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"Are you trying to compete on price? It can be a very dangerous and futile game for small Businesses"

By Rocky Tapscott

So many small Business owners lose the fight for Business survival because they try to compete with their larger competitors on price, instead of offering some sort of unique benefit or extra value that the big guys just don't do.

Here's a classic example.

A friend called me a couple of days ago and as we talked he mentioned that a couple of sales people had just knocked on his door trying to flog an offer of 12 months complete car engine servicing for only $79 from a local Mechanic.

My first thought was, "That's one way to own a small Business, start with a big one and use a marketing strategy like that to try to get more customers." I can't see how this Mechanic could possibly last a year in Business with an offer like that one, let alone make a lot of money.

Let's think about this for a minute. A normal car will require servicing at least twice each year, possibly more, but let's say twice for the purpose of this story.

Any half decent mechanic will cost a Business around $35 per hour, with car servicing at a major dealer costing upwards of $60 per hour. That means that in order for this Business not to lose any money out of this deal on the front end (apart from the margin they will make on the parts they supply), they have to do two complete engine services in less than 2.25 hours.

As an owner, I would prefer that the guy doing the service on my car didn't have a gun to his head while he was trying to do a good job...this of course doesn't allow for any difficulty removing spark plugs, bolts, filters or for that matter mistakes on the part of the Mechanic.

I'd have to say that the likelihood of professionally completing two full engine services, on different days, with so many variables, in under 2.2 hours and leaving a margin for a reasonable profit is fairly remote.

I can understand that this guy is trying to build up clientele quickly, so the profits on the front end are likely to be small, but there are other, far less costly ways of doing it than cutting prices to the bone and hoping that customers have the loyalty to come back and pay full price in the just ain't gonna happen my friend without some other form of incentive to entice them.

People who price shop and take him up on his offer will just about always take the cheapest price no matter who is offering it.

There is no way that anyone is willingly going to pay the full rate next year when you have set the precedent by giving them a full year of services for below cost if someone else is offering a better deal...unless -

  • The service offered is so much better than anything else around

  • There was something very unique about the customer's experience that makes them want to return and pay full price next time

  • The value given is obviously far higher than other Businesses of the same type in the same area

It takes deep pockets to fund a Business for at least a year while continuing to offer superior service, keep highly qualified and motivated staff and continue to provide extra value while you are losing money.

Let's take a look at how a Business owner who has a good idea on some basic marketing would approach the same situation when starting a new Business.

Let's call our imaginary Business owner Tom.

Tom has spent the last 13 years working for a large dealer franchise as a mechanic and more recently as a Service Adviser. He knows his stuff and is highly respected by his employer as a diligent, hard working employee.

He likes his work, but he knows that he could make more money and have a lot more enjoyment in his life if he was working for himself in his own profitable Business.

He is prepared to sacrifice some things at the start to build a Business that will give his family and himself financial freedom in retirement.

He knows that starting a new Business is tough, especially if you have no existing customers who you can entice over from your previous Business or employer :-0

He has around $20,000 saved to launch his Business, which won't go far unless he can get customers quickly and make a profit almost immediately, so Tom will have to hit the ground running.

Press releases are always a great idea to get the initial interest of the local public, and inexpensive giveaways for the first couple of weeks can get a few people in the door, but Tom will need something more robust if he is going to take on the might of the big service chains like Ultra Tune and K-Mart, and the dealer for whom he had previously worked.

And there is no way Tom will ever compete with them on price without sending himself into Bankruptcy. He wanted to employ the best Mechanics in the Business, people like himself - highly trained, customer focused and passionate about doing a great job.

He offers a 100%, no quibbles, smile on the face money back guarantee, so he knows he will have to have the best people working for him to pull it off.

So, let's follow Tom for the first few weeks and months when starting his new Car Service Centre.

First of all, even before leaving his paid employment, Tom contacted several other local Businesses related to the automotive trade and asked them if they would like to participate in joint ventures to cross sell each other's products and services.

He explained to them the benefits of their participation and how they could expect to gain a large number of new customers by working with him in their marketing. Many of these customers would continue coming for years if they were treated right and loved their experience dealing with Tom's partners.

He found 5 other Business people who shared his vision and joined him in Joint Ventures.

Then he sat down and thought about his typical customer.

What are her greatest motoring challenges, fears and problems? How can I offer something unique that has a high perceived value without costing a lot of money?

He decided to put together a series of Free Reports that highlighted his customers most likely problems, along with the solutions his new Business and his Joint Venture partners could provide to solve these problems for them.

