2 min read
What do you do when a new bakery comes to town. Recently a home-based baker (HBB) with a four-year-old cupcake business was blindsided. A new traditional bakery opened on the outskirts of her small town.
She asked, is there enough business for both bakeries? Does a traditional bakery win in the end? What do I do if customers start to buy from the new bakery? Fear and anger surfaced.
The new bakery sells traditional baked goods, cakes, cupcakes, pies, pastries, and cookies. They are selling one dozen cupcakes for half the price as the home-based bakery ($12 for a dozen). The HBB sold her cupcakes for $24 per dozen.
What do you do when new competition undercuts your price?
I am not going to share the entire conversation with you here but I will provide some food for thought.
Every couple months, take a couple hours to analyze the competitive landscape. It doesn’t matter if you live in a major city or small town. Drive around, Google, look for competitors. There are times when a new competitor pops up and an old one goes under.
Keep your eye open for a competitor who has revamped their website. Is the competitor slashing prices on similar products?
(Note: Slashing prices can only do more harm than good. If you keep cutting prices to match your competition, you will erode profits.)
- Hold firm on price. Unless you see a drastic downturn in sales, plan on keeping prices the same.
- Is there a wide variation in the quality of the product? Are your cupcakes better? Examine, value for the dollar, taste, packaging and customer service.
- Buy some of your competitors’ products so you can see what you’re up against.
When you first start your business you may feel guilty emulating your competitors. Stop! Analyzing the competition is one of the most effective ways to improve your business. Do you want to make money or appease the competition?
Don’t lower your price unless you’re certain that your company can emerge unscathed. It is critical to avoid a price war.
How do you overcome a “low-baller?” Shift customer perceptions about your product away from money and onto value. Today’s customers are more budget-conscious. But they may continue to buy your products depending on their perceived value. Remember, when the value of your product exceeds the value of the customer’s money, you’ll get the sale.
Where is the value in your product? Only you can answer this.
- Fresh, never frozen or dried
- Exotic or imported ingredients
- Extracts, not artificial flavors etc.
- Improving convenience through online shopping
- Offering in-depth information on products
- Building trust by making yourself available
- Posting testimonials from satisfied customers
- Building a good reputation as a member of the community
Share your low-baller story with us.