How do you balance competitive pricing with premium service positioning?

[security_guard]

Hey everyone,


I've been wrestling with something lately with our company Imperial Security i'm curious how others approach this challenge.


We're in an market where there's always going to be someone willing to undercut on the price. I've seen competitors offering low rates that honestly make me wonder how they covering their costs, let alone turning a profit. At the same time, we've invested heavily in quality training, advanced technology, better insurance coverage and maintaining higher officer retention rates because we know these things directly impact the service our clients receive.


The challenge I'm facing is how you effectively communicate and justify premium pricing to prospects who are comparing you against lower-cost competitors especially when security services can seem like commodity to clients who haven't experienced the difference


Would love to hear your strategies, experiences or even cautionary tales about racing to the bottom on price. How are you differentiating yourselves and making that differentiation clear to prospects?


Thanks in advance for any insights!

 

[cjd]

There is no easy or quick way to do this. Customers will say they want good service and say that they will pay for it but they tell lies - they actually want both cheap prices but expect good service once they've chosen the lowest price.

The way to do it is to build a really solid reputation with those .customers that chose you and provide simple ways for them to tell others about how good you are. Review sites are useful and you don't need to pay them anything - good service is remarkable enough for people to be surprised about it and tell everyone. Then promote your business using those reviews.

It requires time, persistence and really good customer service - you need to be well capitalised to do it.

In the mean time go in for industry awards - if you are better than your opposition you'll win them which helps promote your service and build confidence.

Don't worry about the cheap guys, generally they'll burn brightly and burn out - the first job of business is to be good at what you do and stick around long enough for people to notice.

 

[Paul Kelly ICHYB]

Colin is spot on, however, you need to get a way of selling the benefits of your service, not just what your service is.

From a laymans perspective, it doesn't matter how trained or qualified a big bloke standing at a door is, as they all appear the same.

What does your training deliver, different to others?
How is your insurance different (remind clients to check their suppliers for insurance)?
How does the technology make a difference?

 

[Mark T Jones]

If you do an image search for 'always someone cheaper' you will find abroad of different, but similar memes. Mildly amusing, but it highlights the fact that it's a common challenge.

As above, it really comes down in being confident in the added value you are bringing to your clients. The better you define your clients, the easier it becomes.

 

[fisicx]

Marketing is key. If you are good at marketing you will get new leads. Your skill as a security guard is less important than your skills in marketing.

Might be worth paying for some marketing help or training.

 

[StrategyDoctor]

This is a common positioning problem. You’re in an industry where, to a lot of buyers, a guard is a guard. Until something goes wrong. So you need to focus on your niche and then be patient, consistent and relentless with your ‘value’ messaging. A few thoughts that you might want to try:-

Don’t sell hours – sell value, risk reduction and headaches avoided : If the conversation stays at “£X per hour vs £Y per hour”, you’ll lose to the cheap guys every time, so walk away quickly and focus on those customers who ask about and understand the value you provide.

Your conversations need to be focused on what are the real costs if security goes wrong?

• Theft / stock loss
• Site shutdowns / H&S issues
• Reputational damage
• Management time dealing with incidents, complaints, re-tendering

Ask questions so you understand what really matters to them and try and put numbers on these:

• “Roughly what would a serious incident cost you in lost revenue and disruption?”
• “How many times last year did security issues drag senior managers in at 2am or over a weekend?”
• “If a claim went wrong and your insurer started asking questions about contractor competence, what could that look like?”

Once they’ve articulated that pain, your higher rate is no longer “extra cost”, it’s insurance against bigger, nastier costs. Then you can reinforce the quality & reliability of your services.

Make sure the ‘invisible value’ is visible. So often the quality in the investment is largely invisible to a new prospect. Can you package it up into something really simple – one page you can talk through a “Security Provider Checklist”

• Vetting & screening: what you do that others often skip.
• Training: hours per officer per year, scenario-based, specific qualifications.
• Supervision: how often supervisors visit; unannounced checks.
• Technology: lone-worker protection, incident logging, reporting dashboards.
• Insurance: what you hold and why it matters; invite them to compare like-for-like.
• Retention: “average officer tenure on site” vs industry churn.

Try and turn your “features” into something the client can actually weigh up and compare to the competition. You can also quickly assess if the customer values what you offer.

Use proof, not promises : Most buyers have been burned by security promises before. Can you offer guarantees and back it up with give examples/references?

Short case studies: “Client A switched to us from a cheaper provider after X incidents; incidents dropped by Y% and we reduced management complaints from weekly to near zero.”

Metrics: “Average incident response time / supervisor visit frequency / years on site.”

Testimonials & reviews (as Colin mentioned): Especially ones that talk about reliability, stability, communication, not just “nice guys”.

References: Offer a couple of clients willing to speak frankly about the difference vs “cheap and cheerful”.

This helps you filter in the clients who do care about quality and may want to understand why they are paying more.