He came up with Reports on -

1) What to do in the event of a flat tyre - a step by step guide for safely removing and replacing a flat tyre, along with tips on reducing tyre wear and extending tyre life.

This Report included a discount voucher for 10% off his customers next set of tyres (from his local Tyre Joint Venture partner). This was valued at between $80 - $150, depending on the vehicle.

Cost to the tyre shop? A small amount of profit on the first set of tyres, but this comes out of their marketing budget anyway, and there is a good opportunity for repeat Business from this new customer that the tyre Business didn't have before, as long as the tyre shop owner goes out of his way to keep that new customer coming back for the next few years.

There is also the potential of referrals of friends and family members if the tyre shop does a wonderful job of keeping their new customer happy.

2) How to care for your car's interior and exterior so it holds it's value for as long as possible and doesn't require major body or interior trim repairs due to lack of maintenance.

This Report included a voucher for a discounted exterior cut and polish from the local spray paint and panel repair shop, along with an interior vacuum and upholstery shampoo, which could increase the cars value by hundreds of dollars at trade in time. This was valued at $100 or more.

Cost to panel shop? An couple of hours work by an apprentice, with the potential of picking up additional work in the future from this customer, along with work from friends and family if he does a good job on the initial work.

3) How to drive defensively and reduce the risk of you or your family being involved in an accident.

This report included a voucher for a discount from a local defensive driving school or a free lesson for one of his customers family members from the local driving school.

The cost to driving schools? Around one hour of their time, with the potential of repeat Business from friends and family members if the initial experience is memorable and the instructor is courteous, friendly and competent.

4) How to buy a car without getting ripped off.

We all have a story about some dodgy car salesman ripping off somebody we know. This report focused on the traps to avoid, techniques for getting a better deal and questions to ask the dealer. It also included a Voucher for a discount vehicle inspection and report provided by Tom's Business for the next vehicle his customer purchased.

Tom uploaded these Free Reports onto his website where they provide valuable content that not only gave his customers extra value but attracts other visitors free from the search engines looking for advice on car service related topics.

He gives a printed and bound copy of his Reports to his customers, and encourages them to go to his website and sign up for hie Free Newsletter. He mentions the special deals available on the website and in the Newsletter and finds a large percentage of his customers decide to subscribe to get these extras.

While many of these search engine visitors to his website are from places nowhere near Tom's service centre, his Free Newsletter offers eBooks and automotive products from his internet affiliate partners based around the World to subscribers, which generates an additional income stream for his Business - he makes money while he sleeps!

He is developing Multiple Streams Of Income.

Can you see what Tom is doing here?

All of these reports cost him nothing to create, except a small amount of time, and once they are written, he can keep giving them to new customers for years, and at the same time they offer quality content which attracts search engine visitors to his website! The perceived value to his customers and visitors is far more than what they cost to produce.

By adding more great content to his website each week, he receives more visitors and earns more money online. Eventually his online income will be a significant part of his Business.

It starts small, but grows each month as his traffic grows. He has both an off-line and a Global online Business servicing the same market with millions of potential customers.

If Tom had decided to give new customers a $100 discount on their initial service, it would have cost the full $100...ouch!

Because he gave them vouchers valued at several hundred dollars instead, his actual cost was nothing for the first three, and a few dollars on the last one, because his Joint Venture partners willingly contributed those services as part of their marketing to gain new customers for themselves.

His Joint Venture partners benefited because Tom was sending them a new customer who they never had before, and they have the opportunity to offer these new customers a similar deal as Tom had done with other Joint Venture partners, creating a lifetime customer for themselves in the process.

Also included with every service, along with the Special Reports he gave every customer, Tom had a junior serviceman carefully vacuum the interior and wash the exterior of every customers car.

This took an extra 20 minutes per service, but the employee's hourly rate was low and Tom was charging more than the other Mechanics in the area anyway because he was giving a superior service.

Tom also made sure he asked for and received every customers' home and email address before they left his store, because he will be offering them special discounts as a way of saying thankyou for giving him their Business.

He put all of those email addresses into the database that came with his website and then he will make regular offers to his ever growing list of happy customers

His customer leaves the store with a feeling of deep satisfaction because -

  • She has just received tremendous value, even though she has paid full price for the service, the special Reports and Vouchers increase the value she received by a significant amount

  • Her car was returned clean and tidy at no extra charge

  • Tom has promised to send her additional special offers in the future as a reward for being a valued client

Tom has one of the most important things any Business can have - a happy, satisfied customer.


