NFIB

Competing With a Vendor Who "Marks Down" an Over-Inflated Price
03/ 22/ 2002

We've all seen it, whether we're shopping in a retail store, buying equipment from a distributor, or ordering directly from a manufacturer. An item will be substantially marked down from its initial price, making it seem like a tremendous bargain. The trouble is, the initial price was highly inflated to begin with, and the marked-down price is still more than the item is really worth.

This "bogus" pricing takes place in almost every industry, so how can vendors who don't participate compete? In today's Workshop, Jeffrey Moses offers a few suggestions.

Robert Wagner, of Allegheny Paper Shredders Corporation in Delmont, Pa., runs into the bogus pricing problem regularly. For example, a buyer may be in the process of purchasing a high-volume shredder. The shredder of a competing vendor may seem like a tremendous bargain, since its initial price was stated to be $15,000, marked down to $10,000. The buyer isn't getting the bargain he or she expects, because in reality, the initial $15,000 price was highly inflated.

"When you're selling against a company that operates in that way, you have to re-educate your customers," Wagner says. "It's important to make them aware of what they're really getting. You need to point out features and quality, about service and support. It's vital to focus on dispelling the illusion that they're getting a higher quality product at a lower price."

Even experienced buyers can get caught up in the feeling of getting a great deal when they see a substantial price markdown. When you're competing with a vendor who is involved in this practice, don't think that a few casual words will be enough to "set the buyer straight." A 30 to 40 percent markdown can be highly attractive, and make a lasting imprint in the buyer's mind.

To compete against this practice, learn as much detail as possible about the features of your product and about the quality of manufacturing or construction. Compare your product point-by-point with other ones. Show the customer your product is just as good or better in every way, and that there is no basis for the bogus initial high price of the competitor's product.

"Remember also that the customer may be shopping with you first," Wagner says. "Later, they might then go out and run into the competitor who marks down artificially. Educating customers will encourage them to operate from your set of purchasing values."

When customers realize that a vendor is inflating prices and then marking down artificially, they may become upset. "No one likes to have the wool pulled over their eyes," Robert says. "By educating customers, you at least have leveled the playing field and may find that the customer begins appreciating your straightforwardness."

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