Focus on your Ideal Customer and be disciplined about who you sell to. As you know some buyers genuinely only care about cheapest hourly rate. You’ll waste a lot of energy trying to convert them. I’d consciously split prospects into:

• Price-only buyers – let the competition have them.
• Risk-aware buyers – regulated industries, multi-site operations, brands with something to lose, businesses that have already had a bad experience.

Focus your message and examples on that second group.

If you’re happy to share: who is your Ideal Customer and what kind of sites are you mainly working on at the moment (licensed premises, construction, logistics, corporate, etc.)?
I guess the value you offer would probably be tailored differently to each sector?

 

[WaveJumper]

I think the advice given above is spot on, don't focus on price focus on your service and what this means to the client. In the past I was was tendering out security contracts than ran into the hundreds of thousands we never took the lowest price. You soon learn anyone who comes into a meeting spouting off they can do this or that for an incredible low cost, at the end of the day delivers a crap service.

There will always be those clients who want the cheapest, they are not your client, it may take a little longer to grow but sell your quality and deliver a gold standard service ......... the word will soon spread, and those are the clients you want, as they will still be around next year and the year after.

Wishing you the best of luck

 

[FreddyG]

Would love to hear your strategies, experiences or even cautionary tales about racing to the bottom on price. How are you differentiating yourselves and making that differentiation clear to prospects?

Slowly!

My background is military + working in the music industry. I have experienced both sides of this game.

There are two basic types of security companies - The Herbert Brigade and The Real Deal. And then there are all kinds of companies in between those extremes.

The Herbert Brigade. Their "officers" are indeed vetted, i.e. they have not yet committed any offences! But one look at them and you know that they are not going to be capable of dealing with so much as a child armed with a sticky ice cream cone! The so-called "officers" are a motley collection of the spotty and the overweight, and certainly, have no combat or similar training.

The Real Deal. These are invariably ex-police or ex-airborne NCOs or similar. They come fully trained and clued up, and expect to be paid accordingly. Their on-the-job training will be a few weeks, during which they will get to know the ropes of new situations and learn to deal with them.

So now comes the problem of how to sell the difference! The answer is slowly. The customer has to learn that you are The Real Deal and not a purveyor of spotty Herberts and fat goofs! But real security costs real money!

I like to compare most markets to the chainsaw market. There is no sight quite as alarming as watching someone using a Chinese or similar chainsaw that is falling apart as he uses it! Pretty soon, the chain comes flying off as the bar loosens, and with a bit of luck, we get the amusing sight of ripped flesh as the bits fly off in all directions.

Yes, you can buy a chainsaw at Tesco for just over £100, but that will be £100 wasted. Decent chainsaws start at around £1,000 and come from Husqvarna or Stihl. The same applies to the safety gear that comes with them.

There will always be a market for cheap rubbish. But, just like chainsaws, safety trousers and helmets, security can be a matter of life and death (or financial ruin). £1,500 for something decent that is not a danger to the user is a small price to pay!

 

[FreddyG]

Your conversations need to be focused on what are the real costs if security goes wrong?

This! When security goes wrong, costs can often spiral out of control. And for the next five years, the insurance costs escalate.

 

[Stuart_Walker]

StrategyDoctor is spot on in my experience.

I'd say that you must factor in the emotional impact of deciding your pricing strategy. You will ALWAYS feel like you are missing out and doing the wrong thing (whatever you do) but you have to make your choice and stick to it. Have the courage of your convictions.
I have been in business for over 40 years and trust me- I still get worried when I realise that competitors are undercutting me.
FreddyG makes some really good points. Are you a Herbert or the real deal?

As an aside I would also argue that there is a place in any market for the bargain basement option but don't whatever you do try and combine that with your quality brand as consumers will become confused.

If you decide you want to go cheap then start up a new brand. remember that once you have lowered your price to capture volume, it is incredibly difficult to go back to where you are making a profit.

 

[StrategyDoctor]

@Stuart_Walker this really resonates, especially your point about the emotional side of pricing. Even when we’ve done the numbers and are clear on our positioning, it can still feel uncomfortable when we see competitors coming in cheaper? That sense of “we’re missing out” never fully disappears – the discipline is exactly as you say: make a conscious choice about where you sit in the market and then stick to it, rather than wobbling every time someone undercuts.

I also completely agree with your warning about not trying to mix a bargain-basement offer with a quality brand under one roof. That’s exactly where customers get confused: “Are you the safe, premium option, or the cheapest bloke in town?” Once you blur that line and cut prices to chase volume, it becomes very hard to move them back up to a level where you’re actually making a sensible margin. It is also important to define and understand your Ideal Customer and offer them 'value' that they appreciate.

If anyone wants to go a bit deeper on this, The Discipline of Market Leaders (Treacy & Wiersema) is a good, practical read. The core idea is that you can’t be everything to everyone – you choose one primary discipline and build around it : Lowest cost / operational efficiency, best product/service or best customer relationship / service

There’s usually room in any market for the low-cost operator, but it probably can't be wearing the same badge as the “quality, long-term partner” brand.

For others reading, what has your experience been of these three in your own business – competing on lowest cost, being the best product/service, or winning on customer service and relationships?