“A businessman seeks to remake some part of the world in his own image, and in doing so succeeds in proportion to his vision, creativity, flexibility, and intelligence.” – Dan Ferris
Let’s begin with a business principal that is behind many – if not most – of America’s greatest fortunes.
It may be the most important secret a businessman can know, for it is the most powerful and most reliable way to make a small business grow. If you think about your own business-building experience – or study the early histories of businesses you admire – you will have encountered this marketing strategy.
Yet it’s hardly ever talked about. And it’s often overlooked.
Here’s the secret I’m talking about: Nothing sells better than price.
However valuable your product is … however clever your marketing … nothing will grow your customer base faster than under-pricing the competition.
Let’s look at history. Consider how many billion-dollar fortunes were created by cheap pricing.
Rockefeller dominated the oil industry by buying up production and delivery and thus was able to offer oil and gas at prices his competitors couldn’t touch. And by keeping the prices of these fuels relatively low during his reign, Standard Oil increased the size of the natural fuels market tremendously. Because oil and gas were cheap, people used more of them.
Likewise, Andrew Carnegie made a fortune by producing inexpensive steel. Marshall Field brought down the cost of retail shopping. Sam Walton is known for his discount stores, Henry Ford for making autos within financial reach of the average person, and the Mellons for making money cheap.
To break into a competitive market, you need either (a) a big advertising budget (to establish demand for your product/service) or (b) a way to sell your product/service CHEAP so word will spread on its own.
For most businesses, (b) makes more sense.
So if you want to make your business successful, figure out how you can under-price your competitors.
This may seem too obvious to mention, yet you’re not likely to find it in business seminars, audiotapes, or marketing books. I simply don’t remember reading or hearing advice of this sort – ever.
I remember when I first got into the newsletter business. I was hired to run the newsletters themselves – as editorial director. The marketing director had created a growth strategy based on the one used by the large company she came from. She favored expensive products and high prices. We were going nowhere.
One day, my boss came into my office to tell me he had fired this woman and wanted me to help him grow the company. I told him I knew nothing about selling newsletters. He admitted he didn’t either, but he had an idea that it might be like selling bagels.
In the next six months, we reformatted the newsletters – making them cheaper to produce – and slashed our prices. Instead of charging $200 per subscription, we were asking for only $39.
Our competitors were not happy, but it worked wonders for us. We were profitable almost immediately. Within 12 months, the business went from less than $500,000 in revenues to more than $5 million. Five years later, we were one of the largest newsletter publishers in our industry, with sales topping $50 million.
Sure, there were a lot of things we did wrong along the way. But growing the business and making money weren’t two of them.
How does this apply to you?
If you are starting a new business or thinking of starting one, you’d be crazy not to make this concept a core part of your growth and marketing strategy. If your business is mature, under-pricing your competition is still the single strongest way to introduce a new product or product line, or to enter a new market.[Ed. Note. Mark Morgan Ford was the creator of Early To Rise. In 2011, Mark retired from ETR and now writes the Palm Beach Letter. His advice, in our opinion, continues to get better and better with every essay, particularly in the controversial ones we have shared today. We encourage you to read everything you can that has been written by Mark.]