I just got off the phone with a friend of mine who's in the real estate business.
We were discussing the problem of people always going for the cheapest product and service. He works with a few construction companies and individuals who make a living at flipping homes. They are always look for the carpenter, painter, landscaper, etc. who will do the work for the lowest cost. This also includes his services as a realty agent.
He has a client for whom he has helped sell more than 10 properties. One each one, he has given a discount on his normal fee. When he asked another friend, who's in the construction business, what he'd do if he were his client and did not offer the same discount for the next home. His friend said, "Simple, I'd fire him."
My friend believes he must offer discounts because that's what 1) people expect, and 2) others are doing. He believes you must go low to maintain current clients, get the contract/job/bid, and attract new clients. What my friend doesn't see is that this mentality can lead to only one place... down. Listening to him, I don't feel he truly believes in the service he offers even though, from what I've seen, he goes above and beyond most other agents.
I can understand though, because I struggle with this too in my own business. You have bills to pay, family to provide for, and the "next guy" waiting in line to do the work at a lower cost. People want the benefit of a service, but don't want to pay the cost. They are price shoppers and quickly dilute the services they use into commodities. It's easy to think that you have no choice and must do business with these people.
While I haven't found my way out of the "cycle of doom" yet, I know it's possible. Listening to people like Dan Miller or Darren Hardy make me know the "cycle of doom" is not something you have to live with or just accept. Discovering your USP and believing in the value of your service/product enough not to compromise on it go a long way to helping break free. Outlining your ideal target market and pursing them is also a step in the right direction.
However, what do you do if you've fallen into the "cycle of doom" already? You've discounted your product/service to gain new customers/clients only to have to drop your prices more because the guy down the street just dropped his prices. How to climb out without having your finances fallout from under you? Is that possible? I'd love to hear your thoughts.