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OK, so Tom now has a customer, it's on to stage 2 - he has to keep her coming back...

Having read a few books on marketing, Tom knew that making a profit on the front end, or initial sale, wasn't really the main focus of a successful Business.

It is the back-end or future sales that he should be interested in. He knew that the lifetime value of each new customer was several thousand dollars.

* By the way, we will discuss Lifetime Customer Value in greater detail in a future Newsletter.

He didn't want to lose money on the front end if possible, but he knew that by keeping customers coming back by offering great service and exceptional value, his success in his new venture was assured.

So, this is what Tom decided to do.

Five days after each customer's car was serviced, they received a Thankyou Note in the mail from Tom.

How often have you received a thankyou note from the Businesses you deal with in the last month? Or the last year, for that just doesn't happen, does it?

Well this thankyou note was hand addressed by Tom's office girl, had a real stamp on it, and came in a plain white envelope.

I have included a copy of it below that you may want to use as a template for your own thankyou notes to your clients in the future...

Tom's Car Garage

44 Service Way

Hometown 2154

Hi Kim,

It's Tom from Tom's Car Garage here.

I just wanted to thank you for letting us service your car the other day. I really appreciate you trusting us with your lovely automobile.

Anyway, the second reason for sending you this letter is that when one of the team was cleaning the interior of your car, he inadvertently vacuumed up $2.45 while doing the floor.

He found your money when he emptied the vacuum cleaner later in the day, and he immediately gave it to me, but because you had already left by that time, I thought I would return it to you now.

I apologise for missing you the other day, and I have taped $3.00 to the top of this letter. I hope this meets with your approval.

Thankyou again for letting us service your car, and I hope to see you again when your next service is due.

Kind regards,


P.S. Please hand me or whoever is at the front counter this note on your next visit, and I will make sure you receive a special Bonus and a 10% discount for being a valued customer.

Thanks again for your Business Kim.


Tom's Car Garage

We promise you'll be delighted

with our service or it's Free.

Visit us on the web at -

Imagine Kim's thoughts at this point.

What a nice thing for Tom to do. Isn't he an honest man?

She has just had her car professionally serviced, it came back unexpectedly clean inside and out, and now Tom has sent her a series of free, value laded Special Reports plus a thankyou letter containing the change he found while cleaning the interior of her car!

Plus, she gets a discount and a mystery bonus on her next visit!

Do you think Kim will tell her friends and family about the great service she received from Tom? You betcha she will.

Do you think she will be receptive to Tom's next letter telling her about a great deal she can get at the local car parts store because she is one of Tom's preferred customers?

Or any number of special offers he makes to her through his Joint Venture partners via mail and email over the next few months until her car is due for a service again? Will she get Tom to service her car again? Of course.

Now imagine how much potential profit there is for Tom in each new relationship he forms like this one with a happy satisfied customer.

Imagine how much referral Business he will get from these customers becoming evangelists for his Service Centre if he just asks for referrals each time a customer comes in to his workshop extremely happy with their service?

And all it cost Tom was $3.00, a few minutes of his receptionists time and a stamp...

How does this compare to offering a full years service for $79 and trying to survive competing on price?

That's right, there is no comparison, is there.

Tom's Business will be going gangbusters in 12 months time with a legion of happy customers, the $79 one still won't have made a profit unless he can turn those initial sales into backend profits along the way somehow.

Don't compete on Price!

It will kill your Business. Instead, offer something of unique value.

Develop a powerful USP, offer something that nobody else is offering or present your service in a unique way, boost the value you give to your customers by creating free Reports and do Joint Ventures with other local Businesses to cross sell each other's products and services and watch your profits soar.

Just think about how you are going to go about this...then do it!

I hope you have enjoyed this article. If you would like to ask any questions or make a comment on anything written here, please use the contact form. I will get back to you as soon as I can.

And one last thing, if you found this page through a search engine or a link from another website and you enjoyed reading this article, then you'll love my newsletter, SBI Tactics. You can subscribe here.

Thankyou for reading this article. I hope it has been valuable for you.

Kind Regards,


Local Web Solutions

P.S. And don't forget, if you would like to get in touch to discuss having your Site Build It website built, please call me on 61755432004 or 07 55432004 within Australia. Or Use This Form to get in touch now. Just let me know a little about your business and your website plans and I'll get back to you with a preliminary proposal ... then we can take it from there.

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