products or services at a price that is high to your customers. The biggest advantage you do so is you will get a high profit from what you are selling. This will be a great cash flow for your business. The disadvantage is some customers may complain “expensive” in front of you and eventually you will lose your customers. Besides that, you will also lose in the price war.
The Advantages of Selling High for your business:
- Since you are selling high and this will help you to have a high profit margin for your business
- You will collect and filter up a group of customers that are willing to pay more for your services or products.
- You will stand out of the price war.
The Disadvantages of Selling Low for your business:
- If you are selling high, your sales volume will be low.
- In order to sell high, you must learn how to provide values to your customers and make them willing to pay more. This is one of the challenges of business.
The reasons why I choose to sell high
For your information, I’m running a computer products sales and service business in day time. This is my offline business and also the only business that my mentor left for me. For your information, in my country, computer related business is a very competitive business. Because of the competition, most of my competitors will choose to sell low for their business. They sell the computer gadgets and charge their service at a very low price so that they can win in the competition.
However, I think differently and choose the different path to sell high. Maybe I was influenced by my mentor that selling high is the way to run a business. However there are some certain points that I agree and below are some of the reasons why I do that:
- Who can last longer? From what I saw, those who sell low cannot last very long in their business. Most of them will have to close down due to the low margin to afford the business. However, on the other hand, company like mine who sell high can last longer.
- Profit Margin. Selling high means I have a higher margin profit. So through this margin profit I can give a better service and quality to my customers. So I can provide more values to my customers and they are happy with my service.
- Which one can make 1 million faster? Well I think you know the answer for this question.
- My targeted customers. I’m actually targeting at a totally different market for my business. The market that I target is customers that are willing to spend money to get special service, save their time and help them to solve problems. I understand that computer is important in our life. So I will provide the best and the fastest service to them to save their time and reduce the down time of their computers. I know there are some customers who are willing to pay more to save their time as their time is valuable.
However, in order to sell high, I have to do extra works. First I must provide good service. Second, I must learn how to provide more and more value to my customers so that they can pay the money happily. This is one of the challenges that I’m having now – building value for customers.
Which one to choose?
Above are just some of my opinions and ideas on making the decision to sell high or sell low. I believe selling high is good for my business so I choose to do that. Basically there are no right or wrong in this decision. If you want to sell low, then you must change your business strategy to sell low. For example, you must learn how to increase and maintain your sales volume. Then only you can make the profits. There are a few competitors I saw in my area are doing quite well with selling low. So the most important things are your business mission, strategy and market you are targeting at.
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2 Responses to “Business Decision: Sell Low or Sell High?”
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If I were to run a business one day (for non niche market - e.g. selling computers), I think I will sell low but provide a good quality of services and products same as my competitors (maybe is you). Having said that, I must also make sure the market has not yet saturated so that my sales volumn can be maintained high. Are you doing this business in Malaysia? As for selling computers in Malaysia, I somehow suspected the market is kind of saturated. Therefore if selling low may very hard to survive. Perhaps I”m wrong. I think selling PC is a good opportunity in China market.
Some places in China are quite competitive selling computer. However China Market is big and there are still some market that you can target at to make big profit. This is also same in Malaysia